The Welsh Assembly Government has recovered the £600,000 funding previously awarded to dairy firm Dairygold Food Products.
The Felinfach, Ceredigion-based company had received a processing and marketing grant in 2002 to fund packing line expansion, but just 18 months later it closed down, with the loss of 115 jobs.
The Assembly Government had then threatened legal action to reclaim the grant on the grounds that the firm had not fulfilled the terms and conditions.
“I am very pleased with the outcome of these long-running negotiations. We were determined that this public money should be repaid,” said Deputy First Minister Ieuan Wyn Jones.
“The Welsh Assembly Government remains committed to helping secure employment for those affected by the closure of the Dairygold plant,” he added.