How to determine the company size category

The following step-by-step instructions are to help you to determine the company size category in
accordance with Commission Recommendation 2003/361/EC.

Step 1

The first step in establishing the data for the determination of the company size category is to
assess whether, at the time of the submission of the registration in REACH-IT / submission of the
documents for SME check under BPR, the company is autonomous, or whether partner or linked
enterprises, as defined in Article 3 of the Annex to Commission Recommendation 2003/361/EC, are
to be considered too.

In general:

The enterprise is autonomous if it is not classified as a partner or linked enterprise within

the meaning of Article 3 of the Annex to the Commission Recommendation 2003/361/EC. For
example, an enterprise is autonomous if it holds less than 25% (capital or voting rights) in any
other company and if no other company holds more than 25% in the enterprise.

An enterprise is considered a partner to another enterprise if it holds, either solely or

jointly with one or more linked enterprises within the meaning of Article 3(3) of the Annex to the
Commission Recommendation 2003/361/EC, at least 25%, but no more than 50% in another
company.

An enterprise is considered as linked to another enterprise if it holds more than 50% of

the members' voting rights in another company and/or if an enterprise directly or indirectly
controls, or has the capacity to control, the affairs of another company.

A company will also be considered to be linked if a relationship exists through an individual

or group of individuals acting together under the condition that the companies are engaged
(wholly or partly) in the same markets or in adjacent markets' (markets for products or
services that are directly upstream and downstream of each other).

If 25% or more of the capital or voting rights of the enterprise are directly or indirectly
controlled, jointly or individually, by one or more public bodies, the enterprise cannot be
considered an SME.

Investors listed in Article 3, paragraph 2, second subparagraph to the Annex of the

Recommendation, such as universities or autonomous local authorities, which have the
status of a public body under national law, are not concerned by this rule. They may hold a
participation of between 25%, but no more than 50%, in an enterprise without losing their
SME status.

Step 2

The second step is to determine the reference year(s) for the establishment of financial and
headcount data of an enterprise, in accordance with Article 4 of the Annex to Commission
Recommendation 2003/361/EC.

The starting point is the year of the concrete submission (registration, update of registration,
notification etc.) in the REACH-IT system. The data to apply to the headcount of staff and the
financial amounts are generally those relating to the latest approved accounting period and
calculated on an annual basis.

In the case of newly established enterprises whose accounts have not yet been approved, the data
to apply is to be derived from a bona fide estimate made in the course of the financial year.

Example
 With respect to the various possible dates of closure (year end) of the accounts, please find below
an example showing the correct years of reference in a case where the submission in REACH-
IT is done on 6 August 2011.

Year end Correct years of reference

31 December 31/12/2009 31/12/2010

31 July 31/07/2010 31/07/2011

31 August 31/08/2009 31/08/2010

The dates given above are purely illustrative and do not cover all possible variations.

The size category of the company may, however, change over the course of years. Remember that
in this case the following applies:

Where, at the date of closure of the accounts, an enterprise finds that on an annual basis, it
has exceeded or fallen below the headcount or financial ceilings related to the final size
categories, this will not result in the loss or acquisition of the status of medium-sized, small
or micro enterprise unless those ceilings are exceeded over two consecutive accounting
periods.

Step 3

The third step is to determine the headcount, turnover and balance sheet total, in accordance with
Articles 4 and 5 of the Annex to Commission Recommendation 2003/361/EC.

The staff headcount corresponds to the number of annual work units (AWU). Therefore,
when calculating the staff numbers, not only the full time employees and/or those directly
involved with REACH activities should be included in the staff headcount, but also seasonal
workers, owner-managers and partners engaging in a regular activity in the enterprise and
benefiting from financial advantages from the enterprise. Where staff do not work full time
during the year, the work of those who have worked part-time, regardless of duration, and the
work of seasonal workers should be counted as an appropriate fraction.

The annual turnover is determined by calculating the income that your enterprise
received during the year in question from its sales and services after any rebates have been paid
out. Turnover should not include value added tax (VAT) or other indirect taxes.

The annual balance sheet total refers to the value of the company's total assets.

For more details regarding the definitions of Turnover and Balance sheet total, please see Council
Directive 78/660/EEC of 25 July 1978 based on Article 54 (3) (g) of the Treaty on the annual
accounts of certain types of companies, Official Journal L 222, p. 11-31, of 14 August 1978.

It is necessary to note that while it is compulsory to respect the staff headcount thresholds, an
SME may choose to meet either the turnover or balance sheet ceiling. It does not need to satisfy
both and may exceed one of them without losing its status.

How to determine the company size category

Step 4

The next step to ensure accurate assessment of the company size category is to establish the
overall data of the enterprise, including its partner and linked enterprises, in accordance with
Article 6 of the Annex to Commission Recommendation 2003/361/EC.
 To the headcount, turnover and balance sheet total of the enterprise in question, you should add
the relevant data of all partner and/or linked enterprises as follows:

Add the proportional headcount and financial data of the partner enterprises in ratio to
the percentage interest in the capital or voting rights (whichever is greater) to the headcount
and financial data of your enterprise (if you are an OR, then to those of the represented
enterprise, of course). Please note that if the partner enterprise situated immediately
upstream/downstream (directly or indirectly) is linked to another enterprise, 100% of the data of
the linked enterprises must be included in the data of the partner enterprise.

Add 100% headcount and financial data of the linked enterprises to the headcount and
financial data of the company in question. If the linked enterprise has any partner enterprises
situated immediately upstream/downstream (directly or indirectly)or is also linked in a chain to
other enterprises (directly or indirectly), add 100% of the data of all the linked enterprises and
the percentage equal to the holding of the partner enterprise(s) to the data of the enterprise in
question.

If the company or any of its partner and linked enterprises are drawing up consolidated accounts,
or are included through consolidation in the accounts of other enterprises, the figures from the
consolidated accounts should be used when establishing the data of the enterprise in question.

Example of ownership structure and calculations

Formula for calculations of financial and headcount data of Enterprise A:

A = 100% A + 100% C + 27% (D + F) + 25% (B + E) + 100% (H + I) + 25% J

* Partner-partner relationships are not to be considered.

Step 5
Only after having established the relevant headcount and financial figures in line with the above
steps, check if the data meets the staff headcount ceiling and one (or both) of the financial limits in
the following table to determine if the company can be considered a micro, small or medium-sized
enterprise.

Enterprise category Headcount Turnover or Balance sheet total

medium-sized < 250 50 million euro 43 million euro

small < 50 10 million euro 10 million euro

micro < 10 2 million euro 2 million euro