The European Parliament has advanced a regulatory simplification package that would create a new official category of small mid-cap enterprises (SMCs) – companies that have grown beyond the EU’s existing SME threshold but remain well below the scale of large corporations. Three EP committees voted on the measures this week, with the broader package clearing its inter-institutional authorization vote 166 in favor, 9 against, and 0 abstentions, clearing the way for trilogue negotiations with the Council and Commission to begin. The initiative forms part of the fourth Omnibus simplification package that the European Commission proposed in May 2025.
Under current EU law, companies that surpass the SME ceiling – fewer than 250 employees and either up to €50 million in turnover or €43 million in total assets – face an abrupt jump in compliance obligations across data protection, capital markets, environmental regulation, and critical infrastructure rules. That structural cliff edge has drawn repeated criticism from growth-stage firms that find themselves subject to large-company regulatory frameworks almost immediately after crossing the SME threshold. Both the Draghi report on EU competitiveness and the Letta report on the future of the single market identified tailored SMC measures as a priority fix, and the Commission’s May 2025 Omnibus package responded directly to those recommendations.
What the EU Simplification Package Would Change
The European Parliament’s proposed SMC thresholds are set at fewer than 1,000 employees and either up to €200 million in turnover or up to €172 million in total assets – notably more expansive than the Commission’s original proposal of 750 employees, €150 million in turnover, and €129 million in total assets. The Commission estimated that approximately 38,000 companies across the EU would qualify under its initial thresholds, a figure that will rise under Parliament’s broader definition. Thresholds would be reviewed every five years.
On data protection, existing GDPR record-keeping exemptions available to SMEs under Article 30(5) would extend to SMCs – but only where processing is not considered high-risk for individuals’ rights. The carve-out does not apply to sensitive data categories, including biometrics, ethnic origin, political opinions, religion, health information, or criminal conviction records. Under the Batteries Regulation, SMCs would gain the same due diligence policy exemptions currently available to SMEs, with the requirement to review, update, and publicly disclose battery due diligence policies shifting from every three years – the Commission’s original proposal – to every five years, or more frequently only if a significant change occurs.
On fluorinated gases, the current F-gases Regulation requires all importers and exporters of F-gas-containing products to register in the EU’s F-gas Portal – a requirement Parliament identified as disproportionate for smaller firms. MEPs moved to limit that registration obligation to imports of 10 tonnes of CO₂ equivalent or more of hydrofluorocarbons, or 100 tonnes of CO₂ equivalent or more of other fluorinated greenhouse gases, and to exports subject to an existing export limitation. The package also introduces the SMC definition into the Markets in Financial Instruments Directive (MiFID), which would allow qualifying companies to access SME Growth Markets and benefit from simplified prospectus disclosure rules under the updated Prospectus Regulation.
Why the Rules Change Matters for Growth-Stage Businesses
The structural problem the SMC category addresses is specific: a company that crosses the 250-employee SME ceiling in the EU does not gradually inherit larger-firm obligations – it faces them immediately and across multiple regulatory regimes simultaneously. That dynamic creates a documented disincentive to grow, particularly for firms in data-intensive sectors subject to GDPR compliance costs and for manufacturers handling batteries or F-gases who face both environmental registration burdens and capital access constraints at the same time.
The MiFID and Prospectus Regulation changes carry direct financing implications. SME Growth Markets are multilateral trading facilities designed specifically to help smaller companies access public capital under adapted rules; excluding companies with 251 to 999 employees from those facilities has effectively pushed mid-scale firms toward more expensive or less accessible private financing channels. Easing prospectus disclosure requirements for SMCs parallels the kind of legislative support for growth-stage company access to capital that has surfaced in other policy contexts as well. The combined effect of lighter GDPR record-keeping, simplified F-gas registration, and capital markets access could meaningfully reduce the compliance cost stack that accumulates for firms in the 250-to-999 employee range.
What Critics and Watchdogs Have Raised
Business data industry association FEBIS called the GDPR component “a significant step to ease compliance burdens for medium-sized companies” while stressing that high-risk processing must remain fully documented – a position that reflects broad industry support paired with concern over legal consistency. Capital markets observers have flagged that easing SME Growth Market entry for SMCs could widen the listing pipeline, but warned that investor-protection and transparency standards must remain intact to avoid eroding market confidence. A separate definitional tension also exists: the European Investment Bank already applies a broader mid-cap definition of up to 3,000 employees for financing purposes, meaning firms that qualify for EIB mid-cap lending programs will not automatically fall within the new legislative SMC category and will not benefit from the regulatory exemptions it carries.
Where the Proposal Stands and What Comes Next
Both legislative packages cleared their committee votes and inter-institutional authorization this week. The economics and civil liberties committees adopted the MiFID and critical entities directive changes 98 in favor, 6 against, and 5 abstentions; the same committees plus the environment committee adopted the GDPR, prospectuses, F-gases, batteries, and trade defense changes 158 in favor, 9 against, and 10 abstentions. No objection was raised during the March 9–12 plenary session, formally opening trilogue negotiations between the Parliament, Council, and Commission.
In trilogue, the specific thresholds and the scope of exemptions in each affected regulation remain subject to adjustment before any final text is adopted. Once a political agreement is reached, firms will need to track implementation separately across each instrument, as MiFID, GDPR, the Batteries Regulation, the F-gases Regulation, and the critical entities directive each carry distinct national transposition timelines. The outcome of the Council’s position in those negotiations will determine whether Parliament’s higher SMC thresholds, particularly the 1,000-employee ceiling versus the Commission’s 750, survive into the final adopted text.