SME update

• European Commission proposes a new company category of small midcaps
• New strategy document outlines Commission’s future initiatives to foster Single Market integration
• European Parliament’s JURI Committee discusses future 28th regime initiative

European Commission proposes to create a new company category of small midcaps

The European Commission (EC) published its fourth omnibus simplification package on 21 May, this time focusing on small mid-cap (SMC) companies. The omnibus creates a new company category of SMC, alongside the existing SME category under EU legislation. It proposes to apply a range of legislative alleviations tailored to these entities.

SMCs are defined as companies that:

• Have fewer than 750 employees and
• A turnover of EUR 150 million or less, or
• A balance sheet total of EUR 129 million or less

The package proposes to extend existing SME benefits to SMCs, including:

• Simplified listing rules and
• Reduced prospectus requirements

In addition, the proposal introduces new simplification measures for both SMEs and SMCs:

• General Data Protection Regulation (GDPR) relief: exemption from keeping detailed records of activities involving the processing of personal data, if the activities are unlikely to pose high risks to individuals’ rights and freedoms
• Digitalisation of paper-based requirements in product legislation: many EU laws still require companies to provide paper-based documents (e.g., declarations of conformity, instructions for use). By digitising these requirements, companies can submit and distribute information more easily and national authorities can verify compliance more efficiently.

The new SMC category will also be used by the EC in future legislation to grant exemptions, alleviations or specific tailored requirements, similar to the current approach for SMEs.

The proposal now has to go through the EU co-legislative process. Both the European Parliament (EP) and the Council will adopt positions before reaching a compromise.

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Commission unveils new Single Market Strategy

To further integrate and modernise the EU Single Market, the EC presented its anticipated Single Market Strategy on 21 May.

Key highlights of the strategy:

• The EC will launch a European Business Wallet, enabling businesses to operate simply and digitally across the EU, at the end of 2025. The wallet features a digital identity for economic operators, which will enable sharing verified data and credentials and a legally valid notification channel, thus enabling seamless interactions with public administrations
• As part of the proposed 28th regime, the EC will introduce (probably in March 2026) common rules to facilitate the digital setup of businesses and their operations across the Single Market. The EC will explore the possibility for companies to establish themselves in Europe more rapidly, ideally within 48 hours
• The EC will develop (early 2026) a voluntary streamlined approach to help SMEs demonstrate their sustainability efforts and improve their access to sustainable finance, including by assessing the need to amend the Taxonomy Disclosures Delegated Act to allow financial institutions to better reflect their financing activities of those SMEs
• To unlock the full potential of e-invoicing, and stressing their strength in automating VAT and other reporting obligations, such as for sustainability reporting or customs formalities, the EC will (late 2026) issue a Recommendation to integrate an e-invoicing module into all accounting software solutions and auditing national certifications schemes, and launch a pilot project for the reuse of e-invoicing data for sustainability reporting

These and other measures aim to improve the business environment for European SMEs and start-ups, helping them thrive in the Single Market.

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Commission publishes its annual SME report

The latest EC’s Annual Report on SMEs, notes that despite ongoing economic headwinds and geopolitical uncertainties, Europe’s 26.1 million SMEs continue to demonstrate remarkable resilience and adaptability.

While SME real value added declined slightly in 2024 by -0.2%, the outlook for 2025 is notably more optimistic. A rebound of 1.6% is projected, largely driven by micro-SMEs.

This performance underlines the essential role of SMEs in maintaining the stability and dynamism of the EU economy. The number of SMEs is projected to grow steadily by 1.2% annually, showing continued confidence in entrepreneurial activity across Europe.

However, ongoing risks remain, such as the implications of new trade tensions, including the recent US tariff announcements.

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JURI Committee discusses 28th regime

The European Parliament’s (EP) JURI Committee held a public hearing on the EC’s planned 28th regime for businesses (in the form of a directive), on 13 May.

This regime would allow businesses -especially start-ups and small midcaps- operating across the EU Single Market to follow a single set of rules on insolvency, company and labour law, and tax, using online procedures and digital tools.

Niels Behrndt from the EC’s DG JUST stated the goal is to facilitate the creation of enterprises in the EU and their economic success. The company law regime would be part of a broader package, with a public consultation launching soon. The EC aims to present the proposal in March 2026.

MEPs broadly welcomed the initiative but raised concerns about the scope of companies that could benefit from the 28th regime:

• MEP Pascal Canfin (Renew, France) stressed that stock options should also benefit original employees
• MEP Marion Walsmann (EPP, Germany) called for a harmonised EU fund for companies under the 28th regime, a one-stop shop for company procedures, and unified reporting requirements
• MEP Rene Repasi (S&D, Germany), leading the EP’s opinion on the 28th regime, outlined the timeline: a workshop in early June, request of draft report translation sent on 27 June. He hopes the deadline for amendments to be in early September, and a committee vote in October.

European Parliament’s publishes draft report on access to finance for SMEs and scale-ups

The EP’s draft report on access to finance for SMEs and scale-ups, prepared by MEP Jorge Martín Frías (PfE, Spain) calls on the EC to consider actions in favour of SMEs.

These measures aim to strengthen SMEs’ financing landscape, including through reducing administrative burdens, unlocking private capital and savings, and fostering retail investment.

MEPs will table their amendments to the report in the coming weeks, and a final vote in the EP Plenary is scheduled for 20 October.

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