COMMUNICATION FROM THE COMMISSIONTO THE EUROPEAN PARLIAMENTpursuant to Article 294(6) of the Treaty on the Functioning of the European Unionconcerning the position of the Council at first reading with a view to the adoption of 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
Date: 2011-09-23
Institutions: European Commission
Subjects: administrative formalities, closing of accounts, firm governed by commercial law, micro-enterprise, publication of accounts, registration of a company

EUROPEAN COMMISSION 

Brussels, 23.9.2011 
COM(2011) 589 final 

2009/0035 (COD) 

COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT 

pursuant to Article 294(6) of the Treaty on the Functioning of the European Union 

concerning the 

position of the Council at first reading with a view to the adoption of 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 

(Text with EEA relevance) 

 
 
 
 
  
 
 
 
2009/0035 (COD) 

COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT 

pursuant to Article 294(6) of the Treaty on the Functioning of the European Union 

concerning the 

position of the Council at first reading with a view to the adoption of 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 

(Text with EEA relevance) 

1. 

BACKGROUND 

Date of transmission of the proposal to the European Parliament and 
to the Council 
(document COM(2009) 83 final – 2009/0035 COD): 

26/02/2009. 

Date  of  the  opinion  of  the  European  Economic  and  Social 
Committee: 

15/07/2009. 

Date of the position of the European Parliament, first reading: 

10/03/2010. 

Date of transmission of the amended proposal: 

Date of adoption of the position of the Council: 

Not applicable. 

12/09/2011. 

2. 

OBJECTIVE OF THE PROPOSAL FROM THE COMMISSION 

The  proposal  from  the  Commission  was  adopted  in  the  context  of  the  Better  Regulation 
initiative.  In  providing  an  option  for  Member  States  to  exempt  micro-entities  from  the 
requirements of the Fourth Company Law Directive1, the aim of the proposal was to simplify 
and improve the existing regulatory framework so as to limit information obligations resulting 
from accounting requirements on EU micro-entities in order to: 

• 

• 

reduce the administrative burden; and 

enable alignment of micro-entities' reporting requirements with the real needs 
of users and preparers of accounts. 

1 

Directive 78/660/EEC of 25 july 1978 based on Article 54(3)(g) of the Treaty on the annual accounts of 
certain types of companies, OJ L 222, 14.8.1978, p. 11. 

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3. 

COMMENTS ON THE POSITION OF THE COUNCIL 

3.1 

General comments 

As a key priority of the Better Regulation agenda, this fast track amendment was proposed in 
February 2009 with a view to obtaining significant simplification in the short-term. 

Following a request, in December 2008, to the Commission to continue the simplification of 
accounting,  the  European  Parliament  welcomed  the  proposal  in  its  legislative  resolution  of 
March  2010.  It  however  agreed  inter  alia  upon  an  amendment  to  require  that  companies 
should still be obliged by EU legislation to keep accounting records showing the company's 
business transactions and financial situation. 

The  Council  generally  welcomed  the  Commission  objective  to  simplify  existing  legislation 
for the micro-entities. Whilst a majority of the Council welcomed the Commission proposal, a 
blocking minority thought that the Commission proposal was not an entirely appropriate way 
in which to achieve the stated objectives. The Council position reflects a compromise between 
those  views.  In  particular,  it  maintains  an  EU  obligation  for  micro-entities  to  draw  up 
accounts. 

3.2 

(1) 

(2) 

Follow up of amendments introduced by the European Parliament 

Amendment introduced requiring micro-entities to still be subject to the obligation to 
keep accounting records that show the company's business transactions and financial 
situation:  this  amendment  has  been  retained  in  essence  in  Recital  5  of  the  Council 
position (last sentence). 

Various amendments, highlighting that Member States should have the free choice of 
exempting micro-entities or not, taking particular account of the situation at national 
level regarding the number of businesses covered by the thresholds laid down in the 
Directive: these have been maintained in essence in Recitals 6 and 7 and Article 2 of 
the Council position. 

3.3 

New measures introduced by the Council position 

The Commission proposal was to amend Directive 78/660/EEC on the annual accounts of EU 
companies with limited liability as follows: 

(1) 

creation  of  a  category  of  micro-entities,  defined  as  companies  which  on  their 
balance  sheet  dates  do  not  exceed  the  limits  of  two  of  the  three  following 
criteria: 

(a)  balance sheet total: EUR 500 000; 

(b)  net turnover: EUR 1 000 000 

(c) 

average number of employees during the financial year: 10 

(2) 

the  Member  States  would  be  able  to  exempt  micro-entities  within  their 
jurisdiction from any obligations under Directive 78/660/EEC. 

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The  Council  position  supported  the  approach  of  having  a  separate  category  of  micro-entity 
company,  but  it  proposed  a  new  definition  that  would  reduce  the  size  thresholds  for  the 
balance  sheet  total  and  net  turnover  respectively  to  EUR  250  000  and  EUR  500  000.  The 
Commission  estimates  that  with  these  lower  thresholds,  the  simplification  measures  in  the 
Council  position  would  reach  around  15%  fewer  companies  than  the  Commission  proposal 
would. 

The  Council  proposed  that  the  Member  States  should  not  have  the  ability  to  provide  for  an 
outright exemption from EU accounting requirements for micro-entities, but instead proposed 
a number of simplifications that the Member States could adopt, including: 

• 

• 

• 

The ability to reduce the information presented in the accounts in accordance 
with simplified layouts for the balance sheet and the profit and loss. A Member 
State  may,  in  addition,  relieve  micro-entities  from  the  obligation  to  calculate 
year-end accruals and prepayments in respect of certain types of expenses; 

The  ability  to  considerably  reduce  the  information  usually  disclosed  in  the 
notes to the accounts, and allow this information to be disclosed at the foot of 
the balance sheet; 

The  ability  to  exempt  micro-entities  from  publishing  their  accounts,  provided 
these are provided to a competent authority that in turn files at least the balance 
sheet with the national register; 

To  provide  certainty  and  ensure  greater  comparability  between  micro-entity  accounts,  the 
Council also proposed that fair value accounting be prohibited for this category of company.  

Compared to the Commission proposal, the Council position would nevertheless continue to 
impose a certain number of accounting obligations at EU level, including for instance general 
valuation rules, mandatory layouts for the balance sheet and profit and loss account, as well as 
minimum transparency requirements. 

4. 

CONCLUSION 

The Council adopted its position at first reading by qualified majority. Even though it amends 
the  Commission  proposal  to  a  considerable  extent,  especially  on  the  definition  of  micro-
entities, it maintains the thrust of the Commission proposal to offer the ability to the Member 
States  to  exempt  micro-entities  from  a  considerable  number  of  burdensome  accounting 
obligations at EU level. Whilst the Commission proposal was to allow for a full exemption, 
the Council position would restrict this to a pre-defined number of areas that would still allow 
for significant progress towards simplification. 

The Commission therefore considers that it can endorse the Council position. Having regard 
to  the  opinion  of  the  European  Parliament  at  first  reading,  the  Commission  undertakes  to 
facilitate  the  inter-institutional  negotiation  to  reach  an  acceptable  compromise  for  both  co-
legislators. 

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