EU Reduces Reporting Burden For SMEs

by Ulrika Lomas, Tax-News.com, Brussels

17 July 2007

Public limited liability companies will no longer have to order costly expert reports in cases of mergers and divisions unless there is a demand for such reports among shareholders, after the European Parliament accepted a proposal for removing unnecessary burdens on small businesses.

The European Commission proposal is one of a package of ten ‘fast track actions’ presented a few months ago to cut red tape, and now awaits agreement by Member States.

According to the Commission, this package contains the first examples of "pure reduction" proposals, for instance when it comes to information obligations, to be agreed in a "fast and efficient" procedure by the legislators.

Commission Vice President, Günter Verheugen, responsible for Enterprise and Industry Policy, stated that: “This is a landmark case for better regulation. Today we set a new precedent for removing red tape at high speed in the EU. It is a good example of unnecessary burdens that could and should be removed very quickly. But we will not rest until we reach our target of reducing the burdens by 25% in 2012. More fast track actions will be tabled soon.”

Internal Market and Services Commissioner, Charlie McCreevy added: "This shows that Commission, Council and Parliament can work together to cut red tape quickly. It bodes well for future work on removing unnecessary burdens and making life easier for EU businesses."

Last week's proposal potentially applies to more than 600,000 public limited liability companies across Europe, and in particular to those owned by a limited number of shareholders. The current obligation was meant to inform shareholders of the draft terms of mergers or divisions, but it is considered needless paperwork when shareholders have no interest in the costly reports. This is often the case for Small- and Medium-Sized Enterprises (SMEs), where shareholders take an active part in the day-to-day management of the business.

It is estimated that the average cost of commissioning such an expert report amounts to roughly EUR3,500.

To identify further reduction possibilities, the Commission is currently embarking on a large-scale measurement exercise. The aim is to identify further onerous requirements that can be scrapped or adjusted to better suit their objective without burdening business.

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