Evaluation confirms SME definition works well for the vast majority of the EU’s 23 million SMEs

The Commission published the findings of an evaluation concluding that the current definition of small and medium enterprises (SMEs) is still fit for purpose. 

Having SME status can facilitate businesses’ access to EU and other types of funding and support measures while often allowing for less burdensome administrative procedures. The report recommends maintaining the current SME definition, as it continues to provide a stable framework that does not discourage SMEs from scaling up. It also confirms that the definition still reflects current economic circumstances and is well-suited to support the Commission’s SME and broader economic policy objectives.

The existing definition provides a solid basis for the bulk of EU companies and is the preferred option of the large majority of SMEs.

While the evaluation raised particular issues that a change of definition would not properly address, the Commission will continue to tackle these by fully exploiting recent initiatives.

Relevant initiatives

The 2020 Communication on digitalisation of justice in the European Union stresses the importance of digital tools for businesses to access information, interact with authorities and enjoy access to justice. At the same time, it highlights authorities' and legal professionals' need for appropriate tools to communicate, exchange or submit documents securely cross-border.

The 2020 SME Strategy for a sustainable and digital Europe and 2021 Updating the 2020 New Industrial Strategy: Building a stronger Single Market for Europe’s recovery include the commitment to consult and assess the need for additional company law measures to facilitate cross-border expansion and scale-up by SMEs.

The 2021 Communication 2030 Digital Compass: the European way for the Digital Decade sets out digitalisation objectives. They stress the importance of providing key public services online (with a target of 100% of such services available online by 2030) and creating connected public administrations, applying the once-only principle. 

The upcoming report on the functioning of the Business Registers Interconnection System (BRIS), required by Directive 2012/17/EU, will pave the way for better linking of business registers.

The upcoming European single access point for financial and non-financial information publicly disclosed by companies (ESAP) will provide better access to relevant company information.

Together, the initiatives provide alternative means to address the issues raised during the evaluation. These include companies and managing authorities utilising digitalisation's potential to assess SME status, better application of the ‘only once’ principle, more linking of business registers and better information on ownership.

Next steps

The Commission will also work on more guidance on applying the definition rules adapted to the audience (companies and managing authorities) and perform thorough analyses of companies too large to fit the definition yet not considered a ‘large’ enterprise. An external study will assess the specific challenges these companies meet once they ‘outgrow’ the SME-phase. It will identify their needs and examine whether these are already addressed by general policy measures, taking into account the already existing support in areas such as state aid and equity finance (EIB support for small mid-caps and the Fund of Funds). The industrial strategy also provides tailored support measures.