Definition of small and medium-sized enterprises (SMEs)

1) OBJECTIVE

To define micro-enterprises, small enterprises and medium-sized enterprises by their size, turnover or balance sheet total and their independence in order to better adapt measures which concern them.

2) ACT

Commission Recommendation (96/280/EC) of 3 April 1996 concerning the definition of small and medium-sized enterprises [Official Journal L 107 of 30.04.1996].

3) SUMMARY

Whilst the European Commission invites the Member States, the European Investment Bank and the European Investment Fund to apply a common definition of small and medium-sized enterprises, the Member States and the two financial institutions are not obliged to comply with it. Compliance with this definition is, however, compulsory when it comes to State aid allowing SMEs to benefit from preferential treatment over other enterprises, when such treatment is authorised by Community regulation.

Each enterprise must be independent - i.e. 25 % of the capital or the voting rights may not be owned by one enterprise, or jointly by several enterprises, falling outside the definition of an SME or a small enterprise. This threshold may be exceeded in the following two cases:

if the enterprise is held by public investment corporations, venture capital companies or institutional investors, provided no control is exercised over the enterprise;
if the capital is spread in such a way that an enterprise can legitimately declare that it is not owned up to 25 % by one or more enterprises falling outside the definitions of an SME.

The present recommendations give the following definitions:

Medium-sized enterprises have fewer than 250 employees. Their annual turnover should not exceed EUR 40 million or their annual balance-sheet total should be less than EUR 27 million.
Small enterprises have between 10 and 49 employees. They should have an annual turnover not exceeding EUR 7 million or an annual balance-sheet total not exceeding EUR 5 million.
Micro-enterprises are enterprises which have fewer than 10 employees.

Loss of medium, small or micro-enterprise status only occurs if the thresholds are exceeded over two consecutive financial years.

The European Commission can amend the recommendation, particularly the level of the thresholds, whenever it desires and normally every 4 years.

The Commission uses this definition in all Community programmes which concern small and medium-sized enterprises.

Act	Dateof entry into force	Final date for implementation in the Member States
Recommendation 96/280/EC	30/04/1996	31/12/1998

4) implementing measures

5) follow-up work

Commission Recommendation of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises (2003/361/EC) [Official Journal L 124 of 20 May 2003]. As from 1 January 2005, this Recommendation will replace Commission Recommendation 96/280/EC of 3 April 1996.

Last updated: 06.03.2003