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Definition of micro, small and medium-sized enterprises

The definition of micro, small and medium-sized enterprises is updated to take account of economic developments. The definition of enterprises according to staff headcount and turnover or balance-sheet total is essential for identifying businesses able to benefit from European Union (EU) programmes or policies specifically designed for small and medium-sized enterprises (SMEs).

ACT

Commission Recommendation 2003/361/EC of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises [Official Journal L 124 of 20.05.2003].

SUMMARY

The definition of micro, small and medium-sized enterprises is updated to take account of economic developments since 1996 (inflation and productivity growth) and the practical lessons learnt.

The new definition thus qualifies small and medium-sized enterprises (SMEs) and the concept of the microenterprise. It strengthens the efficiency of the Community programmes and policies designed for these businesses. The aim is to ensure that enterprises whose economic power exceeds that of an SME do not benefit from the support mechanisms specifically intended for SMEs.

Micro, small and medium-sized enterprises

Micro, small and medium-sized enterprises are defined according to their staff headcount and turnover or annual balance-sheet total.

A medium-sized enterprise is defined as an enterprise which employs fewer than 250 persons and whose annual turnover does not exceed EUR 50 million or whose annual balance-sheet total does not exceed EUR 43 million.

A small enterprise is defined as an enterprise which employs fewer than 50 persons and whose annual turnover and/or annual balance sheet total does not exceed EUR 10 million.

A microenterprise is defined as an enterprise which employs fewer than 10 persons and whose annual turnover and/or annual balance sheet total does not exceed EUR 2 million.

Autonomous, partner, linked enterprises

The new definition of an SME clarifies the typology of enterprises. It distinguishes between three types of enterprise on the basis of the type of relations they have with other enterprises in terms of percentage interest in capital, voting rights or the right to exercise a dominant influence:

  • autonomous enterprises;
  • partner enterprises;
  • linked enterprises.

Autonomous enterprises are by far the most common. These include all enterprises which are not one of the other two types (partner or linked). An enterprise is autonomous if it:

  • does not have a holding of 25 % or more in another enterprise;
  • is not owned 25 % or more by an enterprise or public body or jointly by several linked enterprises or public bodies, with a few exceptions;
  • does not draw up consolidated accounts and is not included in the accounts of an enterprise which draws up consolidated accounts and is thus not a linked enterprise.

An enterprise may continue to be considered autonomous, even if this 25 % ceiling is reached or exceeded, if there are certain categories of investor who play a positive role in business financing and creation, such as "business angels".

Partner enterprises: This type represents the situation of enterprises which establish major financial partnerships with other enterprises, without the one exercising effective direct or indirect control over the other. Partners are enterprises which are neither autonomous nor linked to one another. An enterprise is a partner of another enterprise if:

  • it has a holding of 25 % to less than 50 % in the other enterprise;
  • the other enterprise has a holding of 25 % to less than 50 % in the applicant enterprise;
  • the applicant enterprise does not draw up consolidated accounts which include the other enterprise, and is not included by consolidation in the accounts of the other enterprise or of an enterprise linked to it.

Linked enterprises correspond to the economic situation of enterprises which form a group through the direct or indirect control of the majority of the capital or voting rights (including through agreements or, in certain cases, through individual shareholders), or through the ability to exercise a dominant influence on an enterprise. Such cases are thus less common and very different from the two preceding types. To avoid difficulties of interpretation for enterprises, the European Commission has defined this type of enterprise by adopting - wherever they are suitable for the purposes of the definition - the conditions set out in Article 1 of Council Directive 83/349/EEC on consolidated accounts, which has been in application for several years. An enterprise will thus generally know immediately that it is linked, since it is already required under that Directive to draw up consolidated accounts or is included by consolidation in the accounts of an enterprise which is required to draw up such consolidated accounts.

Staff headcount relevant to the definition of micro, small and medium-sized enterprises

The staff headcount is measured in annual work units (AWU), i.e. the number of persons who worked full-time within the enterprise in question or on its behalf during the entire reference year under consideration. The work of persons who have not worked the full year or have worked part-time is counted as fractions of AWU. Apprentices or students engaged in vocational training under an apprenticeship or vocational training and maternity or parental leave are not counted.

Legal value of the definition

The definition of micro, small and medium-sized enterprises is binding only for certain matters, such as State aid, implementation of the Structural Funds or Community programmes, particularly the Framework Programme on Research and Technological Development.

The European Commission nevertheless urges the Member States, the European Investment Bank and the European Investment Fund to use it as a reference. The measures taken in support of SMEs will then be more consistent and effective.

Timetable

To allow a smooth transition at Community and national level, the new definition has been used since 1 January 2005.

On the basis of a review of the application of the definition of 6 May 2003, and taking account of any amendments to Article 1 of Directive 83/349/EEC on the definition of linked enterprises within the meaning of that Directive, the Commission will if necessary amend this definition, particularly the ceilings for turnover and for the balance-sheet total, in order to take account of experience and economic developments in the European Union.

Background

The Commission adopts a new definition of micro, small and medium-sized enterprises to replace, from 1 January 2005, the definition laid down in Recommendation 96/280/EC.

REFERENCES

ActEntry into forceDeadline for transposition in the Member StatesOfficial Journal
Recommendation 2003/361/EC1.1.2005-OJ L 124 of 20.5.2003
Last updated: 08.08.2007

See also

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