News story

Davey welcomes red tape cut for smallest companies

Small companies, or micro-entities, form the backbone of the British economy but have limited resources to comply with the same accounting requirements…

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government


Small companies, or micro-entities, form the backbone of the British economy but have limited resources to comply with the same accounting requirements as larger companies. The agreement reached today will exempt these companies from some obligations, potentially saving between £150-300 million per year in reduced administrative costs.

Mr Davey said:

“I greatly welcome the progress made today in Europe to simplify the accounting rules for our smallest companies. This is a significant step in reducing red tape and a clear signal that we will take action to stop our smallest companies being held back by excessive regulation.

“I believe this shows what can be achieved by a positive and constructive engagement with the European Union - the first ever exemption for micro-entities from an existing EU directive. We now need to build on this breakthrough and I hope that further improvements can be agreed before the proposal becomes law.”

Member States will now discuss the measures with Members of the European Parliament, who must also give their approval before the new rules can enter into force.

Notes for editors

  1. Edward Davey was attending the Competitiveness Council on Monday 30 May 2011 in Brussels.

  2. The agreement introduces a new category of companies called ‘micro-entities’. A company can be defined as a micro-entity if it does not exceed the limits of two of the following three criteria: a balance sheet total of €250,000, a net turnover of €500,000 and an average number of 10 employees during the financial year in question.

  3. The agreement simplifies the rules for the profit and loss account and balance sheet reporting requirements. Member States will be provided with the flexibility not to require publication of these accounts. Simplified balance sheet information will still need to be filed at Companies House.

  4. The European Commission first introduced a proposed Directive that would give Member States the option to exempt micro-entities from the 4th Company Law Directive in 2009. Today’s agreement follows a long period of negotiation and reflects the UK’s commitment to delivering this agreement.

  5. Final agreement of the package requires a vote of the European Parliament, which has strongly supported the objective to reduce administrative burdens on very small companies.

  6. In March the government announced businesses with fewer than 10 employees would be granted a moratorium from new domestic regulation for three years, and also announced a public audit of almost 22,000 statutory instruments currently on the statute book.

  7. BIS’s online newsroom contains the latest press notices, speeches, as well as video and images for download. It also features an up to date list of BIS press office contacts. See for more information.

Notes to Editors

Contact Information

Name BIS Press Office Job Title

Division COI Phone




Name Nick Evans Job Title

Division Department for Business, Innovation and Skills Phone 020 7215 3496 Fax



Published 30 May 2011