When identifying what EU grants may be available to one’s business, an understanding of company size will help to expedite in pinpointing funding eligibility. Micro, small and medium sized companies for example are generally eligible for a wider variety of funding options. Company size is effectively determined through three criteria namely: headcount, revenue and total number of assets.
The number of staff employed by a business is the most important and compulsory criterion in determining whether an enterprise can be considered as a small or medium sized company. In addition, the enterprise needs to meet either an annual turnover threshold or balance sheet total, this is illustrated in the table below.
The staff head count is expressed in annual work units, full time employees count as one unit, whilst part-time or seasonal workers count as a fraction of one unit. However, students or employees on maternity or parental leave are not included in the staff headcount. The annual turnover is determined by deducting the expenses from the income that an enterprise would have received during the year. The annual balance sheet refers to the company’s main assets.
However, size isn’t determined on the sole merit of the company in and of itself since there may be other resources accessed by the company. Thus, the company must also understand whether it has any linked or partner companies.
Linked or partner companies are determined through company shareholding. Linked enterprises hold 50% or more shares in an enterprise. On the other hand, a partner enterprise holds between 25% to 50% shares of the main enterprise. Shareholding in a company of less than 25% by third parties is not taken into consideration when determining company size.
If the company analysing its size is linked or partnered with a larger enterprise, then it may qualify as a large enterprise. If for example your company is 25% owned by company B, your company however owns 35% of Company C and 25% of Company D, the calculation for staff headcount, turnover and balance sheet would be worked pro-rata, taking these stakes in other companies into consideration.
Two or more enterprises are considered as linked enterprises when they hold 51% or more in the company’s shares. If your company owns 55% of company B and 80 % of company C on the other hand if another Company owns 65% of your company. Then, all of these other’s companies staff, turnover and balance sheets need to be taken into account when determining company size.
It is important to point out that the primary difference between partner and linked enterprises is that size is calculated by taking 100% of the data from other linked companies involved.
SMEs come in many different shapes and sizes; however, in today’s complex business environment they may have close financial, operational or governance relationships with other enterprises. These relationships often make it difficult to precisely draw the line between an SME and a large enterprise. Should you want to know more about applying for EU Funding for your business, RSM Malta is here to help.