Draft bill to adjust the definition of SME and micro-enterprise affecting aid

This is an important issue, as the definition of a micro-enterprise or SME allows these businesses to access certain commercial advantages due to their small size. It is also a criterion for granting some aid to the self-employed or smaller businesses, using the number of employees or annual turnover as references.

According to the draft bill, the new thresholds defining micro-enterprises and SMEs will be applied retroactively from 1 January. To this end, the Commercial Code and the Capital Companies Act, which currently contain the definitions of each type of business, will be reformed.

Thus, the draft bill prepared by the Government expands the limits for considering a business a micro-enterprise or SME. The main consequence will be that a greater number of businesses will be able to benefit from the abbreviated procedure for submitting annual accounts, primarily in terms of turnover.

This is logical, as increasing the segment broadens the number of companies that will fall under these models, thereby slightly simplifying their commercial obligations. Ultimately, more businesses will benefit from this advantage, which is designed for smaller businesses.

From now on, according to the draft bill that the Government has put out for public consultation, to qualify for the simplified model of submitting annual accounts, businesses must meet at least two of the following requirements for two consecutive years:

• Have total assets of less than five million euros.
• Have a net turnover of no more than ten million euros.
• Have an average workforce of fewer than 50 employees during the year.

In parallel, the draft bill modifies the definition of small and medium-sized entities. Upon its entry into force, and retroactively effective from 1 January 2024, businesses must meet two of the following conditions for two consecutive years.

• The balance increases from 350,000 to 450,000 euros annually.
• Have a net turnover of no more than 900,000 euros. Previously, this limit was set at 700,000 euros.
• Have a workforce of fewer than ten employees.

• Have total assets of less than five million euros.
• Have a net turnover of no more than ten million euros. Previously, this limit was eight million euros.
• Have an average workforce of fewer than 50 employees during the year.

• Have total assets of less than twenty million euros.
• Have a net turnover of no more than forty million euros.
• Have an average workforce of fewer than 250 employees during the year.

In this regard, the European Commission estimates that around 6% of companies in the EU will benefit from this measure, which will also impact the sustainability reports that some businesses must prepare. This proportion could be even higher in Spain, considering it has a greater number of small and medium-sized enterprises compared to the rest of the European Union countries.

The new criteria defining micro-enterprises and SMEs will also affect other important aspects beyond the formula for presenting their annual accounts. For instance, they will impact the obligation to submit a sustainability report in the coming months, certain aid programs for small businesses, and the special financing conditions offered by some banks.

For example, in the area of aid, one of the requirements for accessing the Digital Kit is “to be a small enterprise, micro-enterprise, or self-employed”. With the change, a greater number of businesses would fall into this category, potentially giving them access to aid for implementing digital solutions.

However, the draft bill proposed by the Government only reforms the Capital Companies Act concerning the submission of annual accounts. Therefore, it will be necessary to wait to see if these changes will also affect subsidy programs for small and medium-sized businesses, as well as other issues, such as the special insolvency procedure for micro-enterprises that came into force last year. (Source AyE)