Credit companies / loan companies- the legislative framework which governs them
According to Article 4 of Law 3601/2007 [1] (“Taking up and pursuit of the business of credit institutions, capital adequacy of credit institutions and investment firms and other provisions”), undertakings that are NOT credit institutions (Banks) are prohibited from professionally carrying on the business of taking deposits or other repayable funds from the public. According to the same article, subject to the specific provisions of the legislation, the professional granting of loans or other credit is also prohibited, unless special authorization has been granted for this purpose by the Bank of Greece. The terms for the issuing of an authorization for professionally granting loans or other credit are specified by decision of the Bank of Greece.
Special provisions as mentioned above, are contained in the Bank of Greece Governor’s Act No. 2485/31.01.2002, which regulates the conditions for the granting of an authorization to establish and operate Credit Companies in Greece, along with the rules for the monitoring of such companies by the Bank of Greece. Under this act, a Credit Company may be established and operate only in the form of a “société anonyme” (Company Limited by Shares), whose main activity is the granting of loans or credit. It is mandatory to include the term “Credit Company” in the trade name of such legal entity.
Furthermore, pursuant to the afore-mentioned Article 4 of Law 3601/2007, the Bank of Greece Governor’s Act no. 2622/21.12.2009 specified in more detail the conditions for the authorization and operation of credit companies, as well as the framework for their monitoring by the Bank of Greece.
As defined in the aforementioned Act, Credit Companies have as their primary object the granting of credit to natural persons in order to meet their personal-consumer needs. It must be pointed out that these companies are not permitted to accept deposits. The minimum initial share capital required for establishing a Credit Company amounts to half the minimum initial share capital required for the establishment of a credit institution (18,000,000.00 €), i.e. an amount of 9,000,000.00 €. Regarding sanctions for non-compliance with the provisions of the law and acts of the Governors of the Bank of Greece, the revocation of its operating license as well as the establishment of branches of credit companies, provisions that are applicable to credit institutions (banks) shall apply accordingly.
Terms and conditions for authorization by the bank of Greece
According to the Bank of Greece Governor’s Act no. 2622/21.12.2009 (valid from 01.01.2010) the authorization for the establishment and operation in Greece of credit companies is granted exclusively by the Bank of Greece under the following conditions:
a) that the required minimum initial share capital equal to half that is applicable to credit institutions, i.e. currently the amount of 9,000,000.00€, is fully paid.
b) that the aforementioned, payable in cash, initial share capital remains deposited in a credit institution operating in Greece until the statutory establishment of the legal entity. The amount of equity in these companies may not fall below the prescribed minimum limit, throughout the duration of their operation.
c) the submission of an application to the Bank of Greece, accompanied by the required supporting documents, is required.
In particular:
1) disclosure of the identity of the shareholders – natural and/or legal persons -who hold, directly or indirectly, shareholdings equal to or greater than 10%, and of the ten shareholders with the largest shareholding or greatest percentage of voting rights, as well as persons who will be responsible for determining the orientation of the Corporation’s activities and who will participate as members in the Board of Directors, and finally the other Board members and the chief operating officer of the financial institution. It must be noted that at least one of the persons who will have the responsibility of running the Corporation should be a member of the Board of Directors.
2) completed signed questionnaires from the aforementioned persons, accompanied by solemn statements on the accuracy of the data and information provided, copies of criminal records for natural persons and certificates of non-bankruptcy.
3) statement of shareholders concerning the origin of the funds with which they acquire their shares.
4) complete CVs of the persons mentioned above under (1), excluding shareholders, with information on their training and professional experience in the financial sector, and two (2) letters of recommendation for each of them that must come from persons other than shareholders, prospective Board members or prospective executives in the Corporation being established.
5) draft statutes (Articles of Association) of the Corporation under establishment, a feasibility study with a full and detailed business plan, which will include identification of sources for generating capital, the description of the internal audit system and procedures, the organizational and administrative structure of the company, etc.
In the event that any data or information submitted is found to be false or misleading, the Bank of Greece reserves the right to revoke the operating license granted. It must hereby made clear that the Bank of Greece also reserves the right to request additional information or clarification on all the evidence submitted to it, while it may be opposed to persons undertaking tasks or acquiring a shareholding, for whom it has reasonable doubts about their suitability, having regard to ensuring sound management and the overall orderly operation of the Credit Company.
Credit Companies may perform activities that are supplementary or similar to their primary activity, following prior approval by the Credit System Supervision Department of the Bank of Greece, which is granted in each case following risk assessment.