The EU has proposed a new small mid-cap category aimed at fostering business growth among enterprises that have outgrown their initial classifications. This initiative, endorsed this week by three European Parliament committees, seeks to create a more supportive regulatory environment for these businesses, bridging the gap between small and medium enterprises and larger corporations.
Small mid-cap: A New Definition for Growing Businesses
Under the proposed definitions, small mid-cap enterprises will be classified as companies with fewer than 1,000 employees and either up to €200 million in turnover or €172 million in total assets. This broader definition expands beyond the initial thresholds suggested by the European Commission, which had recommended limits of 750 employees, €150 million in turnover, and €129 million in total assets.
Avoiding Administrative Burdens
The proposal aims to prevent situations where businesses face drastic increases in administrative obligations as they surpass current thresholds. Lawmakers are advocating for a system that allows these growing companies to thrive without being overwhelmed by regulatory demands.
Regular Review of Thresholds
Members of the European Parliament (MEPs) have stressed the importance of periodically reviewing the defined thresholds. They propose that these evaluations occur every five years to ensure that the measures remain relevant in an evolving economic landscape.
Supporting Existing Small and Medium Enterprises
In crafting these new regulations, the committees emphasised the need to protect the interests of smaller firms. There is a strong commitment to ensuring that support for existing small and medium enterprises (SMEs) is not diluted, aligning with the EU’s ‘think small first’ principle.
Regulatory Exemptions for Mid-Sized Firms
A significant aspect of the new legislation involves extending current exemptions from record-keeping obligations under the General Data Protection Regulation (GDPR) to mid-sized firms. This exemption will apply to data processing activities deemed low-risk while excluding sensitive information such as biometrics, health data, religious beliefs, or ethnic origins.
Improved Access to Capital
The new definition will also be incorporated into the Markets in Financial Instruments Directive, facilitating access to specialised growth markets for small mid-cap enterprises. By benefiting from simplified prospectus disclosure rules, these businesses will find it easier to raise essential funds through public capital markets.
Simplification of Environmental Regulations
The committees are also advocating for simplification measures regarding environmental regulations. One key proposal is to adjust the frequency with which economic operators must review and update their compliance policies under the Batteries Regulation, changing the requirement from every three years to every five years.
Addressing Disproportionate Requirements
In relation to the F-gases Regulation, lawmakers are pushing back against what they see as disproportionate registration requirements for smaller market players. They propose that registration should only be necessary for specific import and export volumes, particularly for hydrofluorocarbons when exceeding 10 tonnes of carbon dioxide equivalent.
Support from Member States
The legislative package also calls for member states to support small mid-cap enterprises in fulfilling their obligations associated with resilience in critical sectors. This support aims to ensure that these businesses can compete effectively on a global scale.
Recommendations from Key Reports
The tailored measures reflect insights from notable reports, including the Draghi report on competitiveness and the Letta report on the future of the single market. These documents have informed the development of the proposals, which are part of a broader effort to streamline regulations for businesses.
Next Steps in the Legislative Process
This set of proposals is a component of the fourth omnibus package on simplification, initially introduced by the European Commission in May 2025. Following the recent vote, inter-institutional negotiations have been authorised with substantial backing from the economics, civil liberties, and environment committees.
Moving Forward Without Objections
No objections were raised during the plenary session held from March 9 to March 12, 2026, which means that formal negotiations on the final laws can now proceed. The outcome of these discussions will be crucial in determining how effectively the EU can support the growth of small mid-cap enterprises in the coming years.
