Definition of Small and Medium-sized Enterprises
| Autonomous – Independent – Affiliated Enterprise |
The prerequisite for a company to be recognized as an SME is that it respects the limits on the number of staff and either the limits of the balance sheet total or those of turnover.
Especially:
| VERY SMALL BUSINESS | Employs from 0 to 10 people staff and its annual turnover, as well as its balance sheet, do not exceed 2.000.000 € |
| SMALL BUSINESS | Employs less than 50 people and its annual turnover, as well as its balance sheet, do not exceed 10.000.000 € |
| MEDIUM– ENTERPRISE | Employs less than 250 people and its annual turnover does not exceed 50.000.000 €, while its annual balance sheet does not exceed 43.000.000 € Employs less than 250 people and its annual turnover does not exceed 50.000.000 €, while its annual balance sheet does not exceed 43.000.000 € |
| LARGE ENTERPRISE | It employs more than 250 people and its annual turnover exceeds 50.000.000 €, while its annual balance sheet exceeds 43.000.000 € |
Regarding the calculation of turnover limits, we distinguish:
- The autonomous enterprise with the financial data and the number of staff based exclusively on the accounts of that enterprise.
- The enterprise that has partner companies,whose turnover limits are the result of the aggregation of the company’s data and the data of the cooperating companies.
- The enterprise which is linked to other enterprises and which adds to its data 100% of the data of the enterprises with which it is affiliated.
The definition of SMEs distinguishes 3 types of enterprises (autonomous, with partner enterprises and affiliated with other enterprises) depending on the type of relationship they have with other enterprises in terms of participation in the capital, the right to vote or the right to exercise a sovereign choice.
Autonomous enterprise
It is the most common case. These are simply all enterprises that do not belong to either of the other two types of enterprises (cooperating or affiliated). An enterprise is autonomous if:
- does not have a 25% or more stake in another business
- is not held directly by 25% or more by another undertaking or public body or jointly by several undertakings linked to each other or by public bodies, except in certain exceptions;
- it does not draw up consolidated accounts and does not contain in the accounts of an undertaking which draws up consolidated accounts and is therefore not an associated enterprise.
An enterprise may continue to be considered as autonomous if the 25% threshold is reached or exceeded when it comes to the following categories of investors (provided that they are not linked to the applicant undertaking):
- public holding companies, venture capital funds (“business angels”) investing equity capital in non-market-traded undertakings, provided that the total number of so-called “business angels” investments in the same enterprise does not exceed EUR 1 250 000
- non-profit-making universities or research centres
- institutional investors, including regional development funds
- autonomous local authorities with an annual budget of less than EUR 10 million; and numbering less than 5,000 inhabitants
Partner company
This formula determines the situation of undertakings which create significant financial partnerships with other undertakings, without one being able to exercise direct or indirect effective control over the other. Cooperatives are enterprises which are not autonomous but are not connected to each other. A business is “cooperating” with another enterprise when:
- holds a stake between 25% and less than 50% in it
- this other undertaking has a holding of between 25% and less than 50% in the applicant undertaking;
- the applicant undertaking does not draw up consolidated accounts including that other undertaking and is not included by means of consolidation in the accounts of that undertaking or undertakings linked to the latter.
Affiliated enterprise
This type corresponds to the financial situation of undertakings which are part of a group, through direct or indirect control of the majority of the capital or voting rights (including through agreements or, in some cases, through shareholders of natural persons), or through the power to exercise a dominant influence over an enterprise. These are therefore rarer cases which are generally distinguished in a very clear way from the two previous types. In the interests of avoiding difficulties in the interpretation of undertakings, the European Commission has identified this type of enterprise by including, when adapted to the subject of the definition, the conditions laid down in the first article of Council Directive 83/349/EEC on consolidated accounts, which has been in force for many years. An undertaking therefore generally knows directly that it is required under that directive to draw up consolidated accounts or that it is included by means of consolidation in the accounts of an undertaking which is required to draw up such consolidated accounts.
