European Parliament Committees Back New ‘Small Mid-Cap’ Category to Support Growing Businesses

Several committees within the European Parliament have approved proposals aimed at creating a new classification for companies known as small mid-cap enterprises, a move designed to expand regulatory exemptions and support firms that have outgrown traditional small and medium enterprise (SME) status.

Lawmakers say the initiative is intended to stimulate business growth across the European Union by addressing regulatory hurdles faced by companies transitioning to larger operational scales.

The proposal seeks to close the gap between SMEs and large corporations by introducing targeted regulatory measures specifically for businesses that have expanded beyond SME thresholds but are not yet comparable to major multinational companies. Members of the European Parliament (MEPs) argue that the current regulatory framework can create sudden increases in administrative burdens when firms exceed existing limits, a situation policymakers want to prevent.

According to the committees backing the measure, the aim is to eliminate so-called “cliff-edge” effects where companies face significantly heavier compliance obligations immediately after crossing established thresholds for smaller businesses. By introducing a separate category for growing firms, lawmakers believe the transition to larger corporate status can be made more gradual and manageable.

Under the proposed framework, MEPs suggest defining small mid-cap enterprises as companies employing fewer than 1,000 people and generating either up to €200 million in annual turnover or holding total assets of up to €172 million. These figures are notably higher than the limits initially proposed by the European Commission, which had recommended thresholds of 750 employees, €150 million in turnover, and €129 million in total assets.

Members of Parliament also insisted that these limits should not remain static. Instead, they argued that the thresholds must be reassessed periodically to reflect economic developments across the bloc. Specifically, they proposed that the criteria be reviewed every five years to ensure the classification continues to align with evolving market conditions.

At the same time, lawmakers emphasized that expanding support for growing companies must not undermine assistance currently provided to smaller enterprises. The committees stressed that the EU should maintain its established “think small first” policy approach, ensuring that SMEs continue to receive priority consideration in policymaking.

One of the central elements of the legislative proposal concerns data protection compliance.

The plan would extend certain exemptions already available to smaller firms under the General Data Protection Regulation (GDPR) to the newly defined small mid-cap companies.

In particular, these businesses would benefit from reduced record-keeping requirements when processing data that does not pose a high risk.

However, lawmakers made clear that the exemptions would not apply to particularly sensitive categories of personal data. Processing activities involving information such as biometric data, health records, religious beliefs, or ethnic origin would remain subject to full compliance obligations under the GDPR.

Improving access to financing for growing companies is another key aspect of the proposal.

The new classification would be incorporated into the Markets in Financial Instruments Directive framework, enabling small mid-cap enterprises to participate in specialized growth markets. By doing so, policymakers hope to make it easier for these companies to attract investment and raise capital.

The proposal also includes provisions designed to simplify disclosure obligations for companies seeking to list shares publicly. By easing prospectus requirements, lawmakers aim to reduce barriers that often prevent mid-sized firms from accessing public capital markets.

Beyond financial regulations, the committees recommended adjustments to environmental compliance rules. The legislative package includes proposals to simplify aspects of the Batteries Regulation and policies related to corporate due diligence. Specifically, MEPs suggested that economic operators should be required to review and update their policies every five years rather than every three years, as initially planned.

Lawmakers also examined regulatory obligations under the F-gases Regulation, arguing that current registration rules may place an excessive burden on smaller companies operating within the market. As a result, they proposed limiting mandatory registration to businesses dealing with certain levels of trade activity. Under the suggested changes, registration requirements would apply only to import or export volumes reaching at least 10 tonnes of carbon dioxide equivalent for hydrofluorocarbons.

The legislative package further calls on EU member states to provide support for these emerging mid-cap companies as they comply with obligations related to the resilience of critical infrastructure. In addition, the measures aim to ensure that such firms can more easily access trade defence instruments, helping them compete more effectively against international rivals.

According to lawmakers, the proposed framework reflects broader recommendations made in two influential policy analyses: the Draghi report on competitiveness and the Letta report on the future of the single market. Both reports emphasized the importance of strengthening the growth potential of mid-sized companies within the EU economy.

The initiative forms part of the fourth omnibus simplification package introduced by the European Commission in May 2025. The package seeks to streamline regulatory frameworks and reduce unnecessary administrative burdens across various sectors of the EU economy.

Following the committees’ approval, negotiations between EU institutions have now been authorized. The vote received strong backing from lawmakers serving on the Parliament’s economics, civil liberties, and environment committees.

Because no objections were raised during the plenary session held between March 9 and March 12, 2026, the legislative process can now move forward. With parliamentary authorization secured, formal inter-institutional negotiations aimed at finalizing the new legal framework are set to begin.

By fLEXI tEAM