Growing companies in Europe just got a lifeline. Two European Parliament committees approved a deal on Thursday that stops firms from facing a sudden jump in obligations the moment they outgrow small business status.
Until now, the moment a company crossed the threshold from small and medium sized enterprise (SME) into “large enterprise” territory, its regulatory obligations jumped almost overnight. A firm quietly compliant with lighter rules on Monday could, on Tuesday, find itself buried in the same paperwork as a multinational. Brussels has spent the past year trying to fix that.
The result is a new category, small mid-caps, sitting in the gap between SMEs and big business. MEPs across economic affairs, the environment, and civil liberties backed the main agreement 123 votes to ten, with six abstentions. A companion file on financial market rules had cleared committee shortly before, 80 votes to four, with five abstentions. Both confirm a deal that the Parliament struck with the Council on 9 June, closing months of negotiation on the EU’s fourth Omnibus simplification package.
A new category for growing firms
The new tier is not a token gesture. Under the agreement, a small mid-cap employs fewer than 1,000 people and posts either an annual turnover of up to €200m or a balance sheet total of up to €172m.
That is a notably higher bar than the Commission originally proposed, at 750 employees, €150m in turnover and €129m in total assets. Parliament pushed for the wider definition throughout the talks, and the final figures reflect its position rather than the Commission’s opening bid, a small but telling sign of where the leverage sat in these negotiations.
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The exemptions themselves span several corners of EU law, from lighter data protection record-keeping to easier access to trade defence procedures and longer reporting cycles for battery due diligence. None of these changes will make headlines on their own.
Together, though, they add up to a meaningfully different regulatory experience for thousands of companies that had been treated, on paper, as equivalent to firms many times their size. The agreement also includes a review clause, requiring the Commission to assess existing small mid-cap definitions scattered across EU legislation, with an eye to eventually bringing them into line with one another.
Two files, two votes
Thursday’s session in fact dealt with two separate pieces of legislation, voted on in quick succession. A directive amending rules on financial markets and the resilience of critical infrastructure went first, cleared by the economic affairs and civil liberties committees alone. The regulation, covering data protection, trade defence and battery rules, followed a little later in a joint vote spanning three committees, drawing an even wider margin of support.
Both files still need to clear a vote in the full Parliament before the Council can formally sign off on the deal. Given the scale of Thursday’s majorities, that step looks set to be a formality. The Parliament is likely to vote on the files in September.
The idea for a small mid-cap category did not originate in Parliament. It traces back to the Draghi report on European competitiveness and the Letta report on the single market, both published in 2024, which warned that Europe’s regulatory architecture punished exactly the kind of companies it should be trying to keep.
A firm that outgrows SME status is, by definition, a success story. Under the old rules, that success came with a bureaucratic penalty. Thursday’s vote is Brussels’ attempt, however incremental, to stop treating growth as a problem to be regulated and start treating it as a result worth encouraging.
