Making the EU SME definition fit for SMEs in need of venture capital and other sources of growth finance
- Regarding the overall design of the EU SME definition, BusinessEurope holds the very broad consensus view that:
- the current EU SME definition (dated 2003) is pragmatic and workable for addressing a large number of issues which interest SMEs;
- the basic structure of this definition should not be fundamentally modified, except for increasing financial parameters to account for inflation since 2003.
- However, technical provisions in the SME definition artificially deprive some companies from the SME status. BusinessEurope’s members are unanimous in stressing that this calls for amending the EU SME definition.
For example, an SME will typically lose its SME status when it gets financed by a venture capital fund taking a majority participation in it. As a consequence, this SME can not apply anymore for attractive national or EU financial instruments making reference to the EU SME definition. This can affect the SME growth prospects. The same problem can occur when a private equity investment fund takes a majority participation in an SME.
- The SME definition contains a calculation methodology for officially granting the SME status to companies. The way this methodology is applied when a venture capital fund or a private equity investment fund takes a majority participation in an SME should be changed.
With regard to these cases, Article 3 of the EU SME definition should be amended to ensure that SMEs do not lose their SME status based on the wrong argument that they are part of a large group and integrated in a common group strategy.
This argument reflects a simplistic view of the SME economy and goes completely against the EU strategy to promote start-ups, scale-ups and innovation.