I. GENERAL PROVISIONS

  • UAB “Bourgeois Boheme Fintech” (hereinafter – the Company) rules for the assessment of the reliability of the Project Owners (hereinafter – the Rules) shall establish the provisions for the evaluation of the credibility of the Project Owners, including the criteria of reputation and creditworthiness of the Project Owners.
  • The Rules are drawn up in accordance with the Law on Crowdfunding of the Republic of Lithuania (hereinafter – the Law) and the accompanying applicable legal acts.
  • The Company hereby confirms, implements and supports adequate and efficient measures, processes and methods that ensure consistent compliance with the present Rules. The Company shall take the necessary measures to prevent the use of the Company’s platform for criminal purposes.
  • The terms used in these Rules shall be understood as they are defined in the Law.
  • I. EVALUATION OF THE PROJECTS OWNERS’ REPUTATION

  • The Company shall collect and evaluate information on the Project Owner and the Project Owner’s manager and his participants to whom directly or indirectly owned voting rights or the authorized capital is equal to 20 percent or exceeds them or who can do a direct and (or) indirect decisive impact to the project’s owner.
  • The information provided by the Project Owner can be provided in standardized form.
  • The reputation shall be deemed good in the absence of evidence supporting the opposite information and if there are no reasonable grounds to doubt the person’s reputation.
    • convictions or initiated pre-trial investigations, with particular attention to convictions for:
      • criminal activity related to securities markets or securities or payment instruments, activities related to the money laundering, market manipulation, trade insecurities using non-public information in prejudice to law;
      • breach of law or financial crimes related to dishonesty and/or fraud;
      • violations of fiscal nature;
      • other legal violations, where infringement concerns the activities of legal entities, bankruptcy, insolvency or legal acts regulating consumer safety;
    • are there any information confirming that the person under assessment fails or failed to discharge his/her credit obligations;
    • are/have there been any civil claims, administrative or criminal cases, investments or assumed risks and borrowing of funds able to exert material influence on financial credibility of the person.
  • Before publishing a project in a crowdfunding platform, the Company must have a sufficient reason to believe that in the paragraph 5 of the Rules listed people meet the platform operator’s approved projects owners’ reputation assessment criteria and that these persons do not meet the condition set in the Law’s article 8 paragraph 1 subparagraph, including clearance of these persons from commitment of a crime or criminal offence related to money laundering or terrorist financing, serious, grave crime or criminal offence against property, property rights and property interests, economy and business order, financial system or equivalent crimes under criminal laws of other countries, where the conviction has not yet expired, or where less than 3 years have passed since the time of the final conviction for the above-mentioned criminal acts.
  • For the evaluation of the projects owners’ reputation the Company will use:
    • the projects owners’ managers and participants submitted documents and written explanations;
    • reasonable and sufficient information about the projects owners, managers and participants of the projects owners received from other sources, i.e. publicly accessible information.
  • When assessing the reputation of the Project Owners, the Company shall not be obliged to re-verify the information provided by the Project Owners, unless the Company has reasons to doubt the accuracy of the provided answers.
  • EVALUATION OF THE PROJECTS OWNERS’ CREDITWORTHINESS

  • Before publishing a project in a crowdfunding platform, the Company will evaluate the Project Owner’s creditworthiness. For this purpose, the crowdfunding platform’s operator will:
    • collect information about the Project Owners’ creditworthiness including information about its undertakings;
    • evaluate whether the Project Owner can realistically within the fixed time limit fulfil financial obligations to the funders i.e. make sure that the Project Owner’s expected to be earned from the project revenue will be sufficient to pay interests and to return the credit or to fulfil other obligations assumed by the funding transaction;
    • make sure that a bankruptcy proceeding is not instituted against the Project Owner.
  • If after evaluating the Project Owner's creditworthiness in accordance with the paragraph 12 of the Rules, the Company considers that the risk of the Project Owner is high, the Project Owner is advised to provide additional operational guarantees – the sureties or guarantors.
  • In order to assess the Project Owner's, the sureties or guarantors (if any) creditworthiness in accordance with the paragraph 12 of the Rules, the Company shall directly or with assistance of the third persons (including credit bureaus) collect, manage and rely on the information received from external databases (State Enterprise Center of Registers, data of the Loan Risk Database managed by the Bank of Lithuania, etc.).
  • In order to assess the creditworthiness of the Project Owner the Company also evaluates the information and confirmations provided by the Project Owner while:
    • filling in the standard form prepared by the Company (registration form);
    • completing a Project Owner's application for announcing the project on the platform;
    • answering other Company inquiries, if any.
  • The Company will ask the Project Owner to complete the standard questionnaire (registration form) and submit the following data and information:
    • the Project Owner's main settlement bank account statement for at least 12 months, except in cases where the Project Owner has been operating for less than 12 months. If the Project Owner has been operating for less than 12 months, the Company shall ask the Project Owner to provide main settlement bank account statement for the full period of operation;
    • the latest approved financial statements of the Project Owner and the guarantor or surety (if any). If the guarantor or surety is a natural person, his/her consent for verification of his/her personal data in the databases shall be provided, as well as his/her main bank account statement for a period of at least 12 months.
    • contact details (name, surname, residence address, e-mail, telephone (if any), mobile phone and position) of the head of the Project Owner, guarantor or surety, in case of a legal entity granting surety or guarantee, and the details of the surety or guarantor (if the surety or guarantor is a natural person);
    • contact details (name, surname, residence address, e-mail, telephone (if any), mobile phone and position) and the personal ID number and/or registration number of each member of the Project Owner, whose voting rights or share of the authorized capital directly or indirectly is equal to or exceeds 20 percent, or which can exert a direct and/or indirect decisive influence on the Project Owner (providing contact details, personal ID number and specifying the percentage of shares held).
  • Seeking to assess information on the financial position of the Project Owner or the guarantor or surety (if any) and the ability of the Project Owner or the guarantor or surety (if any) to execute its financial obligations, according to the data collected, the Company shall assess the following:
    • the financial situation (revenue, the source of income, their variety, stability, profitability and possible future changes, etc.) of the Project Owner and the guarantor or surety;
    • history and information on the inadequate performance of the outstanding and previous financial obligations of the Project Owner and the guarantor or surety;
    • any outstanding or planned obligations of the Project Owner and the guarantor or surety, if the Company is aware or must be aware of them;
    • influence of the circumstances indicated by the Project Owner or known to the Company on the Project Owner’s economic and financial situation and the Project Owner’s abilities to duly perform the financial obligations throughout the entire period of validity of the agreement.
  • Data about the Project Owner must be verified by using external databases in the absence of information in external databases – base in other evidence.
  • The Company shall decline to publish a project on a crowdfunding platform, if:
    • the Project Owner does not meet the evaluation criteria for the projects owners’ reputation and creditworthiness;
    • the Company lacks information or it does not have sufficient grounds to carry out the evaluation described in the Rules;
    • Information available to the Company causes a basis to believe that publishing the project on the platform would cause a threat to the funders interests.
  • THE PROCESS OF EVALUATION OF PROJECT OWNERS RELIABILITY, FUNCTIONS AND ROLES OF COMPANYS EMPLOYEES

  • In order to announce the Project through the Platform, the Project Owner shall provide all required information and submit the documents indicated in the articles 15-16 of Rules required for the Analyst to complete a registration form on the Project provided on the Platform.
  • After the Company receives application to announce a project on the crowdfunding platform, the specialist of Project analysis department (hereinafter – Analyst) checks if Project Owner submitted all required documentation and information. If any of it is lacking, Analyst contacts Project Owner and requests to provide additional information or documents.
  • After Project Owner provides all needed documentation and information, Analyst starts Project Owners evaluation process.
  • Analyst collects information about Project Owners creditability in databases, such as provided by UAB “Creditinfo Lietuva” (www.creditinfo.lt), UAB “Creditreform Lietuva” (www.creditreform.lt), www.creditsafe.com and others.
  • If needed, analyst, upon prior consent of Project Owner, can request information regarding Project Owner from third parties, governmental institutions, and other sources of information.
  • When all information is collected, Analyst evaluates Project Owners creditability according to the Rules and makes preliminary decision what score and class have to be assigned to the Project Owner.
  • After taking preliminary decision regarding the score and class to be assigned to the Project Owner, Analyst refers to the Crowdfunding platform manager and presents the summary of the information about evaluated Project Owner and the proposition to assign the Project Owner certain creditability class.
  • After evaluating the information provided by Analyst and the proposition for assigning certain creditability class for the Project Owner, the Crowdfunding Platform Manager makes final decision for assigning certain creditability class for evaluated Project Owner.
  • If Project Owner is assigned for Low Risk or Medium Risk, his Project is approved and Analyst contacts the Project Owner to inform that cooperation with him can be started.
  • If Project Owner is assigned for High Risk, his Project is rejected. In case if Project Owner can provide mortgage worth more than 70 % of required Funding sum, Analyst refers to General Manager of the Company presenting the summary of information collected about Project Owner and class assigned. General Manager on his own discretion can decide to approve the Project of Project Owner.
  • METHODS OF QUANTITATIVE ANALYSIS OF PROJECT OWNERS CREDITABILITY

  • In order to assess companies, the Company uses mainly data score risk assessments.
  • With the scorecards, the Company offers independent due diligence analysis on each Project Owner assessed. The scorecards vendors’ capabilities are visible to the relevant decision makers, enabling better consensus formation, faster decisions and reduced risk.
  • The Project Owners are divided within 3 risk levels:
    • High risk
    • Medium risk
    • Low risk
  • The companies are divided into start-ups or ongoing businesses:
    • As a start-up are considered any company less than three years’ old and has been active throughout the three years.
    • As ongoing businesses are considered any company with more than three years trade and active throughout at least 3 years and 1 day.
  • Before entering the assessment approach, the Company identies Project Owners by labelling them:
    • Start-up: medium risk to high risk;
    • Ongoing business: low risk to high risk.
  • The Company uses two different methodologies for analysing the three types of risk.
  • For ongoing businesses, the Company prioritise Altman Z-Scores as methodology, and with Start-ups the Company uses a third-party assessment algorithm dedicated to risk analysis in a Start-up who uses the balance scorecard. Following both methods are described: a) Altman Z-Scores and b) Balance Scorecards. a) The Altman Z-score assesses the financial ratios of a business as follows: Altman Z-score is based on five financial ratios that can one can calculate from data found on a company's annual report. It uses profitability, leverage, liquidity, solvency and activity to predict whether a company has high probability of being insolvent. Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E Where: A = working capital / total assets B = retained earnings / total assets C = earnings before interest and tax / total assets D = market value of equity / total liabilities E = sales / total assets A score below 1.8 means it's likely the company is headed for bankruptcy, while companies with scores above 3 are not likely to go bankrupt.

    Altman Z-score Meaning of the cut-off points Z > 2.67 Non-distress zones 1.81 < Z < 2.67 Grey zones Z < 1.81 Distress zones Figure 1 : Altman Z-Score points' meaning b) The Balance Scorecard assesses - The individuals behind the project - The capability of the individuals to work as a team - The track record of reaching milestones in previous projects - The expertise in the field of the project - The viability of the project - The suitability of the project to the present part of the economic cycle. The aim of balance scorecard is to connect the dots between big picture strategy elements such as mission (company’s purpose), vision (what the company aspires for), core values (what the company believes in), strategic focus areas (themes, results and/or goals) and the more operational elements such as objectives (continuous improvement activities), measures (or key performance indicators, or KPIs , which track strategic performance), targets (the company’s desired level of performance), and initiatives (projects that help the company to reach its targets).
    Figure 2 : Balanced Scorecard overview of relevant points

    FINAL PROVISIONS

  • Rules come in force after their approval and are applied from the moment when Company is entered to the Public List of Crowdfunding Platform Operators.
  • Rules may only be amended and appended by decision of the General Manager of the Company. The amendments and supplements to the Rules shall come into force from the date of their approval, unless otherwise stated in the amendments and supplements themselves.
  • Rules are reviewed annually and must be amended according to the changes of legislation.
  • The Company must keep the information, data and documents gathered (evaluated) during the creditworthiness assessment for 10 years from the date of fulfillment of obligations under the financing transaction, if other legal acts regulating the legal protection of personal data and storage of documents do not set a longer term for the storage of documents.