If someone, swept up by the characterization (: Small and Medium Enterprises), considers that their importance in the European economy is “equal”, they are mistaken. The figures of the European Union (March 2020) seem revealing. Small and Medium Enterprises in the European Union are around 25 million. They cover two out of three jobs. They generate 50% of its (total) GDP. And, in addition, 50% of them undertake innovation activities. The European Union since 2008 has demonstrated its interest (through the Small Business Act and related tools).
The data for our country seem shocking: The Greek Small and Medium Enterprises amount (: 2019) to 821,209 (against the total of 821,540-only 331 are characterized as Large). They represent 63.5% of the total value added. They cover an employment share of 87.9%.
So they deserve our attention.
But mainly the attention of the State.
Small and Medium Enterprises may be family businesses. Or maybe not. We mentioned in our previous article the importance of family businesses in the Greek (and not only) economy.
Let us focus in this article on Small and Medium Enterprises.
Small and Medium Enterprises and the… rest
The distinction of companies based on their size
In order to talk about small and medium-sized enterprises, it is necessary to determine which ones we are referring to. A noticeable difference and feature of each category is the size of the business. Size is a very important feature of any business. It also affects its organizational structure and its management.
The size of a company usually takes into account the number of employees, turnover, invested capital and capacity.
The (relevant) Recommendation of the European Commission
Distinction of companies according to their size is provided in the relevant Recommendation of the European Commission 361EC / 06.05.2003. Based on this Recommendation, companies are divided into:
(a) Very Small Enterprises: These are enterprises with less than 10 employees and a turnover of less than € 2,000,000.
(b) Small Enterprises: Enterprises that employ less than 50 employees and their turnover does not exceed € 10,000,000.
(c) Medium Enterprises: Enterprises with less than 250 employees and a turnover of less than € 50,000,000.
(d) Large Enterprises: Enterprises that employ 250 or more employees and their turnover is over € 50,000,000.
The distinction of enterprises at national level
We find a similar distinction of enterprises (entities) at national level in law 4308/2014 (article 2), to which the law of SAs also refers (law 4548/2018, article 2 case k). According to Law 4308/2014, entities are divided into:
(a) Very Small Entities: “Very small entities are entities that at the closing date of their balance sheet do not exceed the limits of at least two of the following three criteria: a) Total assets: 350,000 euros. b) Net turnover: 700,000 euros. c) Average number of employees during the period: 10 people”.
(b) Small Entities. “Small entities are entities that are not very small entities and at the closing date of their balance sheet do not exceed the limits of at least two of the following three criteria: a) Total assets: 4,000,000 euros. B) Net turnover: 8,000 .000 euros. c) Average number of employees during the period: 50 people”.
(c) Medium entities: “Medium entities are entities that are not very small or small entities and which at the closing date of their balance sheet do not exceed the limits of at least two of the following three criteria: a) Total assets: 20,000,000 euros. b) Net turnover: 40,000,000 euros. c) Average number of employees during the period: 250 people”.
(d) Large Entities. “Large entities are entities that at the closing date of their balance sheet exceed the limits of at least two of the following three criteria: a) Total assets: 20,000,000 euros. B) Net turnover: 40,000,000 euros. C) Average number of employees during the period: 250 people “.
Following the above, Law 4548/2018 (for SAs) provides (article 2 par. k): “For newly established companies and until the preparation of the first balance sheet, “very small”, “small” and “medium” companies means those whose capital does not exceed the amounts of 100,000, 500,000 and 1,000,000 euros, respectively, while “large” means those whose capital exceeds the amount of 1,000,000 euros “.
The «Small Business Act» (SBA) for Europe (2008)
The importance of Small and Medium Enterprises (hereinafter referred to as SMEs) for Europe is, according to what has been said (especially in the introductory part), indisputable. The Commission of the European Communities has recognized in good time the need to take initiatives to better adapt the single market to the needs of SMEs. In the light of the above initiatives, the Commission presented the “Small Business Act” (hereinafter: SBA) for Europe (2008). This is the Communication from the Commission of the European Communities to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions of 25.06.2008 in Brussels.
According to this Communication, SMEs are a key factor in the well-being of the European Union, local and regional populations. In this context, the Commission’s goal was to transform the EU into an international environment for SMEs. In an environment capable of contributing to the sustainable development and competitiveness of SMEs.
The goal of the «Small Business Act»
The goal of the initiative was identified as:
(a) improving the overall approach to entrepreneurship policy;
(b) the definitive introduction of the “Think Small First” principle in policy-making, ranging from legislation to public services; and
(c) promoting the development of SMEs and addressing the problems that continue to hamper this development.
The 10 principles of the «Small Business Act»
The Commission has adopted ten principles in order to implement the announcements and provisions for SMEs. Principles aimed at planning and implementing policies at EU and Member State level to improve SME development conditions. The Commission’s list is structured as follows:
- Creating an environment in which entrepreneurs and family businesses can thrive and in which entrepreneurship is rewarded.
- Ensuring that honest businessmen are quickly given a second chance in the event of bankruptcy.
- Setting rules in accordance with the “Think Small First” principle.
- Greater response of public administrations to the needs of SMEs.
- Adapting policy instruments to the needs of SMEs: facilitating the participation of SMEs in public procurement and making better use of the opportunities offered by state aid for SMEs.
- Facilitate SMEs’ access to finance and create a legal and business environment conducive to timely payments in commercial transactions.
- Support SMEs to take full advantage of the opportunities offered by the single market.
- Promoting the upgrading of skills in SMEs as well as all forms of innovation.
- Enabling SMEs to turn environmental challenges into opportunities.
- Encourage and support SMEs to benefit from market development.
The implementation of the ten principles
The Commission has submitted measures-recommendations for the implementation of the SME development project. Some of them concern the Commission itself. Others, concern Member States. Many of these are legislative proposals. In particular, tax legislation and law on insolvency. Also, possible bilateral agreements between states, with the aim of opening the EU markets to third markets.
Of the measures proposed, some focus on citizens and their information. To those citizens who are already (or not) doing business. The aim is to cultivate a business culture, to inform about state aid and public procurement, to strengthen the “green markets”.
Small and Medium Enterprises in Greece (2019)…
The Member States are committed to implementing the above ten principles developed by the Commission. Their efforts are reflected in annual reports, separate for each Member State.
Regarding Greece, this report captures the importance of the SMEs for the domestic economy and entrepreneurship. Specifically, according to the “Small Business Act” for Greece (2019), the Greek SMEs:
(a) amount to 821,209 companies (almost 100% of the total of 821,540 Greek companies);
(b) represent 63.5% of the total value added, while the corresponding figure in the EU is 56.4%; and
(c) contribute the most in the field of employment with their (relative) share reaching 87.9%, while the corresponding share in the EU is 66.6%.
…and the performance of our country in the ten principles of the Small Business Act.
Despite the fact that the SMEs are of this crucial importance for the Greek economy, the performance of our country in terms of the principles of the Small Business Act for 2019, almost overall, is disappointing. (: Comparison with other Member States).
Specifically, Greece’s performance is below the EU average in 8 out of 10 Small Business Act policy principles. Our country’s effort has a positive sign only in the field of state aid and public procurement. It is compatible with the EU average in terms of the principle of promoting upgrading skills in SMEs as well as all forms of innovation.
Greece, unfortunately, has one of the lowest scores in the EU in terms of implementing the principles of: (a) second chance, (b) access to finance, (c) turning environmental challenges into opportunities, and (d) internationalization.
Specifically:
(a) Entrepreneurs who have declared bankruptcy, unwittingly, and want a second chance at doing business, are almost unable to turn to it. In addition: the fear of (relative) failure in our country is high. Reasons for the above, of course, the law on insolvency in our country, the cost and the time of the bankruptcy process. It is a regulated sector that undoubtedly needs further legislative intervention and reform. Some improvements, however, are expected to take place with the imminent introduction of the law on insolvency.
(b) Access to financing is one of the most important factors in the development of entrepreneurship and the economy. Our country, however, has an extremely low performance in the possibilities it provides to companies to find financing. The extremely reduced possibilities concern both external lending (banks) and internal (own lending).
(c) Greece presents extremely low performance in terms of the existence of a business “green” culture. The size of SMEs benefiting from public support measures for their green production is one of the lowest in the EU. At the same time, SMEs still do not receive any assistance in improving their energy efficiency and the use of renewable energy sources.
(d) Finally, in terms of internationalization, our country has implemented most of the Commission’s recommendations. However, progress in the development of imports and exports is particularly slow. The cause of this problem is located in the (non) information of the SMEs.
The European Union has recognized in time the importance of Small and Medium Enterprises in the European economy. It has set out the principles within which both it and the Member States must act.
The relevant actions of our country still seem inefficient. They clearly lag behind the other Member States and their progress. The most characteristic are the areas related to: (a) the “second chance” that could be taken advantage of by the “honest” among the bankrupt, (b) access to finance, (c) the promotion of “green culture” and related development and (d) the internationalization of Small and Medium Enterprises.
It is up to the State to do the right thing.
To the SMEs to remain vigilant.
And exert due pressure.
Stavros Koumentakis
Managing Partner
P.S. A brief version of this article has been published in MAKEDONIA Newspaper (September 27, 2020).
Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.