Simplified rules for small mid-cap companies

On Wednesday 25 February, three European Parliament committees voted in favour of proposals introducing the concept of small mid-cap companies (SMEs) and extending various exemptions to them that have hitherto been available to SMEs. The aim is to avoid borderline situations where a company’s obligations increase dramatically when it exceeds the SME threshold.

MEPs want SMEs to be defined as companies with fewer than 1,000 employees and a turnover of up to €200 million or total assets of up to €172 million (the Commission proposed 750 employees, €150 million turnover and €129 million total assets). At the same time, Parliament wants to ensure that support for SMEs is not diluted, that EU support is in line with the principle of ‘think small first’ and that the thresholds are reviewed every five years.

Lighter record-keeping obligations fordataprotection purposes

Under the new law, the existing exemptions for SMEs from record-keeping obligations under the General Data Protection Regulation (GDPR) will be extended to business management companies (SMCs) when they process data that is not considered high risk to the rights of the data subject. The exemption will not apply to the processing of sensitive data, such as biometric data and data on ethnic origin, political opinions, religion, health or criminal records.

Better access to capital markets

The new definition of SMEs in theMarkets in Financial Instruments Directive(MiFID) would reduce administrative burdens. It would allow these companies (SMEs) to access expanding SME markets and benefit from simpler prospectus disclosure rules, in line with theupdatedProspectus Regulation. This would make it easier for SMEs to raise capital on capital markets.

An SME Growth Market is a special type ofmultilateral trading facilitycreated to help small and medium-sized enterprises (SMEs) access public funding, with rules tailored to smaller companies.

Simplification measures for batteries and fluorinated gases

Under theBattery Regulation, SMEs are exempt from certain obligations regarding due diligence policies on batteries. To reduce the administrative burden, MEPs want the requirement for economic operators to review, update and publish their due diligence policy to be extended to SMEs and applied every five years or more frequently if there is a significant change (instead of every three years, as in the Commission’s original proposal).

All importers and exporters of products and equipment containing fluorinated gases must register on the Fluorinated Gases Portal,in accordance with the EU Fluorinated Gases Regulation, which makes this burden disproportionate, especially for SMEs. MEPs want this registration requirement to be limited to imports subject to reporting requirements (10 tonnes of CO2 equivalent or more of hydrofluorocarbons or 100 tonnes of CO2 equivalent or more of other fluorinated greenhouse gases) and exports subject to an export limitation.

Support for critical infrastructure entities

The package also applies to legislation on the resilience of critical entities, where Member States must support critical entities in Southern Mediterranean countries as they implement obligations, and to trade defence instruments, which must be made more accessible to Southern Mediterranean countries and SMEs.

Fund

The introduction of tailored measures to support small and medium-sized enterprises was one of the recommendations ofthe Draghi report on EU competitivenessand theLetta report on the future of the single market.

The two laws voted on 25 Februaryare part of the fourth omnibus package on simplificationproposed by the European Commission in May 2025.

Next steps

The Economic Affairs and Civil Liberties committees approved the amendments to MiFID and the directive on the resilience of critical entities by 98 votes in favour, 6 against and 5 abstentions. Interinstitutional negotiations were authorised by 102 votes in favour, 6 against and 1 abstention.

The same committees, along with the Environment Committee, approved changes affecting the GDPR and rules on prospectuses, fluorinated gases, batteries and trade defence instruments by 158 votes in favour, 9 against and 10 abstentions. Interinstitutional negotiations were authorised by 166 votes in favour, 9 against and no abstentions.

Once the mandates have been approved by the EP plenary (scheduled for March), negotiations with the Council can begin.

For more information: European Parliament