Category Archives: Business Environment

The process of starting up and developing a business is not just an adventure, but also a real challenge. In order to help entrepreneurs with this, it is essential to create a favourable business environment.
Ensuring easier access to funding, making legislation clearer and more effective and developing an entrepreneurial culture and support networks for businesses are all instrumental as far as the setting up and growth of businesses are concerned.
However, creating a favourable business environment does not mean simply improving the growth potential of businesses. It also means turning Europe into a place in which it is advantageous to invest and work. In this way, the promotion of corporate social responsibility is contributing to making business in Europe more attractive.
Small and medium-sized enterprises (SMEs) make up 99% of European businesses. Their small size makes them very sensitive to changes in the industry and environment in which they operate. It is therefore vital for their well-being to be a focus of political attention.

Action plan for entrepreneurship

Action plan for entrepreneurship

Outline of the Community (European Union) legislation about Action plan for entrepreneurship

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Enterprise > Business environment

Action plan for entrepreneurship

Document or Iniciative

Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions of 11 February 2004 entitled “Action Plan: The European agenda for Entrepreneurship” [COM(2004) 70 final – Not published in the Official Journal].

Summary

Taking account of the reactions provoked by the publication of the Green Paper on Entrepreneurship, this action plan proposes a set of measures to promote entrepreneurship in order to help entrepreneurs fully realise their ambitions and provide them with a business climate conducive to entrepreneurship.

The Action Plan sets out the key objectives to be achieved by the European Union (EU) and Member States’ policy-makers in the following five strategic areas:

Fuelling entrepreneurial mindsets

In order to inform as many people as possible about entrepreneurship, the Commission intends to foster entrepreneurial mindsets among young people through educational activities (such as presenting role models) in schools. The Commission calls upon the Member States to integrate entrepreneurship education into all schools’ curricula, arrange awareness campaigns, offer training material, organise training modules for teachers and, together with business organisations, involve entrepreneurs in teaching programmes.

Encouraging more people to become entrepreneurs

According to the Eurobarometer, although 47% of Europeans say they prefer self-employment, only 17% actually realise their ambitions. Encouraging more people to become entrepreneurs means:

  • Reducing the stigma of failure. A better understanding of business failure, including distinguishing between honest and dishonest bankruptcies, is needed in order to tackle the stigma of failure. The Commission will gather practical information on early warning signs of financial difficulties, reasons for failure, barriers to starting afresh and portraits of failed and restarted entrepreneurs. This information should be used in promotional campaigns or teaching courses and should help reduce the stigma suffered by failed entrepreneurs. The Commission is planning to prepare, together with an expert group, self-evaluation tests for entrepreneurs to assess their financial condition, including information on existing support and procedures aimed at rescue from failure;
  • Facilitating business transfers. Given that it is possible to become an entrepreneur with a reduced risk of failure by taking over an established firm rather than building an enterprise from scratch, the EU should ensure that such enterprises do not close because of obstacles in the tax and legal environment or the lack of a successor. The Commission will foster implementation of the Recommendation on Business Transfers;
  • Reviewing social security schemes for entrepreneurs. In order to determine more precisely the influence of social security on the attractiveness of entrepreneurship, the Commission is planning to present an overview of social security schemes for the self-employed and business owners, including their spouses and other dependants, and the effects of transition from one status to another. Based on this, the Commission will ask the Member States to define the areas in which they intend to take action and will then organise an exchange of experience involving external experts about how best to make progress.

Taking account of demographic ageing and the fact that the age group that is most active in setting up businesses (25-34 years) will be less visible in the future, the action plan calls on the Member States to react quickly.

Gearing entrepreneurs for growth and competitiveness

The EU has taken a whole range of initiatives to enable small and medium-sized enterprises (SMEs) to make the most of the opportunities offered by the knowledge-based economy. It has, for example, reserved 15% of the budget for the 6th Framework Programme for RTD for SMEs. It has also extended the scope of the Block Exemption Regulation to R&D aid granted to SMEs. Focusing more specifically on entrepreneurship, this Communication proposes:

  • Providing tailor-made support for women and ethnic minorities. The Commission intends to promote access to top-class support and management training for entrepreneurs from all backgrounds, including groups with specific needs, such as women and entrepreneurs from ethnic minorities. In this context, the Commission plans to assist the national and regional authorities to address those areas where the needs of female entrepreneurs are still insufficiently met, notably access to finance and entrepreneurial networks, and to identify and evaluate policy measures with a view to identifying good practices to assist ethnic minority entrepreneurs;
  • Supporting businesses in developing inter-enterprise relations. The Commission will reinforce the role of the European support networks ‘Euro Info Centres (EICs)’ and the ‘Innovation Relay Centres (IRCs)’ by involving them in promoting business cooperation and ensuring streamlined delivery of all EU-wide support services, not only by these networks, but also by the Business Innovation Centres (BICs).

As noted in the Green Paper on Entrepreneurship, too few fast-growing enterprises, or “gazelles”, which are the key drivers of innovation and entrepreneurial dynamism, emerge in Europe. Entrepreneurial growth rarely happens by chance: entrepreneurs primarily seek inspiration from successful role models. The Commission will therefore seek good policy practices for disseminating as role models and providing suitable support to potential gazelles.

Improving the flow of finance

The Commission helps to improve the financial environment for enterprises, especially SMEs, through its financial instruments and by bringing together SMEs and financial players to allow the exchange of good practice and make for a better mutual understanding among SMEs and the financial community.

This Communication proposes creating more equity and stronger balance sheets in firms. The Commission intends to use its financial instruments for SMEs to facilitate entrepreneurial growth by stimulating the supply of both debt and equity finance. It also plans to intensify its actions to improve the availability of venture capital, “business angel” finance, and investments by private individuals (“micro-angels”).

The Commission also plans to analyse the impact of State aid and remedy possible market failures in the provision of funding for SMEs, particularly young and growth-oriented ones.

Creating a more SME-friendly regulatory and administrative framework

The Internal Market has made the life of businesses, particularly SMEs, much easier. However, its completion remains a priority, as there are still a number of obstacles that need to be removed. The Commission is continuing to promote the involvement of SMEs in standardisation. It also wants more effective consultation of SMEs to allow them to give their opinions on new initiatives at an early stage of the decision-making process and about the adequacy of existing regulations and practices.

This Communication also proposes reducing the complexity of complying with tax laws. An enterprise operating in an intra-European environment has to comply with different national tax laws and regulations, which can become an obstacle to cross-border activities, particularly for SMEs. To simplify and reduce tax compliance procedures related to direct taxation, the Commission intends to launch a pilot scheme whereby SMEs can apply ‘Home State Taxation’. This should lead to considerable savings and efficiency gains for qualifying SMEs.

For several categories of business-to-consumer transactions, application of VAT at the place of consumption means traders have to be identified and make returns and payments in every Member State where they carry out taxable transactions. This is burdensome for traders within the Internal Market. The Commission intends to propose a ‘one-stop-shop’ system to enable firms to deal with one single tax authority, in their own language, and to benefit from a single set of compliance obligations.

REPORT ON THE IMPLEMENTATION OF THE ACTION PLAN

In September 2006 the report prepared by the Commission (PDF ) concluded that most of the initiatives presented in the action plan had in the meantime been implemented.

As an example, Community funding for measures to help businesses has increased, and access to funding has been made easier. Progress has also been made in the field of entrepreneurship education by offering people from a very young age a real chance to acquire basic commercial expertise and develop their personal qualities and general skills such as creativity, sense of initiative, self-confidence and sense of responsibility.

The action plan has thus proved to be a valuable tool in achieving the aim of promoting entrepreneurship. The initiatives to which it has given rise are now continuing under the Community SME policy.

Support to businesses

Support to businesses

Outline of the Community (European Union) legislation about Support to businesses

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Enterprise > Business environment

Support to businesses

Enterprise Europe network

The Enterprise Europe Network offers information and tailored services to businesses, thus making a tangible contribution to promoting entrepreneurship and the growth of businesses in Europe.

The network, which is the widest in Europe in terms of its geographical coverage and the range of services offered, provides a ‘one-stop-shop’ for all the information which may be of use to European businesses. It is based on the proximity principle and the ‘no wrong door’ concept: in other words, businesses can contact any partner in the network, which will often be the nearest one, and be individually guided to the most appropriate service.

While the network is mainly targeted at small and medium-sized enterprises (SMEs), larger companies may also receive assistance.

The services of the Enterprise Europe Network include:

  • facilitating access to funding by making businesses aware of the available opportunities;
  • providing information on the EU policies, programmes and legislation which are relevant to a particular business’s activities;
  • settling problems linked to Community standards and intellectual property rights;
  • helping businesses to identify trustworthy commercial partners;
  • encouraging businesses to become more innovative and helping them to participate in research programmes and form technological partnerships;
  • exchanging best practice;
  • visiting businesses to assess their needs;
  • promotional and information material.

The network operates as a ‘two-way street’, and the Commission uses the feedback regularly received to adapt its policies and initiatives to the needs of European businesses, particularly SMEs, without creating additional red tape.

The Enterprise Europe Network provides a local service throughout the EU and outside its borders thanks to the presence of more than 500 contact points.

The Enterprise Europe Network is a key element of the Competitiveness and Innovation Framework Programme (CIP) and brings together the expertise of the former Euro Info Centres (EICs) and Innovation Relay Centres (IRCs).

Your Europe – Business

The ‘Your Europe – Business’ website offers European businesses more direct access to information of relevance to them, particularly by providing details on the provisions in force not only in the European Union but also in each of its Member States.

European portal for SMEs

The European portal for SMEs provides information on all the policies, legislation, programmes and initiatives of relevance to SMEs.

Solvit

SOLVIT is an on-line problem-solving network. Problems linked to the misapplication by the public authorities of EU internal market rules are solved in a pragmatic manner within ten weeks. Both businesses and European citizens can submit problems to the SOLVIT centres.

EURES – European employment services

EURES services are coordinated by the Commission and facilitate the free movement of workers within the European Economic Area (EEA). The network partners include public employment services, trade unions and employers’ organisations. The aims pursued by the EURES are:

  • to inform and advise potentially mobile workers on employment opportunities and living and working conditions in the EEA;
  • to help employers who wish to recruit workers from other countries;
  • to provide specific advice and vocational guidance to workers and employers in cross-border regions.

In addition to its mobility and employment website, EURES has more than 700 advisers throughout the EEA.

Environment and SMEs

The Environment & SMEs website provides information on the main environmental legislation, best practice, training opportunities, advice and toolkits to help SMEs to respect the environment and put in place sustainable activities. While large businesses have an obvious effect on the environment, the activities of SMEs also have a considerable impact.

The organizations for the promotion of energy technologies network (OPET)

The objective of OPET, a network created by the European Commission, is to promote the potential of new energy technologies and raise awareness of this issue among the public and, in particular, the business community. The network disseminates information on the latest developments, participates in knowledge-sharing and supports the marketing of new technologies. The network thus covers the building sector, renewable energy sources, co?generation, heating and cooling, hydrocarbons and placing on the market.

Intellectual property rights helpdesk

The Intellectual property rights helpdesk provides general information on these rights, how to protect one’s rights and the usefulness of so doing, and offers assistance on the problems which entrepreneurs can encounter in this area. The helpdesk is particularly aimed at entrepreneurs who participate, or wish to participate, in research and technological development projects.

European consumer centres network

The European consumer centres network is intended to assist European consumers in relation to questions or difficulties which may arise when they purchase goods or services in another Member State.

A modern policy for SMEs

A modern policy for SMEs

Outline of the Community (European Union) legislation about A modern policy for SMEs

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Enterprise > Business environment

A modern policy for SMEs

Document or Iniciative

Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions of 10 November 2005, entitled “Implementing the Community Lisbon programme – Modern SME policy for growth and employment” [COM (2005) 551 final – Not published in thOfficial Journal].

Summary

Small and medium-sized enterprises (SMEs) make a major contribution to growth and job creation in the European Union (EU). This is why the new policy on small and medium-sized enterprises (SMEs) creates a more coherent, pragmatic and horizontal framework for these enterprises. Promoting entrepreneurship and developing an environment favourable to SMEs will allow them to become more competitive.

SMEs are very diverse, and consequently have different needs. Some of them are start-ups, while others are rapidly growing “gazelles”. Some are active in vast markets, others in local or regional markets. If by definition all SMEs have fewer than 250 employees, some are micro-enterprises, others are family SMEs. In order to unlock the growth potential of SMEs as a whole, policies and action to support them need to reflect this diversity.

The success of this new policy will depend on the effective involvement of all SME stakeholders, national, regional and European, public and private.

Specific action is proposed in five key areas:

  • Promoting entrepreneurship and skills. Promoting entrepreneurship, reducing the burden of risk linked to setting up and running a business, eliminating the negative effects linked to business failure, and providing support for the successful transfer of businesses are all elements that contribute to a better exploitation of Europe’s entrepreneurial potential. Special attention will be paid to promoting entrepreneurial skills, reducing the skills gaps and providing support to particular categories of entrepreneurs (women, young people, old people, and people from ethnic minorities).
  • Improving SMEs’ access to markets. Better access to tenders on the public market, greater participation in the standardisation process, increased awareness of intellectual property rights, and support for inter-enterprise cooperation, particularly in border regions, will help SMEs to take full advantage of the opportunities provided by the internal market. SME access to international markets will also be facilitated.
  • Cutting red tape. It is vital to simplify the regulatory and administrative constraints weighing on SMEs. The principle of giving priority to small enterprises (“Think Small First”) will be integrated across all EU policies. The interests of SMEs will systematically be taken into consideration when assessing the impact of Community legislation and when preparing forthcoming legislation. Derogations for SMEs can be developed for this purpose. Special attention will be given to the rules concerning state aid, SME involvement in Community programmes, value-added tax (VAT) and, at national level, direct taxation.
  • Improving SMEs’ growth potential. Improving SMEs’ access to finance, research, innovation and information and communication technologies (ICT) will contribute directly to unlocking their potential for growth. Financial support, initially provided at Community level by the Multiannual Programme for Enterprises and Entrepreneurship (2001-2006), has now been increased by the Competitiveness and Innovation Framework Programme (CIP) (2007-2013). It is also vital to strengthen SMEs’ capacities for research and innovation, as continued innovation is essential for the sustainable development of SMEs. SME involvement in the 7th Research Framework Programme will thus be facilitated.
  • Strengthening dialogue and consultation with SME stakeholders. Enterprises, in particular SMEs, and the European Institutions suffer from a lack of information exchange. More systematic cooperation and consultation with stakeholders is an essential guideline of the new SME policy. When policies are being developed, SMEs will be consulted by the Commission’s SME Envoy or the “SME Panel”, a new quick-and-easy mechanism for consultation via the Enterprise Europe Network. In addition, as from the end of 2005, “European Enterprise Awards” will reward measures that have proved to be effective in promoting entrepreneurship and thus contributed to the exchange of best practices. The Community business support networks will, for their part, continue to play an essential role in spreading information on the EU to businesses, particularly SMEs.

Background

SMEs make up a large part of Europe’s economy and industry. The EU’s 23 million SMEs account for 99 % of all businesses and contribute up to 80 % of employment in some industrial sectors, such as textiles. European SMEs are thus an essential source of growth, employment, entrepreneurial skills, innovation and economic and social cohesion. It is therefore essential to unlock the potential of SMEs and improve the environment they operate in by promoting entrepreneurship.

Open method of coordination: BEST procedure

Open method of coordination: BEST procedure

Outline of the Community (European Union) legislation about Open method of coordination: BEST procedure

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Enterprise > Business environment

Open method of coordination: BEST procedure

Europe is a reservoir of good practice in the field of enterprise policy. However, these examples of good practice are rarely known outside their home Member State. By sharing best practices, the Member States have the potential to enhance their performance and thus to increase the competitiveness of European companies.

The aim of the BEST procedure is to compare these best practices. It is the European Commission’s response to the call from the Lisbon European Council of 23 and 24 March 2000 to create an open method of coordination to improve the environment for enterprises.

Several methods could be used to identify and exchange good practices, including comparing the performances of the Member States, peer assessment, seminars and conferences.

In the context of the BEST procedure, DG Enterprise and Industry has identified specific projects considered essential for the development of enterprises. These projects reflect the priorities laid down by the national governments and the enterprises themselves by way of the Enterprise Policy Group. Each year, the Commission launches a certain number of projects which then lead to the adoption of recommendations.

BEST projects are one of the instruments for implementing the objectives of the European Charter for Small Enterprises.

The BEST procedure has five steps:

  • identification of specific sectors and issues, with the assistance of the Enterprise Policy Group;
  • definition of the project (scale, aim);
  • implementation (limit of 18 months and voluntary participation of the Member States);
  • adoption of conclusions (systematic comparison of performances);
  • follow-up (feedback of Member State information on changes in the environment for enterprises) to ensure real progress.

EXAMPLES OF BEST PROJECTS

“Models to reduce the disproportionate administrative burden on SMEs” (project launched in 2006)

The bureaucratic hurdles facing enterprises, in particular SMEs, considerably curb their growth. This BEST project aims to collect information on the various methods used by the Member States to reduce this administrative burden.

“Measures to support entrepreneurs from ethnic minorities” (project launched in 2004)

Entrepreneurs from ethnic minorities have many problems starting up and developing a business. This BEST project aims to collect information on national measures and support plans to solve these problems.

“Business Angels” (project launched in 2001)

Business Angels are private investors, often entrepreneurs, former entrepreneurs or executives with expertise in a particular sector. They provide venture capital to young entrepreneurs and can also provide management advice. This BEST project aims to raise awareness in the Member States about the potential of Business Angels to help alleviate shortcomings in the banking system in the area of business start-ups.

CONTEXT

The BEST procedure was described for the first time in the communication entitled “Challenges for Enterprise Policy in the Knowledge-Driven Economy” [COM(2000) 256 final – Not published in the Official Journal] which accompanied the proposal for a decision of the Council on the Multiannual programme for enterprises and entrepreneurship (2001-2005), extended until 31 December 2006 and now replaced by the Competitiveness and Innovation Framework Programme (CIP) (2007-2013).

Development of micro-credit

Development of micro-credit

Outline of the Community (European Union) legislation about Development of micro-credit

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Enterprise > Business environment

Development of micro-credit

Document or Iniciative

Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions of 13 November 2007 – A European initiative for the development of micro-credit in support of growth and employment [COM(2007) 708 final – Not published in the Official Journal].

Summary

In Europe, micro-credit – i.e. loans of less than € 25 000 – is aimed at micro-enterprises (enterprises employing fewer than 10 people) and disadvantaged persons (unemployed or inactive people, those receiving social assistance, immigrants, etc.) who wish to go into self-employment but do not have access to traditional banking services.

Micro-credit can promote the transition from unemployment to self-employment and offers access to finance for persons whose projects the banks refuse to finance because of insufficient collateral. It can thus play a key role in implementing the Lisbon Strategy for Growth and Jobs.

Nevertheless, even if micro-credit has been on the increase for a number of years in the Member States of the European Union (EU), much remains to be done to enable this instrument to develop its full potential.

Therefore, the EU is proposing an initiative aimed at developing the market for micro-credit. The initiative comprises four strands:

  • improving the legal and institutional environment in the Member States;
  • further changing the climate in favour of entrepreneurship;
  • promoting the spread of best practices, particularly in relation to training;
  • providing additional financial capital for micro-credit institutions.

First strand: improving the legal and institutional environment in the Member States

The institutional framework in the Member States does not always allow micro-credit to develop in a positive way. Indeed, the specific nature of micro-credit is not generally taken into account in national or Community legislation. The Commission therefore encourages the Member States to take the measures needed to create a legal, institutional and business environment which is more conducive to the development of micro-credit. With this in mind, the Commission proposes that the Member States:

  • create an environment allowing the development of micro-finance institutions (MFIs) and covering all segments of the clientele. Given the number and diversity of potential clients, MFIs should have easy access to financial resources allowing them to develop micro-credit. MFIs are financed through grants and donations and, where appropriate, bank loans. They are certain to benefit from the creation of a suitable environment in which they are more visible;
  • help micro-credit to become sustainable by relaxing interest caps for micro-credit operations. In the Member States where they exist, interest rates should be fixed at a fairly high level in order that lending institutions can cover their costs, while regularly evaluating the social and economic impact in order not to jeopardise the security of borrowers;
  • reduce operating costs by applying favourable tax schemes. More favourable tax schemes (tax exemptions, tax reductions, grants) are important for the development of micro-credit;
  • adapt national regulation and supervision to the specificity of micro-finance. If they receive deposits, MFIs are subject to Community prudential regulation and are supervised accordingly. In order not to put a brake on the supply of micro-credit and the growth of MFIs not receiving deposits from clients, the new regulations and supervision must take account of their costs and the risks which MFIs pose.

Second strand: further changing the climate in favour of entrepreneurship

In order to encourage Europe’s shift towards an economy based on knowledge, services and new technologies, and to create a climate more conducive to entrepreneurship, the Commission proposes that the Member States:

  • improve the institutional framework for self-employment and micro-enterprises. Equal treatment for the self-employed and wage-earners is essential. Nevertheless, a programme of publicity and awareness-raising should be set up in order that self-employment and micro-enterprises are better recognised. To this end, legal, tax and administrative barriers should be lowered (e.g. exemption from social insurance charges, simplified registration procedures, improved access to more numerous and less expensive outlets);
  • increase the chances of success of new micro-enterprises through training, mentoring and business development services. The micro-enterprise environment is a complex one and demands a supply of business development services because those starting up in business do not always have all the competencies required in order to be successful. Training and mentoring are therefore needed to improve a start-up entrepreneur’s chances of success.

Third strand: promoting the spread of best practices

Promoting the spread of best practices for MFIs is a key element in the initiative to encourage micro-credit. The Commission therefore proposes to set up a new body to provide technical assistance and support the development of non-bank MFIs in the Member States. This new body would have the task of:

  • laying down a code of conduct for MFIs. Such a code would serve to increase confidence in MFIs and spread ethical and customer-friendly best practices among them. The quality of an MFI would thus be assessed on the basis of its social and financial performances and its business practices;
  • introducing a specific “micro-credit” label to create awareness among EU citizens. This label would enable the attention of investment funds dedicated to micro-credit to be focused more on MFIs which perform well, and improve citizens’ confidence in microfinance investment vehicles and steer new resources towards MFIs with the best social and financial performance;
  • providing information on this initiative and handling the publicity;
  • publishing brochures and organising conferences;
  • providing technical manuals, guides and software designed to help MFIs adopt best practices;
  • providing easier access to finance for MFIs by mobilising financial resources.

Fourth strand: providing additional financial capital for new non-bank MFIs

The Commission proposes to set up a support structure within the JEREMIE department of the EIF for the purpose of providing technical and financial support to promising non-bank MFIs. This micro-fund would have the aim of assisting MFIs to become self-sustaining and would help to increase the use of micro-credit in Europe and further develop this sector.

Context

This initiative seeks to promote the sustainable development of micro-credit in the EU and forms part of the Lisbon Strategy for Growth and Jobs, and of the policy of encouraging entrepreneurship and economic initiative, the policy of promoting “flexicurity” and the inclusion of disadvantaged persons, and the policy of developing human capital and renewing trust-based social links.

Related Acts

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions of 27 June 2007 – Towards Common Principles of Flexicurity: More and better jobs through flexibility and security [COM(2007) 359 final – Not published in the Official Journal].

from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions of 29 June 2006 – Implementing the Community Lisbon Programme: Financing SME Growth – Adding European Value [ final – Not published in the Official Journal].

Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast) [Official Journal L 177 of 30.6.2006].

Directive 2006/49/ECof the European Parliament and of the Council of 14 June 2006 on the capital adequacy of investment firms and credit institutions (recast) [Official Journal L 177 of 30.6.2006].


Business environment

Business environment

Outline of the Community (European Union) legislation about Business environment

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Enterprise > Business environment

Business environment

The process of starting up and developing a business is not just an adventure, but also a real challenge. In order to help entrepreneurs with this, it is essential to create a favourable business environment.
Ensuring easier access to funding, making legislation clearer and more effective and developing an entrepreneurial culture and support networks for businesses are all instrumental as far as the setting up and growth of businesses are concerned.
However, creating a favourable business environment does not mean simply improving the growth potential of businesses. It also means turning Europe into a place in which it is advantageous to invest and work. In this way, the promotion of corporate social responsibility is contributing to making business in Europe more attractive.
Small and medium-sized enterprises (SMEs) make up 99% of European businesses. Their small size makes them very sensitive to changes in the industry and environment in which they operate. It is therefore vital for their well-being to be a focus of political attention.

SMALL AND MEDIUM-SIZED ENTERPRISES (SME) – 99% OF EUROPEAN ENTERPRISES

  • A “Small Business Act” for European SMEs
  • A modern policy for SMEs
  • European Charter for Small Enterprises
  • Definition of micro, small and medium-sized enterprises
  • The SME Envoy
  • A programme for clean and competitive SMEs

ENTREPRENEURSHIP

  • Action plan for entrepreneurship
  • Promoting entrepreneurship in schools and universities

BUSINESS SUPPORT

Financing

  • Developing Public Private Partnerships
  • Development of micro-credit
  • Access to financing for businesses
  • Financing SME Growth
  • Competitiveness and Innovation Framework Programme (CIP) (2007-2013)

Advice

  • Support to businesses

IMPROVING THE BUSINESS ENVIRONMENT

Improving rules, practices and management

  • Combating late payment in commercial transactions
  • Green Paper: European Contract Law for consumers and businesses
  • Open method of coordination: BEST procedure
  • Reducing administrative costs
  • Administrative burdens: sectoral reduction plans 2009
  • A simplified business environment
  • Transfer of businesses
  • Overcoming the stigma of business failure
  • Community eco-management and audit scheme (EMAS)
  • Late payments

Corporate social responsibility (CSR)

  • A European strategy 2011-2014 for Corporate Social Responsibility
  • Promoting corporate social responsibility
  • Corporate social responsibility: a business contribution to sustainable development.
  • Green Paper on corporate social responsibility
  • Sustainable Consumption, Production and Industry Action Plan

Transfer of businesses

Transfer of businesses

Outline of the Community (European Union) legislation about Transfer of businesses

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Enterprise > Business environment

Transfer of businesses

Document or Iniciative

Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions of 14 March 2006 – Implementing the Lisbon Community Programme for Growth and Jobs – Transfer of Businesses – Continuity through a new beginning [COM (2006) 117 final – Not published in the Official Journal].

Summary

When a business owner retires, his business all too often comes to an end. Owing to legal, fiscal and psychological difficulties, many transfers of thriving businesses fail. It is not easy to find a successor, especially as businesses are now generally transferred to third parties rather than to a family member. Furthermore, most Europeans prefer to be employed, and entrepreneurs are more interested in creating than in taking over a business.

Yet taking on an existing business offers many advantages (an established production structure, a client network, know-how, business reputation, etc.). A successful business transfer also benefits European growth and, consequently, plays a crucial role in the Lisbon Strategy. For instance, existing businesses provide five jobs on average for every two provided by a new business.

The transfer of businesses is a practice which will gain ground over the next decade, with one third of business owners in the EU retiring over the next ten years. It is estimated that 690 000 small and medium-sized enterprises (SME) and 2.8 million jobs will be affected each year. It is therefore essential to create suitable conditions for transfers of businesses.

In order to do this, the Commission is proposing a number of improvements to the Member States, including:

  • More sustained political attention to transfers

The Member States should systematically promote the transfer of businesses as an alternative to business creation. They should, for instance, consider introducing support measures for transfers similar to those available for business creation.

  • Awareness-raising among stakeholders

At present, insufficient effort is made to raise awareness. Only half of the Member States have taken relevant action. Like retiring business owners, potential new entrepreneurs should receive special attention because taking over an existing business often offers an interesting alternative to creating one. The Commission therefore recommends more action to raise awareness among business owners, for example through chambers of commerce and other points of contact such as tax advisers, accountants or banks, of the need to plan transfers sufficiently in advance. The Commission also calls on the Member States to encourage mentoring systems with a view to assisting business owners at the time of transfer. Lastly, the Member States should envisage direct approaches to raising awareness among business owners, such as sending letters to business owners over a given age.

  • Making it easier to change the legal status of a business

Succession contracts, partnership agreements, the establishment of limited liability companies and restructuring are all legal tools which can be used to prevent business closure. For example, the succession contract, which is prohibited in many countries, the partnership agreement or the establishment of limited liability companies make it possible to ensure business continuity in the event of the owner’s or an associate’s death. When changing legal status, a business about to be transferred can undergo legal restructuring in order to avoid liquidation.

  • Improved financing of transfers

The financial environment is rarely favourable for transfers of businesses. Indeed, transferring a business leads to a number of difficulties. First, it requires more capital than business creation, but the financial facilities designed for creating businesses often prove insufficient for transfers. Secondly, banks often consider financing transfers to be too costly and too risky, particularly for small businesses. Lastly, it is sometimes difficult to find a financial solution on time, as such a solution often takes the form of a combination of equity and loan. The Commission therefore recommends that the Member States provide suitable financial conditions such as start-up aid, loans and guarantees. Guarantees for equity in SMEs should include investments of local or regional funds to supply the initial and/or start-up capital, and mezzanine financing (a combination of equity and debt capital).

  • Tax incentives for business transfers

Although transfers within families have been made easier in many countries, transfers to third parties must receive greater encouragement through exemptions from tax on income generated by the sale of a business, specific tax relief on income reinvested in another business or used to finance the retirement of the business owner, or tax exemptions for employees investing in their own business.

  • Transparent markets for business transfers

The provision of impartial services to act as mediators between potential buyers and sellers should make it possible to organise transparent markets for business transfers. In some countries, the chambers of commerce take on this responsibility.

In order to implement all of these recommendations, a support infrastructure needs to be created to reach the hundreds of thousands of businesses which will be affected by a transfer over the next few years. This implementation infrastructure will make use of the Member States, their national, regional and local administrations, and business support organisations. It will involve in particular the dissemination of information to those providing support, the training of trainers and the development of teaching material.

Background

In 1994, the Commission published a Recommendation on the transfer of SMEs. This notice assesses the implementation of the 1994 Recommendation.

Overcoming the stigma of business failure

Overcoming the stigma of business failure

Outline of the Community (European Union) legislation about Overcoming the stigma of business failure

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Enterprise > Business environment

Overcoming the stigma of business failure

Document or Iniciative

Communication from the Commission of 5 October 2007 to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions: Overcoming the stigma of business failure – for a second chance policy – Implementing the Lisbon Partnership for Growth and Jobs [COM(2007) 584 final – Not published in the Official Journal].

Summary

Half of all businesses do not survive the first five years. However, the death of businesses is not incompatible with economic dynamism. Public opinion often associates failure with fraud or personal inability. Yet only 4 to 6 % of bankruptcies are fraudulent. Most of the time, bankruptcy is simply the direct consequence of business renewal.

Business failures have a high cost in terms of employment, purchasing power (unpaid wages) and finance (unpaid debts). This cost could be reduced if businesses in difficulty received better assistance and, in the event of bankruptcy, if it was made easier for them to make a fresh start. Furthermore, entrepreneurs who restart a business learn from their mistakes and subsequently enjoy greater success. For all these reasons, a second chance should be given to failed businesses.

Public image, education and the media

Europeans fear business failure. They need to be shown that new attempts are part of a normal process of learning, research and discovery through, for example, information campaigns and education programmes. The Commission has created awareness-raising tools which can be used for this purpose. The media also have a role to play, particularly when it comes to combating the cliché according to which bankruptcy is a crime, regardless of the cause. Lastly, sustained dialogue with all involved parties should make Europeans aware of the advantages of a fresh start.

The role of insolvency law

Many European bankruptcy laws treat fraudulent and honest business failure in the same manner. Sometimes, they impose restrictions, prohibitions and even disqualifications on bankrupts. Legislation should make a greater distinction between the treatment of fraudulent and non-fraudulent bankruptcies. Furthermore, legal proceedings should be made simpler and faster, lasting no longer than one year. Lastly, legislation should provide for early discharge from remaining debts subject to certain criteria. Overwhelming debts can in fact dissuade an entrepreneur from setting up another business.

Actively supporting businesses in difficulty

Business failure must be prevented by supporting entrepreneurs at as early a stage as possible. The Commission recommends that the Member States introduce support measures such as expert assistance. As businesses in difficulty cannot afford to pay for costly advice, it is essential to make such support more accessible. The Commission has in fact developed an early warning instrument: it has put a self-assessment tool on-line to help entrepreneurs make a rapid estimate of their financial health. In addition to this, the INTERREG IVC programme and European business organisations offer many possibilities for networking and the exchange of good practices in the field of business support.

Lastly, it is also possible to prevent bankruptcies by considering other alternatives: the Commission advises Member States to shift their focus to restructuring and rescuing businesses in difficulty.

Actively supporting restarters

Entrepreneurs who create a second business face psychological, technical and financial difficulties. Training and coaching should therefore be made available to them. It is also necessary to promote the link between these entrepreneurs and their clients, business partners and investors, who are often suspicious of bankrupts.

Furthermore, entrepreneurs who are restarting a business need financial resources. Public bodies should remove barriers to public financing. Banks and financial institutions should be less cautious vis-à-vis restarters, and the names of non-fraudulent bankrupts should not appear on lists restricting access to loans in the banking sector.

 

Late payments

Late payments

Outline of the Community (European Union) legislation about Late payments

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Enterprise > Business environment

Late payments

This Directive aims to encourage enterprises and public authorities to comply with payment deadlines in commercial transactions in order to ensure the smooth functioning of the single market.

Document or Iniciative

Directive 2000/35/EC of the European Parliament and of the Council of 29 June 2000 on combating late payment in commercial transactions.

Summary

The Directive is designed to combat late payments in commercial transactions within the European Union by laying down common minimum requirements consistent with the principles of subsidiarity and proportionality. These minimum requirements should be complied with in all of the Member States without prejudice to existing national measures.

Late payments constitute a major obstacle to the free movement of goods and services in the single market and could substantially distort competition. The resulting administrative and financial burdens impede cross-border trade. Small and medium-sized enterprises (SMEs) and the craft sector are most vulnerable here.

The Directive covers all debts incurred in commercial transactions *. It applies to businesses * and public authorities alike.

Interest on late payment is payable from the day following the stipulated payment deadline. The due date for payment is in principle thirty days fromthe receipt of the invoice or, in the absence of an invoice, thirty days from the receipt of the goods or services, unless the contracting parties make an express decision to the contrary. Nevertheless, any agreement on the date of payment must comply with the minimum requirements laid down by this Directive unless it is grossly unfair. The time limit can be a maximum of sixty days for certain contracts specifically determined by national legislation.

Beyond this time limit, the creditor is entitled to claim interest for late payments. The legal rate applicable is the interest rate applied by the European Central Bank to its main refinancing * operations, plus a minimum of seven percentage points. In any event, compensation for recovery costs should be reasonable.

The transfer of the ownership of goods may also be deferred until the actual payment, if the contract expressly provides for this (“retention of title” principle).

Moreover, an accelerated procedure in the form of an enforceable title * should be available to the creditor for recovery of uncontested debts if he takes legal action against the debtor. This takes effect within a maximum of ninety days of the action being brought.

Key terms used in the act
  • Commercial transactions: transactions between undertakings or between undertakings and public authorities which lead to the delivery of goods or the provision of services for remuneration.
  • Business: any organisation engaged in independent economic or professional activity, even if such activity is carried out by a single person only.
  • Interest rate applied by the European Central Bank to its main refinancing operations: the interest rate applied to such operations in the case of fixed rate tenders. If a main refinancing operation was conducted according to a variable rate tender procedure, this interest rate refers to the marginal interest rate which resulted from that tender. This applies both in the case of single-rate and variable-rate tenders.
  • Enforceable title: any decision, judgment or order for payment issued by a court or other competent authority, whether for immediate payment or payment by instalments, which permits the creditor to have his claim against the debtor collected by means of forced execution; It shall include a decision, judgment or order for payment that is provisionally enforceable and remains so even if the debtor appeals against it.

References

Act Entry into force Deadline for transposition in the Member States Official Journal
Directive 2000/35/EC [adoption : co-decision COD/1998/0099] 08.08.2000 08.08.2002
Ten new Member States
01.05.2004
OJ L 200 of 08.08.2000

 

Combating late payment in commercial transactions

Combating late payment in commercial transactions

Outline of the Community (European Union) legislation about Combating late payment in commercial transactions

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Enterprise > Business environment

Combating late payment in commercial transactions

Document or Iniciative

Directive 2011/7/EU of the European Parliament and of the Council of 16 February 2011 on combating late payment in commercial transactions (Text with EEA relevance).

Summary

This Directive aims at combating late payment * in commercial transactions * in order to contribute to the proper functioning of the internal market and to foster the competitiveness of undertakings, particularly small and medium-sized enterprises (SMEs).

The Directive applies to all types of payment made as remuneration for commercial transactions between public authorities and between undertakings. It may exclude:

  • debts that are subject to insolvency proceedings against a debtor;
  • proceedings aimed at debt restructuring;
  • transactions with consumers;
  • interest relating to other payments (for examples payments made under the laws on cheques and bills of exchange, or payments made as compensation for damages including payments from insurance companies).

Transactions between undertakings

In the event of late payment, a creditor is entitled to claim interest on condition that they have fulfilled their contractual and legal obligations and that they have not received the amount due * on the agreed date. The creditor is paid such interest according to the payment period or date laid down in the contract.

With regard to commercial transactions between economic operators, the Directive stipulates, whilst respecting their contractual freedom, that they must pay their invoices within 60 days except where they have expressly agreed otherwise and insofar as other terms are not grossly unfair to the creditor.

Where the contract does not specify any date for payment, the creditor is also entitled to receive interest if 30 calendar days after receipt, by the debtor, of the invoice or an equivalent request for payment, the creditor has not received the amount due.

The creditor may even be entitled to compensation from the debtor for recovery costs.

Transactions between undertakings and public authorities

In the event of late payment, and where the debtor is a public authority, the creditor shall be entitled to claim interest if they have fulfilled their contractual and legal obligations and have not received the amount due on the agreed date.

Where the debtor is a public authority, the date of receipt of the invoice must not be the subject of a contractual agreement. The period of payment for an invoice must not exceed:

  • 30 days following receipt of the invoice;
  • 30 days following the date of receipt of the goods or services where the date of receipt of the invoice is uncertain.

Member States may extend payment periods to a maximum of 60 days under certain conditions.

The statutory rate of interest for late payment shall be increased to at least 8 percentage points above the reference rate applied by the European Central Bank. Public authorities may not set lower interest rates for late payment.

Unfair contractual terms and practice

Contractual terms shall not apply if they cause prejudice or are unfair to the creditor – for example if they exclude the payment of interest for late payment or compensation for recovery costs.

In order to avoid such unfair practice, Member States must ensure transparency with regard to the rights and obligations resulting from this Directive and shall be bound to publish the applicable rate of statutory interest for late payment.

Member States may also encourage the implementation of payment codes setting out payment time limits.

Recovery procedures

Creditors may lodge action or apply to a court provided that the debt is not disputed.

This Directive repeals Directive 2000/35/EC.

Key terms of the Act
  • Late payment: payment not made within the contractual or statutory period of payment.
  • Commercial transactions: transactions between undertakings or between undertakings and public authorities which lead to the delivery of goods or the provision of services for remuneration.
  • Amount due: the principal sum which should have been paid within the contractual or statutory period of payment, including the applicable taxes, duties, levies or charges specified in the invoice or the equivalent request for payment.

References

Act Entry into force Deadline for transposition in the Member States Official Journal

Directive 2011/7/EU

15.3.2011

16.3.2013

OJ L 48, 23.2.2011