EUROPA – Enterprise – The new SME definition – User guide and
Contents
1. They are requested to inform the Commission by 31 December 2004 of any measures they have taken further to it and no later than 30 September 2005 to inform it of the first results of its implementation Done at Brussels 6 May 2003 For the Commissian Erkki LIIKANEN Member of the Commission 20 5 2003 EN Official Journal of the European Union ANNEX TITLE DEFINITION OF MICRO SMALL AND MEDIUM SIZED ENTERPRISES ADOPTED BY THE COMMISSION Article 1 Enterprise An enterprise is considered to be any entity engaged in an economic activity irrespective of its This includes in particular er punc wi panohi ride totes in craft oc other acti ve heel ctae ciations regularly engaged in an economic activity Anice 2 Staff beadcount and financial ceilings determining enterprise categories 1 The category of micro small and medium sized enterpeises SMEs is made up of enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding EUR 0 millions F au kamal ur anke total not exceeding EUR 43 million 2 Within the SME category a small enterprise is defined as an enterprise which employs fewer than 0 persons and whose annual turnover and oe annual balance sheet total does not exceed FUR 10 million 3 Within the SME microenterprise is defined as an emerprise which employs fewer than 10 persons and whose annya turnover a sanos bolance host total doer net exceed SUR 2 million Artide 32. account taken of such relationships has been restricted to the relevant market or to adjacent markets refer ence being had where necessary to the Commission s definition of relevant markets in the Commission notice on the definition of relevant market for the purposes of Community competition law In order to avoid arbitrary distinctions between differen ublic bodies of a Member State and given the need for egal certainty it is considered necessary to confirm that an enterprise with 25 or more of its capital or voting rights controlled by a public body is not an SME In order to ease the administrative burden for enter rises and to simplify and speed up the administrative ing of cases for which SME status is required it is appropriate to allow enterprises to use solemn declara tions to certify certain of their characteristics j FI 18 7 1985 p T 1 283 27 10 2001 p 28 Ort OfL OJ L 222 14 5 1978 p L1 oe 372 5 12 1997 p 5 33 34 Annex Il Text of the Recommendation L 124 38 C an his to establish in detail the composition of the staff headcount for SME definition purposes In order to promote the development of vocational training and sandwich courses it is desirable when calculating staff numbers to disregard apprentices and students with a vocational training contract Similarly maternity or parental leave periods should not be counted 16 The various types of enterprise d
3. applies to the applicant enterprise O Autonomous In this case the data filled in the box below result from the accounts of the enterprise applicant enterprise only Fill in the declaration only without annex O Partner enterprise Fill in and attach the annex and any additional sheets then complete the O Linked enterprise declaration by copying the results of the calculations into the box below Data used to determine the category of enterprise Calculated according to Article 6 of the Annex to the Commission Recommendation 2003 361 EC on the SME definition Reference period Headcount AWU Annual turnover Balance sheet total All data must be relating to the last approved accounting period and calculated on an annual basis In the case of newly established enterprises whose accounts have not yet been approved the data to apply shall be derived from a reliable estimate made in the course of the financial year EUR 1 000 Important Compared to the previous accounting period there is a change regarding the data which could result in a change O No O Yes in this case fill in and attach a of category of the applicant enterprise micro small declaration regarding the previous medium sized or big enterprise accounting period 7 Signature Name and position of the signatory being authorised to represent the enterprise sss I declare on my honour the accuracy
4. consolidated if they exist To them are aggregated proportionally the data of any possible partner enterprise of that linked enterprise situated immediately upstream or downstream from it unless it has already been included through consolidation Such partner enterprises are treated like direct partner enterprises of the applicant enterprise Their data and a partnership sheet have therefore to be added in Annex A To be determined by the Member State according to its needs C Chairman CEO Director General or equivalent If the data of an enterprise are included in the consolidated accounts to a lesser proportion than the one determined under Article 6 paragraph 2 the percentage rate according to that article should be applied Definition Article 6 paragraph 3 second sub paragraph 49 50 Annex IV Measures to prevent abuse of the definition Measures to prevent abuse of the definition One of the main objectives of the new definition is to ensure that support measures are granted only to those enterprises which genuinely need them It is important to stress that the definition contains several anti circumvention measures designed to reserve the advantages of SME support programmes to real SMEs In this respect the simplified approach of the present guide must not be used to justify artificial corporate architecture aimed at by passing the definition Thus an enterprise for instance having three invest
5. proportionally the data of any possible partner enterprise of that linked enterprise situated immediately upstream or downstream from it unless it has already been included through consolidation B CALCULATION METHODS FOR EACH CASE In case 1 The consolidated accounts serve as the basis for the calculation Fill in Box B 1 below Box B 1 Headcount AWU Annual turnover Balance sheet total Total Where in the consolidated accounts no headcount data appears the calculation of it is done by adding the data from the enterprises to which the enterprise in question is linked EUR 1 000 The data entered in the Total row of the above table should be entered in line 1 of the table in the Annex to the declaration Identification of the enterprises included through consolidation Linked enterprise Address Registration Names and titles of the name identification of registered office VAT number principal director s A B C D E To be determined by the Member State according to its needs Chairman CEO Director General or equivalent Important Partner enterprises of such a linked enterprise which are not yet included through consolidation are treated like direct partners of the applicant enterprise Their data and a partnership sheet should therefore be added in Annex A In case 2 For each linked ente
6. 92 894 7909 4
7. Recommendation 96 280 EC of 3 April 1996 concerning the definition of small and medium sized enterprises was based on the idca that the existence of different definitions at Commu cies Following the logic of a single market without internal frontiers the treatment of enterprises should be based on a set of common rules The pursuit of such an approach is all the more necessary in view of the exten sive interaction between national and Community measures assisting micro small and medium sized enter prises SME for example in connection with Structural Funds or research It means that situations in which the Community focuses its action en a given category of SMEs and the Member States on another must be avoided In addition ee that the applica tion of the same Commission the the European Investment Fund EIF would improve the consistency and effectiveness of policies ig SMEs and would therefore limit the risk of jon of competition Recommendation 96 280 EC has been Level sd widely by the Member States and the definition contained in the Annex thereto has been taken over in Commission Regulation EC No 70 2001 of 12 January 2001 on the application of Articles 87 and 88 of the EC Treaty to State aid to small and medium sized Apart from the need to adapt Recommendation 96 280 EC to Ty OTT 107 30 4 1996 p 4 OJ L 10 13 1 2001 p 33 in in economic developments pursuant to Article 2 of the Annex there
8. What if my partner is linked to another In this case 10096 of the data of the linked enterprise must be included in the data of your partner enterprise see 2 3 3 p 23 You then include in your own data the percentage equal to the holding of your partner enterprise see Art 6 3 p 37 and illustrations p 28 30 21 Establishing the data of my enterprise Art 6 2 6 3 and 6 4 If you are a partner enterprise you must add a proportion of the other enterprise s staff head count and financial details to your own data when determining your eligibility for SME status This proportion will reflect the percentage of shares or voting rights whichever is the higher that are held Thus if you have a 3096 stake in another enterprise you add 3096 of its headcount turnover and balance sheet to your own figures If there are several partner enterprises the same type of calculation must be done for each partner enterprise situated immediately upstream or downstream from yours Case of public bodies Art 3 4 An enterprise is not an SME under the new definition if 2596 or more of its capital or voting rights are directly or indirectly controlled jointly or individually by one or more public bodies The reason for this stipulation is that public ownership may give such enterprises certain advantages notably financial over others financed by private equity capital In addition it is often not possible to calculate
9. for two audiences The first are entrepreneurs running micro small or medium sized enterprises who are interested in applying for grants or loans aimed at SMEs These entrepreneurs may also want to know if they satisfy the criteria to benefit from specific legislative provisions for SMEs The second audience are the European national regional and local officials who draw up and run the various schemes process the applications and ensure that companies satisfy the eligibility criteria for support Efforts are also being made to facilitate the handling of SME applications for financial help or participation in specific programmes This is achieved through a model self assessment declaration which enterprises themselves can complete a copy is included in annex Ill p 40 This can then be sent to the relevant administrative department to establish the company s SME status when submitting an application Use of the declaration is voluntary for both enterprises and Member State administrations and its contents can be adapted to suit customary national usage 3 Commission communication Model declaration on the information relating to the qualification of an enterprise as an SME Official Journal C 118 p 5 15 of 20 May 2003 E Chapter 1 Why a new definition 1 Why a new definition istockphoto The new definition is the result of wide ranging discussions between the Commission Member States business
10. provision in its memorandum or articles of association OS donec is a shareholder in or member of another enterprise controls alone pursuant to an agreement other shareholders in or members of that enterprise a majority of shareholders or members voting rights in enterprise There is a presumption that no dominant influence exists if the investors listed in the second subparagraph of paragraph 2 are not involving themselves dicecily or indirectly in the management of the enterprise in question without prejudice 10 their rights as stakeholders L 124 39 35 36 Annex II Text of the Recommendation L 124 40 CE Official Journal of the European Union Enterprises any of the eclationships described in the first subparagraph through one oe more other enterprises or any one of the investors mentioned in paragraph 2 are also considered to be linked rear agent oer or rura relationships through natural person or ce S Onini vegan jointly are also considered linked 2A qnid W Ber SEN mir ST SS their activity in the same reke vant market or in adjacent markets An adjacent market is considered to be the market for a product or service situated directly upstream or downstream of the relevant market 4 Except in the cases set out in 2 second subparagraph an enterprise cannot A EA EE pa a ape n ts are directly or indirectly controlled jointly or individually by ane or more see griego ape ecu ce ame sr pr eme
11. rs rl ENTERPRISE AND b INDUSTRY PUBLICATIONS SME definitio User guide and model declaration Commission This guide contains Cover istockphoto Details and explanations of the new SME definition which took effect on 1 1 2005 A model declaration that individual companies may complete themselves when applying to SME support schemes in order to establish their SME status DISCLAIMER This SME User Guide serves as a general orientation for entrepreneurs when applying the new SME definition It does not have any legal value and does not bind the Commission in any way Commission Recommendation 2003 361 EC as published in the Official Journal of the European Union L 124 p 36 of 20 May 2003 is the sole authentic basis for determining the conditions regarding qualification as an SME Micro small and medium sized enterprises SMEs are the engine of the European economy They are an essential source of jobs create entrepreneurial spirit and innovation in the EU and are thus crucial for fostering competitiveness and employment The new SME definition which entered into force on 1 January 2005 represents a major step towards an improved business environment for SMEs and aims at promoting entrepreneurship investments and growth This definition has been elaborated after broad consultations with the stakeholders involved which proves that listening to SMEs is a key towards the successful
12. the relevant staff and financial data of public bodies Investors listed on pages 18 19 such as universities or autonomous local authorities which have the status of a public body under national law are not concerned by this rule They may hold a participation of between 2596 but no more than 5096 in an enterprise without it losing its SME status Applying the new SME definition 22 Chapter 2 How to calculate the data of partner enterprises The percentages given below are purely illustrative For further examples see annex I gt My enterprise A owns 33 of C and 49 of D while B has a 25 stake in my business To calculate my headcount and financial data add the relevant percentages of the data for B C and D to my total data MY TOTAL 100 of A 25 of B 33 of C 49 of D 23 2 3 3 Am a linked enterprise Art 3 3 This type of relationship corresponds to the economic situation of enterprises which form a group through the direct or indirect control of the majority of voting rights of an enterprise by another or through the ability to exercise a dominant influence on an enterprise Such cases are thus less frequent than the two preceding types Definition Two or more enterprises are linked when they have any of the following relationships One enterprise holds a majority of the shareholders or members voting rights in another One enterprise is entitled to appo
13. 0 lt 50 million cer 43 million in 1996 40 million in 1996 27 million Ns P lt 50 lt 10 vilton T lt 10 million in 1996 7 million in 1996 5 million a or 10 lt 2 million lt 2 million previously not defined previously not defined is ES A What is the definition of an employee National labour rules apply They vary from country to country for instance for temporary staff working as independent contractors or on hire from an interim employment agency You should contact your own authorities to establish how your national legislation defines the term employee For the contact details of your national authority please go to europa eu int comm employment_social esf2000 contacts en htm 15 2 2 1 Staff headcount Art 5 The staff headcount is a crucial initial criterion for determining in which category an SME falls It covers full time part time and seasonal staff and includes the following e Employees Persons working for the enterprise being subordinated to it and considered to be employees under national law Owner managers Partners engaged in a regular activity in the enterprise and benefiting from financial advantages from the enterprise Apprentices or students engaged in vocational training with apprenticeship or vocational training contracts are not included in the headcount N
14. 1983 based on Article 54 3 g of the Treaty and concerning consolidated accounts OJ L 193 of 18 7 1983 p 1 as last amended by Directive 2001 65 EC of the European Parliament and of the Council OJ L 283 of 27 10 2001 p 28 Definition Article 5 43 ANNEX TO THE DECLARATION CALCULATION FOR THE PARTNER OR LINKED TYPE OF ENTERPRISE Annexes to be enclosed if necessary Annex A if the applicant enterprise has at least one partner enterprise and any additional sheets Annex B if the applicant enterprise has at least one linked enterprise and any additional sheets Calculation for the partner or linked type of enterprise see explanatory note ri Reference period Headcount AWU Annual turnover Balance sheet total 1 Data of the applicant enterprise or consolidated accounts copy data from box B 1 in annex B 2 Proportionally aggregated data of all partner enterprises if any copy data from box A in annex A 3 Added up data of all linked enterprises if any if not included by consolidation in line 1 copy data from box B 2 in annex B Total EUR 1 000 Definition Article 6 paragraphs 2 and 3 All data must be relating to the last approved accounting period and calculated on an annual basis In the case of newly established enterprises whose accounts have not yet been approved the data to apply shall be derived from a reliable estimate mad
15. 2 regarding partner enterprises of the table in the Annex to the declaration PARTNERSHIP SHEET 1 Precise identification of the partner enterprise Name or business Hame aeri iom erret E a eara EO e cof rte e dd Oo n a BR RC ac ei Address of registered office Registration VAT number Names and titles of the principal director s 2 Raw data regarding that partner enterprise Reference period Headcount AWU Annual turnover Balance sheet total Raw data EUR 1 000 Reminder These raw data are derived from the accounts and other data of the partner enterprise consolidated if they exist To them are added 10096 of the data of enterprises which are linked to this partner enterprise unless the accounts data of those linked enterprises are already included through consolidation in the accounts of the partner enterprise If necessary add linkage sheets for the enterprises which are not yet included through consolidation 3 Proportional calculation a Indicate precisely the holding f of the enterprise drawing up the declaration or of the linked enterprise via which the relation to the partner enterprise is established in the partner enterprise to which this sheet relates Indicate also the holding of the partner enterprise to which this sheet relates in the enterprise drawing up the declaration or in the linked enterprise b The higher of these t
16. 2003 6 w 0 LE As regards the ceiling for the balance sheet total in the absence of any new aged it is justified to maintain the approach whereby the tumover ceilings are icd to a coefficient based on the statistical ratio between the two variables The statistical trend requires a greater increase to be made to the tumover ceiling Since the trend differs according to the size cateyory of the enterprise it is also appropriate to adjust the coeffi cient in order to reflect the economic trend as closely as possible and not to penalise microenterprises and small enterprises as opposed to medium sized enterprises This coefficient is very close to 1 in the case of microenter pe and small enterprises To simplify matters there re single value must be chosen for those categories for the turnover ceiling and balance sheet total ceiling As in Recommendation 96 280 EC the financial ceilings and the staff ceilings maximum limits and the Member States the EIB and the EIF may fix ceilings lower than the Community ceilings if they wish to direct their measures towards a specific category of SME In the interests of administrative simplification the Member States the EIB and the EIF may use only one criterion the staff headcount for the implementation of some of their policies However this does not apply to the various rules in competition law where the financial criteria must also be used and adhered to Following
17. Applying the new SME definition 2 1 Am I an enterprise Art 1 The first step to qualify as an SME is to be considered as an enterprise According to the new definition an enterprise is any entity engaged in an economic activity irrespective of its legal form The wording is not new It reflects the terminology used by the European Court of Justice in its decisions By being formally included in the recommendation the scope of the new SME definition is now clearly marked out Thus the self employed family firms partnerships and associations regularly engaged in an economic activity may be considered as enterprises It is the economic activity that is the determining factor not the legal form 2 2 What are the new thresholds Art 2 Once you have verified that you are an enterprise you have to establish the data of your enterprise according to the following three criteria e staff headcount annual turnover e annual balance sheet Comparing your data with the thresholds for the three criteria will allow you to determine whether you are a micro small or medium sized enterprise The article numbers refer to the annex of the European Commission s Recommendation of 6 May 2003 see Annex Il p 32 yet have approved annual accounts you should make a realistic bona fide estimate of the relevant data during the course of the financial year see Art 4 p 36 BALANCE SHEET 13 I
18. Types of enterprise taken into consideration in calculating staff numbers and financial amounts 1 An autonomous enterprise is any enterprise which is not classified as a partner enterprise within the meaning of paragraph 2 or as a linked enterprise within the meaning of paragraph Y 1 Turner enterprises ref rhrerr arem rper enki tbe meaning of terry tk rn de pof a 28 santana onc or more meaning or more or fights of another enterprise downstream enterprise dH However an be ranked as autonomuus and thus as not any ses even if this 25 Vener memorie ere pe irr nerit vi OA Pra gre via meaning of paragraph 3 either individually or jointly to the enterprise in question sce cd si ty wh ve ope wel Ps uin a roe de total investment of those business angels in the same enterprise ts less than EUR 1 250 000 b universities or non profit research centres c institutional investors including regsonal development funds 4d autonomous local authorities with an annual budget of less than EUR 10 million and fewer than 5 000 inhabitants 3 Linked enterprises are enterprises which have any of the following relationships with each other a an emerprise has a majority of the shareholders or members voting rights in another enterprise tb has the to of the members of the administrative ee gr right Pt al management OF Biesubi aca riii o BRE MS enterprise purwiant to a contract entered into with that enterprise or to a
19. as in addition the subject of two open consultations on the Internet After work lasting for more than one year there was almost complete consensus despite the diversity of the objectives pursued All those who contributed to the revision felt that it is important that the increased legal certainty and improved recognition of the economic reality should be accompanied by an effort by administrations to simplify and speed up the administrative handling of cases requiring qualification as a micro small or medium sized enterprise To this end offering enterprises the possibility to complete themselves a concise declaration was considered a modern and convenient method This declaration could if necessary be completed on line and could also function as a practical users manual for enterprises The document attached to this Communication is a model for such a declaration It is in no way mandatory as regards its use or content either for enterprises or for the administrations of the Member States but is designed as one possible example amongst others Such declarations are without prejudice to the checks or investigations provided for under national or Community rules JOL 124 of 20 05 2003 p 36 C Commission Decision 2000 690 EC of 8 November 2000 setting up an Enterprise Policy Group OJ L 285 of 10 11 2000 p 24 If those Member States using the definition of SMEs wish to speed up the processing of administrative files it would of cou
20. d into force on 1 January 2005 and will apply to all the policies programmes and measures that the Commission operates for SMEs For Member States use of the definition is voluntary but the Commission is inviting them together with the European Investment Bank EIB and the European Investment Fund EIF to apply it as widely as possible Objectives of this guide This guide presents the changes being made by the new definition and the reasons for them see chapter 1 p 8 It then explains how to determine if an enterprise can qualify as an SME by following a step by step approach see chapter 2 p 11 Commission Recommendation 96 280 EC of 3 April 1996 concerning the definition of small and medium sized enterprises Text with EEA relevance Official Journal L 107 p 4 9 of 30 April 1996 Commission Recommendation 2003 361 EC of 6 May 2003 concerning the definition of micro small and medium sized enterprises Text with EEA relevance Official Journal L 124 p 36 41 of 20 May 2003 N Photos com Photos com Since the average European enterprise employs no more than six people most can be considered as SMEs However the new definition takes into account possible relationships with other enterprises In certain cases those relationships particularly if they create significant financial links with other enterprises may imply that an enterprise is not an SME This guide is primarily designed
21. dered SMEs when those programmes were adopted Legally binding commitments entered into by the Commission on the basis of such programmes will remain unaffected see Article 8 2 of the definition DS 5 3 E 8 2 o To promote innovation and improve access to Research amp Development R amp D Specific provisions now apply to universities and non profit research centres enabling them to have a financial stake in an SME This cooperation will benefit both parties It strengthens an enterprise by giving it a worthwhile financial partner and access to R amp D It also offers universities and research centres a route for the practical application of their innovative work To take account of different relationships between enterprises One of the main objectives of the new definition is to ensure that support measures are granted only to those enterprises which genuinely need them For this reason it introduces methods to calculate the staff and financial thresholds to gain a more realistic picture of the economic situation of an enterprise To this end a distinction has been introduced between different types of enterprises autonomous partner and linked see chapter 2 on next page The new definition also contains safeguards to prevent abuses of SME status see annex IV p 50 Clear instructions are given on how to treat particular relationships between an SME and other enterprises or investors when calculating t
22. e in the course of the financial year Definition Article 4 The data of the enterprise including the headcount are determined on the basis of the accounts and other data of the enterprise or where they exist the consolidated accounts of the enterprise or the consolidated accounts in which the enterprise is included through consolidation The data entered in the Total row of the above table should be entered in the box Data used to determine the category of enterprise in the declaration 44 Annex III e Model Declaration ANNEXA Partner enterprises For each enterprise for which a partnership sheet has been completed one sheet for each partner enterprise of the applicant enterprise and for any partner enterprises of any linked enterprise of which the data is not yet included in the consolidated accounts of that linked enterprise the data in the partnership box in question should be entered in the summary table below Box A Partner eter Headcount AWU Annual turnover Balance sheet total 9 name identification i 2 3 4 5 6 7 Total EUR 1 000 attach sheets or expand the present table if necessary Reminder This data is the result of a proportional calculation done on the partnership sheet for each direct or indirect partner enterprise The data entered in the Total row of the above table should be entered in line
23. e one exercising effective direct or indirect control over the other Partners are enterprises which are not autonomous but which are not linked to one another The applicant enterprise is a partner of another enterprise if it has a holding or voting rights equal to or greater than 25 in the other enterprise or the other enterprise has a holding or voting rights equal to or greater than 2596 in the applicant enterprise the enterprises are not linked enterprises within the meaning defined below which means among other things that the voting rights of one in the other do not exceed 50 Henceforth in the text the term Definition refers to the Annex to Commission Recommendation 2003 361 EC on the definition of SMEs Definition Article 3 In terms of the share of the capital or voting rights whichever is higher is applied To this percentage should be added the holding in that same enterprise of each enterprise which is linked to the holding company Definition Article 3 paragraph 2 An enterprise may continue being considered as autonomous when this 25 threshold is reached or exceeded if that percentage is held by the following categories of investors provided that those are not linked with the applicant enterprise a public investment corporations venture capital companies individuals or groups of individuals with a regular venture capital investment activity who invest equity capital in unquoted businesses busines
24. efined according to their relationship with other corres to objectively differing degrees of integration It is therefore appropriate to apply distinct procedures to each of those of enterprise when calculating the quantities repre senting their activities and economic power HEREBY RECOMMENDS Article 1 This Recommendation concerns the definition of micro small and medium sized enterprises used in Community poli cies applied within the Community and the European Economic Area 2 Member States the European Investment Bank EIB and the European Investment Fund EIF are invited a prises i ini gg Annex for their programmes di towards medium sized enterprises small enter prises or microcnterprises b to take the necessary steps with a view to using the size classes set out in Article 7 of the Annex especially where the monitoring of their use of Community financial instru ments is Official Journal of the European Union 20 5 2003 Anile 2 The ceilings shown in Article 2 of the Annex are to be as maximum values Member States the EIB and the EIF may fix lower ceilings In implementing certain of their policies they may also se io apply only the criterion of number of aniors except in governed by the various rules on State Article 3 This Recommendation will replace Recommendation 96 280 EC as from 1 January 2005 Article 4 This Recommendation is addressed to the Member States the EIB and the EIF
25. erived from a bona fide estimate made in the course of the financial year Arrkde 5 Staff headcount bids evar viparen corper emilia ve pte nr ph nig advenas re wee tre ed Meier eer ess deer ed e inane pronior eur pe not L a agent endi acsi m makean h oor T i AE a a employees b persons working for the enterprise being subordinated to it and deemed to be employees under national law kc owner managers i partners engaging in a regular activity in the enterprise and benefiting from financial advantages from the enterprise students engaged in vocational with an vocational contract are not ie ew ragja a aiarar tme ni poco qd WT il Article 6 Establishing the data of an enterprise 1 tn the case of an autonomous enterprise the data including the number of staff are determined exclusively on the basis of the accounts of thar enterprise 20 5 2003 20 5 2003 CENT Official Journal of the European Union 2 The data i the headcount of an or linked enterprises are determined PA base of ropes rid otter ana toe seeing iecur ugs eer Por some of ie came prise or the consolidated accounts in which the enterprise is included through consolidation To the data referred to im the first subparagraph are added the data of any partner enterprise of the enterprise in ques tion situated immediately upstream or downstream from it is proportional fo the percentage interest in the capital or voting rights whichever is greater In the ca
26. erprises B has B C a stake of 7096 in C which C D itself has a stake of 60 ds ERU Linked Autonomous at in D as first sight but linked to a group 7096 To calculate my data at first sight my enterprise A would remain autonomous because each investor owns less than 2596 of my enterprise But because B C and D are linked to each other as a group they own 60 of my enterprise Therefore must add 10096 of the data of B C and D to the data of my own enterprise My enterprise A My TOTAL 100 of A 100 of B 100 of C 100 of D ll Text of the Recommendation IIl Model Declaration IV Measures to prevent abuse of the definition 31 32 L 124 36 Annex Il Text of the Recommendation LE Official Journal of the European Union 20 5 2003 COMMISSION COMMISSION RECOMMENDATION of 6 May 2003 concerning the definition of micro small and medium sized enterprises notified under document number C 2003 1422 Text with EEA relevance 2003 361 EC THE COMMISSION OF THE EUROPEAN COMMUNITIES regard to the Treaty establishing the Having European Community and in particular Article 211 second indent Whercas m In a report submitted to the Council in 1992 at the request of the Industry Council held on 28 May 1990 the Commission had limiting the proliferation of definitions of small and medium sized enterprises in use at Community level Commission
27. he enterprise s financial and staff figures In essence the new definition takes into account an SME s ability to call on outside finance For example enterprises which are linked to others with large financial resources could come above the ceilings and would not qualify for SME status 11 2 Applying the new SME definition Photodisc The new definition introduces three different categories of enterprises Each corresponds to a type of relationship which an enterprise might have with another This distinction is necessary in order to establish a clear picture of an enterprise s economic situation and to exclude those that are not genuine SMEs In general most SMEs are autonomous since they are either completely independent or have one or more minority partnerships each less than 25 with other enterprises see 2 3 1 p 16 If that holding rises to no more than 50 the relationship is deemed to be between partner enterprises see 2 3 2 p 20 Above that ceiling the enterprises are linked see 2 3 3 p 23 Depending on the category in which your enterprise fits you may have to include data from one or more other enterprises when calculating your own data The result of the calculation will allow you to check whether you comply with the staff headcount and financial thresholds set by the definition see 2 3 p 16 Enterprises coming above these lose their SME status 12 Chapter 2
28. her enterprise Where you do not draw up consolidated accounts and the enterprise to which you are linked is also linked in a chain to other enterprises you must add 100 of the data of all these linked enterprises to yours How to calculate the data of linked enterprises The percentages given below are purely illustrative For further examples see annex I 2 My enterprise A owns 51 of C and 100 of D while B has a 60 stake in my business As the holding in each case is above 50 I take 100 of the data from each of the four enterprises concerned when calculating my headcount and financial thresholds MY TOTAL 100 of A 100 of B 100 of C 100 of D gt 25 Conclusion Conc lusion The definition is an important tool for implementing efficient measures and programmes to support the development and success of SMEs Therefore Member States together with European Investment Bank and the European Investment Fund are invited to apply it as widely as possible We hope that this guide will be useful to SMEs wishing to benefit from the measures introduced by European national regional and local authorities according to this new definition Further refinements may be made to the new definition and the Commission will if necessary adapt it in the coming years to take account of experience and economic developments in the European Union The text of the 2003 Commission recommendat
29. hey are often confronted with market imperfections SMEs frequently have difficulties in obtaining capital or credit particularly in the early start up phase Their restricted resources may also reduce access to new technologies or innovation Therefore support for SMEs is one of the European Commission s priorities for economic growth job creation and economic and social cohesion E S b 3 E E o Introduction For an overview of the main funding opportunities available to European SMES consult the following internet page europa eu int comm enterprise entrepreneurship sme envoy index htm Photos com Photos com Importance of a European SME definition In a single market with no internal frontiers it is essential that measures in favour of SMEs are based on a common definition to improve their consistency and effectiveness and to limit distortions of competition This is all the more necessary given the extensive interaction between national and EU measures to help SMEs in areas such as regional development and research funding In 1996 a recommendation establishing a first common SME definition was adopted by the Commission This definition has been widely applied throughout the European Union On 6 May 2003 the Commission adopted a new recommendation in order to take account of economic developments since 1996 for the complete text see annex II p 32 of this guide It entere
30. ific problems micro enterprises face especially during the start up phase To improve access to capital Access to capital is a perennial problem SMEs encounter largely because they are often unable to give the guarantees traditional lenders require To help tackle this the new definition facilitates equity financing for SMEs by granting favourable treatment to certain investors such as regional funds venture capital companies and business angels gt without the enterprise losing its SME status see p 18 19 for more details The same applies to small local autonomous authorities with an annual budget of less than 10 million euro and fewer than 5 000 inhabitants They can invest in an SME up to a certain percentage without the enterprise concerned being at a disadvantage when applying for grants 5 Business angels can be defined as individuals or groups of individuals with a regular venture capital investment activity who invest equity capital in unquoted businesses see Article 3 2 a of the annex of recommendation 2003 361 EC concerning the definition of micro small and medium sized enterprises included at the end of this guide 10 kerri SS eae Chapter 1 Why a new definition PereyyyYr What about SME support agreed before 1 1 2005 As a transitional measure Community programmes which currently use the 1996 SME definition will continue to be implemented for the benefit of enterprises which were consi
31. implementation of the Lisbon goals G nter Verheugen Member of the European Commission Responsible for Enterprise and Industry Photos com a p gt SS def lon cC To unt of diff rent relation be O 2 Applying the new SME definition UJ 2 1 Am an enterprise d 2 2 What are the new thresholds a 2 2 1 Staff headcount IS 2 2 2 Annual turnover and balance sheet total 15 O 2 3 What else do take into account when calculating my data 16 2 3 1 Am an autonomous enterprise 16 2 3 2 Am a partner enterprise 20 q 2 3 3 Am I a linked enterprise 23 T O Conclusion 26 S Annexes 27 l Illustrative examples 28 Il Text of the Recommendation 32 Ill Model Declaration 40 IV Measures to prevent abuse of the definition 50 Introduction The category of micro small and medium sized enterprises SMEs is made up of enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding 50 million euro and or an annual balance sheet total not exceeding 43 million euro Extract of Article 2 of the Annex of Recommendation 2003 36 1 EC Micro small and medium sized enterprises SMEs play a central role in the European economy They are a major source of entrepreneurial skills innovation and employment In the enlarged European Union of 25 countries some 23 million SMEs provide around 75 million jobs and represent 99 of all enterprises However t
32. inition where applicable through a natural person or group of natural persons acting jointly 41 42 Annex III e Model Declaration and the applicant enterprise does not draw up consolidated accounts which include the other enterprise by consolidation and is not included by consolidation in the accounts of the other E E x 22 j5 enterprise or of an enterprise linked to it Type 3 Linked Enterprise This type corresponds to the economic situation of enterprises which form a group through the direct or indirect control of the majority of the voting rights including through agreements or in certain cases through natural persons as shareholders or through the ability to exercise a dominant influence on an enterprise Such cases are thus less frequent than the two preceding types In order to avoid difficulties of interpretation for enterprises the Commission has defined this type of enterprise by taking over 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 applied for many years An enterprise thus generally knows 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 The only two cases which are however not very freq
33. int or remove a majority of the administrative management or supervisory body of another A contract between the enterprises or a provision in the memorandum or articles of association of one of the enterprises enables one to exercise a dominant influence over the other One enterprise is able by agreement to exercise sole control over a majority of shareholders or members voting rights in another A typical example of a linked enterprise is the wholly owned subsidiary 24 Chapter 2 Applying the new SME definition What about franchises Two enterprises with a franchise are not necessarily linked It depends on the terms of each individual franchising agreement Only if this includes one of the four relationships listed on the previous page are the enterprises considered to be linked g LINKED ENTERPRISES My enterprise holds more than 5096 of the shareholders or members voting rights in another and or another holds more than 5096 in mine Q C GO Establishing the data of my enterprise Art 6 2 6 3 and 6 4 All 100 of the linked enterprise s data must be added to those of your enterprise to determine if you comply with the staff headcount and financial thresholds of the definition An enterprise generally knows immediately that it is linked since in most Member States it is required by law to draw up consolidated accounts or is included by consolidation in the accounts of anot
34. ion and the model declaration can be found from page 32 onwards E g H E z 9 Annexes Il Illustrative examples ll Text of the Recommendation Ill Model Declaration IV Measures to prevent abuse of the definition A communication containing a model declaration was published in the Official Journal of the European Union C 118 of 20 May 2003 It has since been the subject of two corrigenda The consolidated version contained in the annex has been drawn up for the purpose of this guide 27 28 Annex I e Illustratives examples Example 1 s C and D which ctively 3296 and A B B C B D te my data Linked Partner Partner a of C and B 3296 of C D Ent My enterprise A Example 2 A B Partner nius B D Partner Linked My enterprise A wp Partner STOP calculation Enterprises B a partners of m since they each of 3896 in my e B is also linked of B and D bec are linked and hand only 3896 of enterprise C 1 my enterprise to take into a of E because thi enterprise is not immediately my enterprise p 21 MY TOTAL 38 of B 30 Annex Illustratives examples Example 3 My enterprise A has three investors B C and D each owning 2096 of my capital or voting rights x These investors are them E Les selves linked to each other forming a group of linked ent
35. l investors their ability to give relevant advice to new entrepreneurs is extremely valuable Their invest ment in equity capital also complements the activity of venture capital companies as they smaller amounts at an earlier stage of the enterprise s life To simplify matters in particular for Member States and enterprises use should be made when defining linked enterprises of the conditions laid down in Article 1 of Council Directive 83 349 EEC of 13 June 1983 based on Article 54 3 g of the Treaty on consolidated accounts as last amended by Directive 2001 65 EC of the European Parliament and of the Council 0 in so far as these conditions are suitable for the purposes of this Recommendation To strengthen the incentives for investing in the a funding of an SME the presump tion of absence of dominant influence on the enterprise in question was introduced in pursuance of the criteria of Article 5 3 of Council Directive 78 660 EEC of 25 July 1978 based on Article 54 3 g of the Treaty on the annual accounts of certain of companies as last amended by Directive 2001 65 EC Account should also be taken in suitable cases of rela pas bolon Gerpis WARN care aa natural with a view to ensuring that only those enter prises which really need the accruing to SMEs from the different rules or measures in their favour actually benefit from them In order to limit the exami nation of these situations to the strict minimum the
36. mission does not formally define the concept of institutional investors They are usually seen as investors which trade large volumes of securities on behalf of a great number of individual small investors and which have no direct involvement in the management of the firms they invest in Mutual funds or pension funds for instance may be considered as institutional investors Exceptions Art 3 2 a d You may still be ranked as autonomous and thus as not having any partner enterprises even if this 2596 threshold is reached or exceeded by any of the following investors Public investment corporations venture capital companies and business angels Universities and non profit research centres Institutional investors including regional development funds Autonomous local authorities with an annual budget of less than 10 million euro and fewer than 5 000 inhabitants It is possible to remain autonomous while having one or more of the investors listed above Each of these may have a stake of no more than 5096 in your enterprise provided they are not linked to one another see 2 3 3 p 23 for the notion of linked enterprise Of course each investor has its rights as shareholder but may not go beyond these and influence the management of the enterprise in the sense of Art 3 3 of the definition linked enterprises 9 See footnote 5 page 9 for a definition of business angel The financial in
37. of jobs and a challenge for competitiveness Their ability to identify new needs of both end consumers and industrial operators their potential for absorbing new technologies and their contribution to apprenticeship vocational training and local development govern future advances in productivity of the entire European Union and its ability to achieve the objectives set at the Lisbon European Council The responsibility of local national and Community administrations in devising enterprise policies which take account of the specific needs and skills of these categories of enterprise is thus a question of major importance Promoting the development of such policies is the main objective of the new the Commission Recommendation on the definition of SMEs A more precise definition will ensure greater legal certainty More suited to the various sub categories of SME and taking account of the various types of relations between enterprises it will promote investment and innovation in SMEs and foster partnerships between enterprises These advantages should be acquired while preventing enterprises which do not have the economic characteristics or face the problems of genuine SMEs from benefiting unduly from measures targeted at SMEs This Recommendation has been the subject of extremely wide ranging discussions with business organisations with the Member States and individual business experts within the Enterprise Policy Group The preliminary draft w
38. of this declaration and of any annexes thereto Done at Signature To be determined by the Member State according to its needs 9 Chairman CEO Director General or equivalent Definition Article 4 paragraph 2 of the annex to Commission Recommendation 2003 361 EC EXPLANATORY NOTE ON THE TYPES OF ENTERPRISES TAKEN INTO ACCOUNT FOR CALCULATING THE HEADCOUNT AND THE FINANCIAL AMOUNTS I TYPES OF ENTERPRISES The definition of an SME distinguishes three types of enterprise according to their relationship with other enterprises in terms of holdings of capital or voting rights or the right to exercise a dominant influence Type 1 Autonomous Enterprise This is by far the most common type of enterprise It applies to all enterprises which are not one of the two other types of enterprise partner or linked An applicant enterprise is autonomous if it does not have a holding of 2596 or more in any other enterprise and is not 25 or more owned by any enterprise or public body or jointly by several linked enterprises or public bodies apart from some exceptions and 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 7 Type 2 Partner Enterprise This type represents the situation of enterprises which establish major financial partnerships with other enterprises without th
39. or do you include maternity or parental leave The staff headcount is expressed in annual work units AWU Anyone who worked full time within your enterprise or on its behalf during the entire reference year counts as one unit You treat part time staff seasonal workers and those who did not work the full year as fractions of one unit 2 2 2 Annual turnover and balance sheet total Art 4 The annual turnover is determined by calculating the income that your enterprise received during the year in question from its sales and services after any rebates have been paid out Turnover should not include value added tax VAT or other indirect taxes The annual balance sheet total refers to the value of your company s main assets7 6 See Article 28 of Council Directive 78 660 EEC of 25 July 1978 based on Article 54 3 g of the Treaty on the annual accounts of certain types of companies Official Journal L 222 p 11 31 of 14 August 1978 7 For more details see Article 12 3 of Council Directive 78 660 EEC of 25 July 1978 based on Article 54 3 g of the Treaty on the annual accounts of certain types of companies Official Journal L 222 p 11 31 of 14 August1978 16 Chapter 2 Applying the new SME definition What happens if go above a particular threshold If your enterprise exceeds the headcount or financial ceilings during the course of the reference year this will not affect your situation You retain the SME s
40. organisations and experts as well as two open consultations on the internet The changes reflect general economic developments since 1996 and a growing awareness of the specific hurdles confronting SMEs The new definition is more suited to the different categories of SMEs and takes better account of the various types of relationships between enterprises It helps to promote innovation and foster partnerships while ensuring that only those enterprises which genuinely require support are targeted by public schemes To update thresholds Developments in prices and productivity made it necessary to adjust the financial thresholds Their significant increase will allow an important number of enterprises to maintain their SME status and ensure their eligibility for support measures The staff headcount thresholds remain at their previous levels since to have raised them would have diluted the measures tailored for SMEs 4 Staff and financial thresholds introduced by the new definition are maximum figures Member States the EIB and the EIF may fix lower ceilings if they wish to direct measures towards a specific category of SME E 3 E B 9 To promote micro enterprises Throughout the Union more and more micro enterprises are being created The new definition takes this development into account by setting financial thresholds for them This refinement aims to encourage the adoption of measures addressing the spec
41. ors each owning 2096 of its capital or voting rights will not be considered as autonomous but as linked to a group of enterprises if the three are themselves linked to each other either directly or via one or more enterprises see Art 3 of the definition and example on p 30 Relationships between enterprises through natural persons are also taken into account when calculating the data of an enterprise if the enterprises in question are linked to the natural person in the sense of Article 3 3 of the definition they are active on the same market or in adjacent markets see Article 3 3 for a definition of an adjacent market In the 25 member EU there are e some 23 million SMEs representing 9996 of all EU companies e employing around 75 million people SME thresholds Micro enterprise Small enterprise Medium sized enterprise Staff 10 Turnover 2 million Balance sheet 2 million Staff 50 Turnover 10 million Balance sheet 2 million Staff 250 Turnover 50 million Balance sheet 43 million Autonomous enterprises Partner enterprises Linked enterprises Common abbreviations EIB European Investment Bank EIF European Investment Fund EU European Union AWU Annual work unit R amp D Research and development SME Small and medium sized enterprise EN NB 60 04 773 EN C
42. r adopted and in which the term Ly Aamir Aier ashe Bo or medium sized enterprise or any other similar term occurs shouk refer to definition contained in this Recommendation the 2 Asa transitional measure current Community programmes using the SME definition in Recommendation 96 280 EC will continue to be implemented for the benefit of the enterprises which were considered SMEs when those Seagetenaion a alipted Lapily Madlig condim autemd tien bx the Onmdulan on tho DIAD oF auch Without prejudice to the first any amendment of the SME definition within the programmes can be made only by adopting the definition con is tok BASCON GNAN te accapdancs ith DARDARA T Artide 9 Revision On the basis of a review of Oa polkasi E Sai Aata erg ye inter deer n beri dg M March 2006 and taking account n 1O UP fr e P e e enterprises within the meaning of that Directive the Commission will if contained n this ed th im fer tare and the pkey Apar papka agone L 124 41 37 38 Annex III e Model Declaration Commission communication Model declaration on the information to the qualification of an enterprise as an SME consolidated version This Communication aims to promote the application of Commission Recommendation 2003 361 EC C on the definition of SMEs which replaces Recommendation 96 280 EC of 3 April 1996 There are some 20 million micro small and medium sized enterprises in the European Economic Area They are a major source
43. r s qa eyes partner enterprise ox linked ennerprise including the data regarding the ceilings set out in Article 2 The declaration may be made even if the capital is spread Mtv a voy thet Rie an poieide to deerat Laily by whom iris hdd Gr which cue the SMEREN declare in good faith that t can legitimately presume that it is not owned as to 25 X or more by one enterprise or jointly by enter prises linked to one another Such declarations are made without prejudice to the checks and investigations provided for by national oe Community rules Article 4 Data used for the staff headcount and the financial amounts and reference period 1 The data to apply to the headcount of staff and the financial amounts are those relating to the latest approved accounting period calculated on an annual basis They are taken into account from the dae of closure of the accounts The amount selected for the turnover is calculated excluding value aided tax VAT and other indirect taxes 2 Where at the date of closure of the accounts an enterprise finds that on an annual basis it has exceeded or fallen below the headcount or financial ceilings stated in Article 2 this will not result in the loss or acquisition of the status of medium sized small or microenterprive unless those ceilings are exceeded over two consecutive accounting periods 3 In the case of newly established enterprises whose accounts have not yer been approved the data to apply is to be d
44. rprise including links via other linked enterprises complete a linkage sheet and simply add together the accounts of all the linked enterprises by filling in Box B 2 below Definition Article 6 paragraph 3 second sub paragraph Box B 2 Enterprise No Headcount AWU Annual turnover Balance sheet total 1 9 2 0 3 0 4 5 Total attach one linkage sheet per enterprise EUR 1 000 The data entered in the Total row of the above table should be entered in line 3 regarding linked enterprises of the table in the Annex to the declaration 47 48 Annexes LINKAGE SHEET only for linked enterprises not included by consolidation in Box B 1 Precise identification of the enterprise Name or business name Address of registered office corri oer ono Cr Dp RR YE ERO D GO Fre EXER E ERUREX POR ro fnac Registration VAT number sssssssessesssessesssessessnsesecsecsnsesecsnesucesessesuceseceuesuecseceuecseesssuecseesneeneeneesneeess Names and titles of the principal director s 2 Data on the enterprise Reference period Headcount AWU Annual turnover Balance sheet total Total EUR 1 000 These data should be entered in Box B 2 in Annex B Important The data of the enterprises which are linked to the applicant enterprise are derived from their accounts and their other data
45. rse be desirable for this declaration not to increase the overall administrative burden on enterprises but to replace whenever possible other requests for information previously required Also it could be preferably incorporated into the files relating to applications to take part in measures for which SME qualification is required To this end the model can be used in the form proposed in the annex It can also be completed simplified or adapted to take account of customary national administrative usage In order to maximise the simplification effect it would of course be desirable that the same model declaration established by a Member State be used for all administrative purposes in that Member State for which the SME qualification is required As the aim of the Recommendation is to provide a common reference framework for the definition of SMEs it would of course be counter productive if the use of such a model declaration were to lead to diverging interpretations of that definition Attention is therefore drawn to the fact that any other model declaration serving the same purpose must take account of all the provisions of the text of the Recommendation in order to determine the qualification of the applicant enterprise as a micro small or medium sized enterprise within this Recommendation s meaning It is the text of the Recommendation and not that of the declaration which sets out the conditions for the SME qualification In this regard i
46. s angels provided the total investment of those business angels in the same enterprise is less than EUR 1 250 000 b universities or non profit research centres c institutional investors including regional development funds d autonomous local authorities with an annual budget of less than EUR 10 million and less than 5000 inhabitants Definition Article 3 paragraph 2 second sub paragraph Ifthe registered office of the enterprise is situated in a Member State which has provided for an exception to the requirement to draw up such accounts pursuant to the Seventh Council Directive 83 349 EEC of 13 June 1983 the enterprise should nevertheless check specifically whether it does not meet one or other of the conditions laid down in Article 3 paragraph 3 of the Definition There are also some very rare cases in which an enterprise may be considered linked to another enterprise through a person or a group of natural persons acting jointly Definition Article 3 paragraph 3 Conversely there are very few cases of enterprises drawing up consolidated accounts voluntarily without being required to do so under the Seventh Directive In that case the enterprise is not necessarily linked and can consider itself only a partner To determine whether the enterprise is linked or not in each of the three situations it should be checked whether or not the enterprise meets one or other of the conditions laid down in Article 3 paragraph 3 of the Def
47. se of the greater percentage applies To the data referred to in the first and second is added 100 of the data of any enterprise which is linked directly of indirectly to the enterprise in question the data were not already included through consolidation in the accounts 3 For the application of h 2 the data of the partner enterprises of the enterprise in question are derived from their accounts and their lima comolidated if hey exia To these ia addes 100 of the data of exterprises which are linked 10 these partner enterprises unless their accounts data are already included through consolidation For the 9 Qe mu pp 2 Sor Bank Ne sni WORN it eben a ih M aue are to be from their accounts and their other eraty uane parahina Jes insegna ea qr partner enterprise of that linked emerpeise immediately upstream or downstream from it unless P dra Ren cul n e somali cu ath enema ka Puis perge dr tified under the second subparagraph of paragraph 2 4 Where in the consolidated accounts no staff data appear for a given enterprise staff figures are calculated nemen ioa TITLE H SUNDRY PROVISIONS Aride 7 Statistics The Commission will take the necessary measures 10 present the statistics that it produces in accordance with the following size classes of enterprises ta 010 1 person b 2 to 9 persons 10 to 49 persons 4d 50 to 249 persons Anie 8 References 1 Community legislation or any Community programme to be amended o
48. t is necessary to note that while it is compulsory to respect the staff headcount thresholds an SME may choose to meet either the turnover or balance sheet ceiling It does not need to satisfy both and may exceed one of them without losing its status The new definition offers this choice since by their nature enterprises in the trade and distribution sectors have higher turnover figures than those in manufacturing Providing an option between this criterion and the balance sheet total which reflects the overall wealth of an enterprise ensures that SMEs engaged in different types of economic activity are treated fairly As the table on page 14 shows the category of micro small and medium sized enterprises consists of enterprises which employ fewer than 250 persons and which have either an annual turnover not exceeding 50 million euro or an annual balance sheet total not exceeding 43 million euro ANNUAL TURNOVER 14 Chapter 2 Applying the new SME definition Within this category Small enterprises are defined as enterprises which employ fewer than 50 persons and whose annual turnover or annual balance sheet total does not exceed 10 million euro Micro enterprises are defined as enterprises which employ fewer than 10 persons and whose annual turnover or annual balance sheet total does not exceed 2 million euro THE NEW THRESHOLDS Art 2 Enterprise category Small Micro 295
49. t must be stressed that the model declaration proposed refers to the Seventh Council Directive 83 349 EEC concerning consolidated accounts Enterprises meeting one or other of the conditions set out in Article 1 of that Directive are in fact linked within the meaning of Article 3 3 of the definition of SMEs having regard to the nature of those conditions It is therefore convenient for enterprises which are obliged to draw up consolidated accounts pursuant to that Council Directive to know automatically that they are also linked within the meaning of the definition of SMEs In the event of a subsequent amendment to that Directive leading to a divergence between the two definitions the model declaration would however have to be adapted to take account of that In view of the timetable for the entry into force of any such possible amendment that adaptation could probably take place simultaneously with any possible future amendment to the Recommendation on the definition of SMEs pursuant to Article 9 of its annex 39 40 Annex III e Model Declaration MODEL DECLARATION INFORMATION ON THE SME QUALIFICATION Precise identification of the applicant enterprise Name or Business fiame oerte iecit erre bet PE GECOEER EEHEREERPE REP REOR SACRE HERI De SERRE Address of registered office Registration VAT number Names and titles of the principal director s Type of enterprise see explanatory note Tick to indicate which case s
50. tatus with which you began the year However you will lose the status if you go above the ceilings over two consecutive accounting periods Conversely you will gain SME status if you were previously a big enterprise but then fall below the ceilings for two consecutive accounting periods8 see Art 4 2 p 36 2 3 What else do I take into account when calculating my data To work out your individual data you will have to establish whether your enterprise is autonomous by far the most common category a partner or linked To do this you must take account of any relationships you have with other enterprises Depending on the category in which your enterprise fits you may then need to add some or all of the data from those enterprises to your own The calculations for each of the three types of enterprise are different and will ultimately determine whether you meet the various ceilings established in the SME definition Enterprises which draw up consolidated accounts or which are included in the accounts of an enterprise which does so are usually considered as linked 2 3 1 Am an autonomous enterprise Art 3 1 Definition You are autonomous if You are totally independent ie you have no participation in other enterprises and no enterprise has a participation in yours You have a holding of less than 25 of the capital or voting rights whichever is the higher in one or more other enterprises and or o
51. the endorsement of the European Charter for Small Enterprises by the European Council of Santa Maria da Feira in June 2000 microenterprises a cate poy of small enterprises particularly important for the velopment of entrepreneurship and job creation should also be better defined To gain a better understanding of the real economic position of SMEs and to remove from that category groups of enterprises whose economic power may exceed that of genuine SMEs a distinction should be made between various types of enterprises depending on whether they are autonomous wi they have holdings which do not email a controlling position partner or whether they are linked to other enterprises The current limit shown in Recommendation 96 280 EC of a 25 holding below which an enterprise is considered autonomous is maintained In order to encourage the creation of enterprises equity financing of SMEs and rural and local development enterprises can be autonomous despite a holding of 25 or more by certain categories of inves tors who have a positive role in business financing and creation However conditions for these investors have ay a2 ay ns Official Journal of the European Union L 124 37 not previously been specified The case of business angels individuals or groups of individuals pursuing a regular business of investing venture capital deserves special mention because compared to other venture capita
52. to consideration must be given to a number of difficulties of interpretation which have emerged in its application as well as the observations received from enterprises In view of the number of amendments now requiring to be made to Recommendation 96 280 EC and for the sake of clarity it is appropriate to replace the Recommendation lt should also be made clear that in accordance with of the Treaty as interpreted by European Communities an considered to be any entity regard engaged in economic activities annie engaged in a craft activity pev ger dip rowan r or family basis partnerships or associations regularly engaged in 2 i gees n criterion remains undoubtedly one of the most impor tant and must be observed as the main criterion intro ducing a financial criterion is nonetheless a necessary adjunct in order to the real scale and performance cad sp ition compared to its compe be desirable to use turn their nature higher tumover figures than those in the manufacturing sector Thus the turnover criterion should be combined with that of the balance sheet total a criterion which reflects the overall wealth of a business UK RUMP UL eer QUAE TUN CNN HS The turnower ceiling refers to enterprises engaged in very different types of economic activity In order not to restrict unduly the usefulness of applying the definition it should be updated to take account of changes in both prices and productivity 20 5
53. uent in which an enterprise can be considered linked although it is not already required to draw up consolidated accounts are described in the first two indents of endnote 5 of this explanatory note In those cases the enterprise should check whether it meets one or other of the conditions set out in Article 3 paragraph 3 of the Definition II THE HEADCOUNT AND THE ANNUAL WORK UNITS 7 The headcount of an enterprise corresponds to the number of annual work units AWU Who is included in the headcount The employees of the applicant enterprise persons working for the enterprise being subordinate to it and considered to be employees under national law owner managers partners engaging in a regular activity in the enterprise and benefiting from financial advantages from the enterprise Apprentices or students engaged in vocational training with an apprenticeship or vocational training contract are not taken into account in the headcount How is the headcount calculated One AWU corresponds to one person who worked full time in the enterprise in question or on its behalf during the entire reference year The headcount is expressed in AWUs The work of persons who did not work the entire year or who worked part time regardless of its duration and seasonal work is counted as fractions of AWU The duration of maternity or parental leaves is not counted Seventh Council Directive 83 349 EEC of 13 June
54. utsiders do not have a stake of 2596 or more of the capital or voting rights whichever is the higher in your enterprise If you are autonomous it means that you are not a partner or linked to another enterprise see Art 3 1 p 35 8 When completing the model declaration you should indicate whether there are any modifications in your data from the previous accounting period that could result in a change of category for your enterprise micro small medium sized or big see model declaration at the end of this guide AUTONOMOUS ENTERPRISES My enterprise holds less than 2596 capital or voting rights in another and or another holds less than 2596 in mine Q 6 SO Note It is possible for you to have several investors each with a stake of under 25 in your enterprise and still remain autonomous provided these investors are not linked to each other in the sense of 2 3 3 linked enterprises If the investors are linked you may be considered as a partner or linked enterprise depending on your individual situation see graphic on page 30 for an illustration Establishing the data of my enterprise Art 6 7 If you are autonomous you use only the number of employees and the financial data contained in your annual accounts to check if you respect the thresholds mentioned in 2 2 p 12 LEA 18 Chapter 2 Applying the new SME definition What are institutional investors The European Com
55. volvement of business angels in an enterprise must be below 1 250 000 euro 19 666 20 Chapter 2 Applying the new SME definition 2 3 2 Am a partner enterprise Art 3 2 This type of relationship represents the situation of enterprises which establish major financial partnerships with other enterprises without one exercising effective direct or indirect control over the other Partners are enterprises which are neither autonomous nor linked to one another Definition You are a partner enterprise if You have a holding equal to or greater than 25 of the capital or voting rights in another enterprise and or another enterprise has a holding equal to or greater than 2596 in yours You are not linked to another enterprise see 2 3 3 page 23 This means among other things that your voting rights in the other enterprise or vice versa do not exceed 5096 C PARTNER ENTERPRISES My enterprise holds at least 2596 but no more than 50 in another and or another holds at least 25 but no more than 50 in mine Q eo What about the data of my partner s partner To avoid a complicated and endless calculation the definition foresees the following rule where your partner enterprise itself has other partners you must add only the data of the partner enterprise s situated immediately upstream or downstream from yours see Art 6 2 p 37 and graphic on p 29
56. wo holding percentages should be applied to the raw data entered in the previous box The results of this proportional calculation should be given in the following table Partnership box Percentage Headcount AWU Annual turnover Balance sheet total Proportional results EUR 1 000 These data should be entered in Box A in Annex A To be determined by the Member State according to its needs Chairman CEO Director General or equivalent Definition Article 6 paragraph 3 first sub paragraph In terms of the share of the capital or voting rights whichever is higher To this holding should be added the holding of each linked enterprise in the same enterprise Definition Article 3 paragraph 2 first sub paragraph 45 46 Annex III e Model Declaration ANNEXB Linked enterprises A DETERMINE THE CASE APPLICABLE TO THE APPLICANT ENTERPRISE O Case 1 The applicant enterprise draws up consolidated accounts or is included by consolidation in the consolidated accounts of another enterprise Box B 1 O Case 2 The applicant enterprise or one or more of the linked enterprises do not establish consolidated accounts or are not included in the consolidated accounts Box B 2 Please note The data of the enterprises which are linked to the applicant enterprise are derived from their accounts and their other data consolidated if they exist To them are aggregated
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