The European Parliament pushed on Wednesday to establish a new business category, the small mid-capitalisation company, or SMC. The move is to reduce red tape for firms that have just outgrown the small enterprise status, or SME.
Three of the European Parliament’s heavyweight committees—Economic and Monetary Affairs (ECON), Environment, Public Health and Food Safety (ENVI), and Civil Liberties, Justice and Home Affairs (LIBE)—tried to smooth the path for Europe’s business people on 25 February.
At their common session, the MEPs targeted companies that outgrow the European Union’s small-and-medium-enterprise label yet still fall well short of corporate giants. They endorsed a package that defines a new category, the small mid-cap enterprise, or SMC, and extends to it a clutch of regulatory easements previously reserved for SMEs.
Outdoing the Commission
Parliament proposes that an SMC employ fewer than 1,000 staff and post either turnover below €200m or total assets under €172m. The European Commission had argued for ceilings of 750 employees, €150m in turnover and €129m in assets. By setting the bar higher, lawmakers hope that thousands of firms poised between start-up exuberance and blue-chip stability will continue to expand without facing a sudden spike in red tape.
The committees wrote another safeguard into the draft: the thresholds must be reviewed every five years. That reflects recommendations in the Draghi report on EU competitiveness and the Letta report on the future of the single market, both of which warned against “cliff-edge” effects when firms cross the SME line. Parliament also insists that the reform “follows a ‘think small first’ principle.”
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The first practical change concerns paperwork under the General Data Protection Regulation. Today SMEs benefit from lighter record-keeping duties when processing data that pose little risk to individuals. The proposal would extend that relief to SMCs, though the waiver would disappear when a firm handles sensitive categories such as health records, biometrics or criminal convictions.
Relief for routine data handlers
Companies that deal mainly in ordinary customer information—say, regional logistics providers or domestic e-commerce platforms—could dodge the need for constant compliance audits as they scale up.
Capital-raising is next in line for simplification. The text amends the Markets in Financial Instruments Directive so that SMCs may list on SME Growth Markets, venues designed for smaller issuers. It also grants them access to pared-down disclosure rules in the updated Prospectus Regulation. Lawmakers expect the lighter prospectus to shorten preparation time and cut advisory costs, making public fundraising more attractive to manufacturers and software developers alike.
Environmental filings would ease too. Under the Batteries Regulation, SMEs need refresh their due-diligence reports only every three years. MEPs want SMCs to share the privilege but on a five-year cycle, unless the firm’s circumstances change materially. For importers of goods containing fluorinated gases, compulsory registration in the F-gas Portal would apply only when consignments hit defined emission thresholds. Parliament argues that forcing tiny quantities through the portal places effort miles out of proportion to climate benefit.
Votes and next steps
Committee support proved resounding. What the package means on the ground depends on how ministries in the Council react. Finance officials may welcome smoother access to capital markets, but environment departments could question the longer battery-reporting cycle. The Commission’s own proposal for SMC thresholds was lower, so a compromise somewhere between the two sets of numbers seems probable.
Should the higher limits survive trilogue, founders approaching the top of the SME ladder will feel the difference first. GDPR audit software might need fewer upgrades; prospectus writers could trim pages, not just paragraphs; environmental-due-diligence schedules would lengthen.
Venture capitalists would gain comfort that an IPO on an SME Growth Market remains viable until a company pushes clearly past €200m a year in sales. A longer runway makes it less tempting for promising European firms to sell early to foreign buyers.
Implications for firms and investors
The economic effect is necessarily incremental. If five per cent of eligible SMCs each hire an average of 50 workers, “tens of thousands” of jobs could follow, the parliamanetary press release says.
Because mid-caps cluster in Germany’s Mittelstand, northern Italy’s industrial districts and rising technology hubs in central Europe, these additions would land far from the usual metropolitan magnets and so bolster regional cohesion.
Caveats remain. Privacy advocates warn that wider GDPR exemptions may dilute protections just as artificial-intelligence models devour ever larger troves of data. Green groups dislike extending battery-due-diligence intervals from three to five years. Parliament counters that the high-risk categories stay fully regulated and that governments may impose stricter checks where local conditions warrant.
A modest slope
Nobody claims the SMC label will solve Europe’s productivity malaise. Labour law, energy costs and patchy digital infrastructure keep many mid-caps awake at night, and those fields lie beyond the scope of the omnibus package. Yet policy gains are cumulative. Each trimmed form or lengthened reporting deadline lowers the background hum of bureaucracy and spares expanding firms the shock of leaping from one regulatory regime to another overnight.
By writing a middle tier into EU law, legislators send a message as well as a rulebook. Parliament wants to ensure that support for SMEs is not diluted, that EU support “follows a ‘think small first’ principle,” and that the new regime adjusts with the business cycle rather than crystallising at birth. If the Council agrees, Europe’s corporate ladder will have acquired a few extra rungs—small changes, perhaps, but ones that may steady the climb for the continent’s most ambitious companies.
