# C_2009317EN.01006701.xml

| 23.12.2009 | EN | Official Journal of the European Union | C 317/67 |
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23.12.2009

EN

Official Journal of the European Union

C 317/67

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Opinion of the European Economic and Social Committee on the ‘Proposal for a Directive of the European Parliament and of the Council amending Council Directive 78/660/EEC on the annual accounts of certain types of companies as regards micro-entities’

COM(2009) 83 final/2 — 2009/0035 (COD)

(2009/C 317/11)

Rapporteur: Mr PEZZINI

Mr PEZZINI

On 20 March 2009 the Council decided to consult the European Economic and Social Committee, under Article 44(1) of the Treaty establishing the European Community, on the

Proposal for a Directive of the European Parliament and of the Council amending Council Directive 78/660/EEC on the annual accounts of certain types of companies as regards micro-entities

Proposal for a Directive of the European Parliament and of the Council amending Council Directive 78/660/EEC on the annual accounts of certain types of companies as regards micro-entities

COM(2009) 83 final/2 — 2009/0035 (COD).

The Section for the Single Market, Production and Consumption, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 22 June 2009. The rapporteur was Mr Pezzini.

At its 455th plenary session, held on 15 and 16 July 2009 (meeting of 15 July 2009), the European Economic and Social Committee adopted the following opinion by 144 votes to 10, with 17 abstentions.

1.   Conclusions and recommendations

1.1   The EESC stresses the necessity of meeting the needs of small and medium-sized businesses and the craft sector to enable them to take up the wide variety of structural challenges presented by a complex society, fully implementing the European Charter for Small Enterprises (1), in a process which is consistent with the Lisbon Strategy.

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1.2   The EESC notes the Commission's initiative to exempt micro-entities from administrative and accounting requirements, which are often burdensome and disproportionate to these businesses’ structure, and draws attention to the positions previously adopted in EESC opinions 1187/2008 (2) and 1506/2008 (3).

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1.3   The EESC considers it important that the initiative should be:

| — | obligatory: each State is required to introduce exemption criteria for micro-entities; |
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obligatory: each State is required to introduce exemption criteria for micro-entities;

obligatory

| — | flexible: Member States should be left the option of adapting the exemption criteria to their own specific situations, within common bounds; |
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flexible: Member States should be left the option of adapting the exemption criteria to their own specific situations, within common bounds;

flexible

| — | simple: changes should be easy to implement; |
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simple: changes should be easy to implement;

simple

| — | transparent: sufficient transparency within the single market must, at all events, be secured. |
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transparent: sufficient transparency within the single market must, at all events, be secured.

transparent

1.4   While the EESC is aware that the Community does not have sole competence in this area, it feels that in order to preserve the integrity of the Single Market and avoid discrimination between entities operating therein, the concessions granted in future measures revising the 4th and 7th Company Law Directives should automatically apply to all micro-enterprises in the EU, in accordance with criteria clearly defined by each Member State.

1.5   In this regard, the EESC calls for an interinstitutional agreement with the same legal basis as the Better Regulation agreement (4), applying the guiding principle ‘Think small first’ and laying down a set of clear, transparent commitments at Community and national level to eliminate/cut red tape, to ensure that the principle is systematically applied in both legislative and implementing processes, especially when it comes to micro and small businesses.

Better Regulation

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1.6   Moreover, the EESC believes the Commission should submit a report to Parliament, the Council and the EESC three years after this proposal has entered into force, assessing the impact and operation of the exemption for micro-entities throughout the EU Member States and the savings actually made by European micro-entities.

2.   Introduction

2.1   Since the European Year of Small and Medium-sized Enterprises and the Craft Industry (5), which led to the creation of DG XXIII (6) and a number of European conferences (7), the Commission has made considerable endeavours to meet the needs of small and medium-sized businesses and the craft industry, enabling them to tackle the numerous economic and structural challenges facing them. Moreover, numerous EESC opinions have pointed this out (8).

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2.2   Small and medium-sized businesses are often subject to the same rules as large businesses. Rarely have their specific accounting needs have been analysed, and the rules on financial information are a considerable financial burden as well as barriers to the effective use of capital, which would be better invested in production and jobs.

2.3   Although the aim of improving the quality of limited liability companies’ accounts and increasing transparency is fundamentally important, the stricter obligations imposed on businesses are often particularly burdensome for micro- and small enterprises.

2.4   For this very reason, the Commission recently launched a proposal to exempt medium-sized companies from certain disclosure requirements and the requirement to draw up consolidated accounts (9); the proposal was welcomed by the EESC (10).

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2.5   The high administrative costs arising from Community legislation limit European businesses’ competitiveness. In addition, legislation on company law, accounting and auditing has not kept pace with the environment in which businesses operate. In practice, the directives ensuring the quality of financial reporting and auditing in the EU place high administrative burdens on businesses, especially smaller businesses.

2.6   According to the estimates made for the Commission, which do not seem to have a scientific or methodological structure, there are around 5,4 million micro-entities likely to be concerned by the exemption measure, and the overall administrative burden of complying with the administrative and accounting requirements laid down by the Directive is around EUR 6,3 billion per year.

2.7   The EESC underscores the Commission's undertaking to reduce administrative burdens for businesses by 25 % (11); it has unreservedly endorsed this commitment (12).

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2.8   The EESC believes that ‘The necessary steps should be taken to ensure that all Member States implement all directives in time and with a high level of quality, and to convince the national and regional governments and legislators to start their own simplification project targeting regulation, where “gold-plating” has happened by implementing European law’ (13).

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3.   The context

3.1   As part of the fourth stage of the Simplification of the Legislation on the Internal Market (SLIM) initiative, the 1st and 2nd Company Law Directives were amended.

3.2   The European Council of 8-9 March 2007 stressed that reducing administrative burdens is important for boosting the European economy, especially considering the impact of this on small businesses. It stressed that a strong joint effort is necessary to reduce administrative burdens within the EU.

3.3   The European Council of 13-14 March 2008 called on the Commission to identify new ‘fast track’ legislative proposals (14) in order to reduce administrative burdens. Accounting and auditing were identified as key areas.

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3.4   The European Small Business Act (15) presented by the Commission in June 2008, on which the EESC commented (16), also stressed the need for simplification for smaller businesses.

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3.5   Moreover, one of the key measures included in the European Economic Recovery Plan presented in late November 2008 was reducing the burden on small and medium-sized enterprises (SMEs) and micro-entities by, inter alia, ‘removing the requirement on micro-enterprises to prepare annual accounts’ (17).

inter alia

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3.6   For its part, the European Parliament, in its Resolution of 8 December 2008 (18), advocated removing financial reporting requirements for micro-entities in order to enhance their competitiveness and release their growth potential, calling on the Commission to come forward with a legislative proposal that allowed Member States to exempt local and regional undertakings from the scope of the 4th Directive (78/660/EEC).

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3.7   Directive 78/660/EEC has been amended several times over the past 20 to 30 years (19).

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4.   Gist of the Commission proposal

4.1   The Commission proposes to introduce the concept of micro-entities, already existing in some Member States, and to exclude them from the scope of the 4th (Accounting) Directive (78/660/EEC). To be granted the exemption micro-entities have to meet two of the following three criteria:

micro-entities

| — | maximum of 10 employees, |
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maximum of 10 employees,

| — | balance sheet total less than EUR 500 000, |
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balance sheet total less than EUR 500 000,

| — | turnover less than EUR 1 000 000. |
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turnover less than EUR 1 000 000.

4.2   For these very small businesses, accounting costs are particularly burdensome. Moreover, there is limited interest in their financial status as they mainly operate at local or regional level.

4.3   Including an exemption in the Accounting Directives would give Member States the option of determining which rules should be observed by micro-entities.

4.4   That is why the Commission has decided to amend the current Community legislation. Various measures have been proposed for micro-entities:

micro-entities

| — | relieving these businesses of the requirement to publish their accounts, |
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relieving these businesses of the requirement to publish their accounts,

| — | giving micro-entities the option of still drawing up annual accounts on a voluntary basis, having them audited and sending them to the national register, |
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giving micro-entities the option of still drawing up annual accounts on a voluntary basis, having them audited and sending them to the national register,

| — | giving Member States the option of removing micro-entities from the scope of the 4th Company Law Directive. |
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giving Member States the option of removing micro-entities from the scope of the 4th Company Law Directive.

5.   General comments

5.1   The EESC supports the aims of the Commission's initiative – exempting micro-entities from administrative and accounting requirements, which are burdensome and wholly disproportionate to the needs of micro-entities and the main users of financial information.

5.2   Particularly in the current economic crisis, the EESC considers that more effective action is urgently needed to help very small businesses all over Europe. The exemption measures for micro-entities should be applied promptly (‘fast-track’ system) (20) throughout the European Economic Area. These measures should be flexible and geared to individual national situations, and should be applied in a transparent manner with regard to physical and legal persons.

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5.3   The Commission proposal should also provide a powerful incentive in the fight against undeclared work, as highlighted by the EESC on a number of occasions. The EESC has thus stressed ‘the very negative impact of undeclared work on public finances, both in terms of social security funding and the loss of tax revenue’ (21), while noting that ‘the price of honesty must not be too high, otherwise the black economy could spread like wildfire’ (22).

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5.4   The EESC welcomes the Commission's simplification proposal, which aims to ensure that the regulatory framework helps to stimulate entrepreneurship and innovation in micro- and small businesses to make them more competitive and enable them to fully exploit the potential of the internal market.

5.5   The EESC is aware that the Community does not have sole competence in this area, and is mindful of the need to apply Article 5 of the Treaty on the subsidiarity principle. However, it feels that, to preserve the integrity of the Single Market and avoid discrimination between entities operating therein, future overhauls of the 4th and 7th Company Law Directives should not leave concessions to micro-entities to the discretion of individual Member States but ensure that these automatically apply to all micro-enterprises in the EU.

5.6   The EESC calls on the Commission, the European Parliament and the Council to ensure that, in the forthcoming overhaul of the 4th and 7th Company Law Directives, the guiding principle ‘Think small first’ is applied by means of an interinstitutional agreement which has the same legal basis as the Better Regulation agreement (23) and lays down a set of clear requirements to eliminate/cut red tape.

Better Regulation

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5.7   In addition, the EESC calls on the Commission to submit a report to Parliament, the Council and the EESC three years after this proposal has entered into force, assessing the impact and operation of the exemption for micro-entities throughout the EU Member States and the savings actually made by European micro-entities.

Brussels, 15 July 2009.

The President of the European Economic and Social Committee

Mario SEPI

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(1)  Called for by the 2000 Lisbon European Council.

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(2)  OJ C 27 of 3.2.2009, p. 7.

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(3)  OJ C 77 of 31.3.2009, p. 37.

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(4)  See EESC opinion in OJ C 182 of 4.8.2009, p. 30, Recommendation No 1, rapporteur: Mr Malosse, co-rapporteur: Mr Cappellini.

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(5)  1983.

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(6)  Initially a Task Force was set up, headed by Ms Cresson, which then became the new DG XXIII.

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(7)  Avignon, 1990; Berlin, 1994; Milan, 1997.

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(8)  See, inter alia: OJ C 161 of 14.6.1993, p. 6; OJ C 388 of 31.12.1994, p. 14 and OJ C 295 of 7.10.1996, p. 6; OJ C 56 of 24.2.1997, p. 7; OJ C 89 of 19.3.1997, p. 27; OJ C 235 of 27.7.1998, p. 13; OJ C 221 of 7.8.2001, p. 1; OJ C 374 of 3.12.1998, p. 4; OJ C 116 of 20.4.2001, p. 20.

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inter alia

(9)  COM(2008) 195 of 18.9.2008.

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(10)  OJ C 77 of 31.3.2009, p. 37, rapporteur: Mr Cappellini.

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(11)  COM(2006) 689, 690 and 691 final of 14.11.2006.

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(12)  OJ C 256 of 27.10.2007, p. 8.

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(13)  OJ C 256 of 27.10.2007, p. 8, point 4.3.6 and OJ C 204 of 9.8.2008, p. 9, point 6.2.

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(14)  Presidency Conclusions of the Brussels European Council of 13-14 March 2008, point 9.

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(15)  COM(2008) 394 final of 25.6.2008.

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(16)  OJ C 182 of 4.8.2009 p. 30, rapporteur: Mr Malosse, co-rapporteur: Mr Cappellini.

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(17)  Communication from the Commission to the European Council – A European Economic Recovery Plan (COM(2008) 800 final of 26.11.2008, point 4).

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(18)  European Parliament resolution of 18 December 2008 on accounting requirements as regards small and medium-sized companies, particularly micro-entities.

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(19)  It has been amended a dozen times, by: Directive 83/349/EEC, Directive 84/569/ECC, Directive 89/666/ECC, Directive 90/604/EEC, Directive 90/605/EEC, Directive 94/8/EC, Directive 1999/60/EC, Directive 2001/65/EC, Directive 2003/38/EC, Directive 2003/51/EC, Directive 2006/43/EC and Directive 2006/46/EC.

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(20)  Fast-track: in order to achieve first results rapidly, three ‘fast-track’ proposals were tabled by the Commission. The first one, which aimed at aligning certain rules on expert reports in the case of domestic mergers and divisions with the rules contained in the Cross-border Mergers Directive (Directive 2005/56/EC), was approved by the Council and the European Parliament in November 2007 (Directive 2007/63/EC). In April 2008 the Commission also tabled two proposals to amend the First and Eleventh Company Law Directives and the Accounting Directives.

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(21)  OJ C 101 of 12.4.1999, p. 30, rapporteur: Mr Giron.

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(22)  OJ C 255 of 14.10.2005, p. 61.

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(23)  See OJ C 182 of 4.8.2009 p. 30 (rapporteur: Mr Malosse, co-rapporteur: Mr Cappellini), Recommendation No. 1 and especially point 3.2: ‘With regard to the Think Small First principle, the Committee reaffirms its previous position (OJ C 27 of 3.2.2009, p. 27) and calls for it to be made a binding rule in a form yet to be determined (e.g. code of conduct, interinstitutional agreement or Council decision) but which would be binding on the European Parliament, Commission and Council. An interinstitutional agreement on the same legal basis as the Better regulation agreement of 2003 would seem one interesting avenue ...’

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Think Small First

Better regulation

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APPENDIX

to the opinion of the European Economic and Social Committee

The following section opinion text was rejected in favour of an amendment adopted by the assembly but obtained at least one-quarter of the votes cast:

| ‘2.6 | According to the estimates made for the Commission, there are around 5,4 million micro-entities likely to be concerned by the exemption measure, and the overall administrative burden of complying with the administrative and accounting requirements laid down by the Directive is around EUR 6,3 billion per year.’ |
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‘2.6

According to the estimates made for the Commission, there are around 5,4 million micro-entities likely to be concerned by the exemption measure, and the overall administrative burden of complying with the administrative and accounting requirements laid down by the Directive is around EUR 6,3 billion per year.’

Outcome of the vote on the amendment: 89 votes in favour, 40 votes against and 30 abstentions.

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