The Rural Development Programme for England (RDPE) provides funding for projects in England which create jobs and growth in the rural economy.
Under the RDPE Growth Programme there are three grant funds available; business development, food processing and rural tourism infrastructure. The grants are funded by the European Agricultural Fund for Rural Development (EAFRD), which is part of the European Structural and Investment Funds (ESIF).
For the food processing grant, the RDPE has made available up to £1M for food and drink businesses that process agricultural and horticultural products which includes most products that result from primary agricultural production and includes some processed products.
Crucially, unlike the business development and rural tourism elements of the RDPE scheme, the beneficiaries in respect of the food and drink processing grant may be located in a rural area or an urban area, provided the applicant can demonstrate that rural areas will receive a benefit.
To find out what is available and how to apply please click here.
Key legal risks and how they can be mitigated
Grant funding can be a great way for businesses to undertake projects or accelerate project implementation. However, as with any investment, there is no such thing as free money and there will always be a number of legal issues to consider.
Obligations to the RDPE under the Grant Funding Agreement
The recipient will enter into a legally binding grant agreement, under which the funder agrees to provide funding, and the recipient agrees to meet certain objectives. Matters that the agreement will address will include the following:
- That the project achieves the outcomes that the recipient has indicated that it will deliver in the course of the application process
- That there will be limitations on what the funding can be used for (broadly, it can only be used for the construction or improvement of buildings, new equipment or machinery)
- That the recipient will comply with stringent procurement requirements to ensure that the project is demonstrably achieving best value
- That the recipient will make certain information and records concerning the grant funded project available
- That if the recipient is in breach of the terms of the grant agreement, the RDPE will have the ability to require the repayment of some or all of the grant fund
The recipient should ensure that it is comfortable that it understands and can comply with such obligations.
Match funding and interim funding
Grant funding will generally only be available to fund a proportion of the eligible costs incurred in respect of the project. The exact proportion will depend on the nature of the recipient and the project, but will, in all cases, be less than 50%. The recipient should ensure that it is able to fund the remaining eligible costs from either its own resources or as debt, equity or grant funding from other sources. Grants are also paid in arrears and any recipients should ensure that project costs can be covered until the grant payment is received.
State aid
The project will have to comply with EU state aid rules. “State aid” applies to organisations receiving financial assistance from public sources, to ensure that public funds do not give one undertaking a competitive advantage over others. Of course, Brexit may mean that EU law (of which state aid is part) will no longer apply in the UK. However, for now, the law still applies and the recipient should ensure that the project is compliant.
The RDPE has indicated that “de Minimis” State Aid rules may be utilised, which state that the maximum amount of the grant available will be EUR 200,000 depending on what the grant will be used for and what other state aid the beneficiary has received over the previous three years. However the ultimate responsibility for State Aid compliance rests with the recipient and if “de Minimis” will not be appropriate, or if there is any uncertainty as to whether “de Minimis” applies, advice should be sought.
Other contractual liability
In the delivery of any development project, the recipient may well be entering into legally binding arrangements for a variety of purposes including for the acquisition of goods and services, the securing of funding, the employment of staff, and the acquisition of rights over land. The recipient should ensure that it understands its obligations under such agreements, and ensure that such arrangements are legally binding and enforceable.
Corporate issues
Potential recipients may wish to revisit their corporate structure prior to or in the course of a project for a variety of reasons, such as to facilitate funding; or reduce risk; It is open to the recipient to consider whether doing so will offer any benefit to itself or the project.
Other issues
Recipients may wish to ensure that any intellectual property rights are appropriately protected and that it has appropriately addressed any regulatory issues, such as compliance with planning consent, health and safety, environmental health, and data protection
Brexit
Although the UK government has given some limited assurances as to the guarantee of RDPE grant funding following Britain’s exit from the EU, in light of the current uncertainty this should be kept under close review.
Although there is a great deal to be considered in undertaking any substantial project, our experience has show that with proper consideration of what the risks are and how to mitigate them it is possible for grant funding to assist in the delivery of some outstanding projects. In our view, with careful planning the RDPE food processing grant fund potentially represents a great development opportunity for businesses active in this sector.