An overview of EC policy on small and medium-sized enterprises (SMEs)

Abstract

The European Commission published a recommendation on 3 April 1996, in which for the first time it proposed a common and coherent definition of what constitutes an SME 1 based on a combination of several criteria. It was addressed particularly to the Member States, the European Investment Bank (EIB) and the European Investment Fund (EIF). This recommendation promotes the use of a definition of SMEs, small enterprises and micro-enterprises at both national and Community level, in order to increase the coherence, effectiveness and profile of all actions to assist such enterprises. Thus, an SME is defined as an enterprise which has fewer than 250 employees and an annual turnover not exceeding ECU 40 million or an annual balance-sheet total not exceeding ECU 27 million and in which no enterprise or enterprises which are not themselves SMEs own 25% or more of the capital or of the voting rights. Furthermore, other sources define small enterprises as fewer than 50 employees with a turnover not exceeding ECU 7 million or balance-sheet total not exceeding ECU 5 million, together with the independence criterion and micro-enterprises as fewer than 10 employees. Since Commission departments are obliged to comply with this Recommendation, the application of the same definition to all community programmes for SMEs should make it possible to improve the coherence between these programmes and to improve coordination both among them and between national aid measures for SMEs. This is due to the great disparities currently existing between them and the need to allow some flexibility so that local and regional circumstances can be taken into consideration.