Ownership Control Assessment (OCA) in Horizon Europe

As one prepares for the signature of a Horizon Europe Grant Agreement, multiple processes run in parallel.
Before a grant applicant is cleared for funding, they must demonstrate meeting the eligibility conditions through these processes.
The compliance with the different requirements is verified by the Central Validation Service (CVS) of the European Research and Executive Agency. The CVS is authorised to carry out the Legal Entity Validation, the LEAR appointment, the Financial Capacity Assessment and the Ownership Control Assessment (OCA).
This Article examines the requirements pertaining to ownership and control.

The purpose of the OCA

In certain cases, it is not sufficient for legal entities to be established in an EU Member State to perceive funding and further guarantees of not being directly or indirectly controlled by non-eligible countries or their nationals is imposed on applicants. The European Commission can apply these further eligibility restrictions only to a specific list of programmes, including Horizon Europe, and the limitation must be justified by security reasons where the protection of essential security and/or defence interests of the European Union or the maintenance of public order and security necessitate it. Under such circumstances, the CVS can perform the OCA to determine any instances of possible control by ineligible third countries over the potential beneficiary.
As the goal of this process is to confirm whether an entity is eligible for funding, the assessment needs to be completed before the Grant Agreement signature.

What is considered control?

In OCA’s context, control is defined as the possibility of an ineligible entity to exercise decisive influence on the potential beneficiary. The influence can be exercised through direct shareholding or through intermediate entities.
It is irrelevant whether the control is exercised or not. If the possibility exists, the control is deemed existing and the eligibility for funding will not be confirmed.

How is control determined?

Control is assessed at the level of the ultimate ownership and control line as well as all intermediate layers.
As organisational structures vary greatly, the assessment is always done on a case-by-case basis.
The CVS generally takes the following elements into consideration: ownership structure and specific rights, corporate governance, commercial links conferring control, financial links conferring control and all other sources of control.
Public bodies are automatically considered to be controlled by their country.

Who is selected for the OCA?

Unless an organisation participating in a restricted call already has a valid assessment in the Funding & Tenders Portal not older than 18 months, the rules make it possible for the CVS to perform the OCA for every new grant.
The Ownership Control can also be assessed on an ad hoc basis in two cases: if there is an indication of third country control from other sources or in case there is an indication of ownership and control changes that occurred after the initial assessment performed by the CVS.

Information to provide

Organisations selected for Ownership Control Assessment are contacted by the CVS through EU Funding & Tenders Portal.
The CVS will request sharing information on the participant’s ownership structure, the list of their shareholders up to the ultimate owners, voting rights within the entity, information about decision-making as well as documentation about meetings and natural person shareholders.

As all layers are put to scrutiny, the same documents must be provided for each intermediate legal entity holding at least 5% of the capital/voting rights up to the ultimate owners.

The CVS may also request additional documentation if necessary to define a particular ownership control situation. Most often the assessment consists of various exchanges with the CVS as they strive to have a profound understanding of the ownership structure and control mechanisms of potential beneficiaries.

It is important to note that as all eligibility conditions, requirements relating to ownership control must be fulfilled throughout the entire duration of the project and not only at the moment of the Grant Agreement signature. As such, any relevant changes must be communicated to the EIC.

How is this different from the SME status verification?

Both processes verify the eligibility of an organisation to perceive EU funding.
There is also some overlap between the information requested for the SME status verification and the Ownership Control Assessment. For instance, the organisational structure, the list of shareholders and the decision-making mechanism are checked in both cases.
However, the scopes of these two processes differ. While the OCA verifies if there is a possibility of control by ineligible entities, the SME stats verification seeks to determine whether a company meets the SME definition of the European Commission.

If you need support to prepare for your Grant Agreement signature, do not hesitate to contact us at hello@getpolite.eu and we will be happy to help!