With their adoption of a report by Klaus-Heiner Lehne (EPP, Germany), MEPs expressed their support, on 10 March, for the European Commission’s proposal to exempt micro-companies from the obligation of drawing up annual accounts. “We are talking about very small companies, the baker on the corner, the butcher and all these small businesses we wish to exempt from accounting obligations,” the rapporteur had explained a few days earlier, in Strasbourg. The plenary voted 445 to 196, with 21 abstentions, in favour of changing accounting rules, in particular the fourth Company Law Directive (78/660/EEC).

EASING ADMINISTRATIVE BURDEN

If the Commission obtains the Council’s go-ahead, micro-companies can be exempted by the member states from drawing up annual accounts, the aim being to strengthen their competitiveness and release their growth potential. Over four million companies are concerned by this EU measure. The proposal covers all small businesses that meet two of the following three criteria: 1. balance sheet total of less than €500,000; 2. net turnover of less than €1 million a year; and 3. fewer than ten employees in the course of the year. The only obligation maintained would be to keep records of the company’s business transactions and its financial situation in order to maintain a certain level of accounting requirements. According to Lehne, this modernisation of a directive that is over 30 years old in response to an EP resolution is meant simply to adapt it to present-day realities: “Directive 78/660/EEC deals with large SMEs and leaves micro-companies on the sidelines,” said Lehne. “Drawing up a balance sheet does not correspond at all to the needs of micro-businesses.” His resolution nevertheless gives member states the choice of whether or not to exempt micro-entities, taking into account the national situation in terms of the “number of companies covered by the thresholds”.

MIXED OPINIONS

During the debate in plenary, on 8 March, MEPs’ opinions on this proposal were mixed. Several Socialists (along with ecologists and United Left members) expressed support for the amendment by Dirk Sterckx (ALDE, Belgium) to reject the proposal so that a more comprehensive impact study could be conducted. “Giving member states the opportunity to exempt small businesses on a sporadic basis goes against the principle of equal treatment and will create distortions of competition,” argued Françoise Castex (S&D, France). This opinion is shared by the European Association of Craft, Small and Medium-Sized Enterprises (UEAPME), including its member, the Association of Chartered Certified Accountants (ACCA), and the European Federation of Chartered Accountants and Auditors of SMEs (EFAA). According to these three organisations, such an exemption will contribute less to net profits, as defended by the Commission (which estimates the savings at €6.3 billion), than to an unfair internal market.

The day after this vote, attention turns to the Council, which will have to work out a compromise. A minority of countries are blocking the measure: Austria, Italy, Portugal, Luxembourg, France, Malta, Ireland, Greece, as well as Spain and Belgium, the present and future Council Presidencies.

Background

Directive 78/660/EEC applies to certain partnerships and all companies with limited liability, although the member states can exempt banks, other financial institutions and insurance companies. Annual accounts include the balance sheet, the profit and loss account and the annex. The directive sets out principles that govern the drawing up of these documents.

On 18 December 2008, Parliament adopted a resolution calling for the exemption of micro-entities, which led, in March 2009, to proposal 2009/0035.