The Bottom Line
- Group-Wide Assessment: When applying for subsidies aimed at Small and Medium-Sized Enterprises (SMEs), your company’s eligibility is determined by the size of the entire corporate group, not just the individual applicant entity.
- Ownership is Decisive: A majority shareholding by another firm automatically makes it a “linked enterprise.” Its employee count, turnover, and balance sheet figures will be fully consolidated with yours for the SME test.
- No Geographic Exceptions: Arguments that parent or sister companies operate outside the EU or in different market sectors are irrelevant. The EU’s definition of linked enterprises under state aid rules is applied strictly based on control and ownership structure.
The Details
A Dutch fishing company recently learned this lesson the hard way after being denied an energy efficiency subsidy (the “ENERGIEVIS” grant). The subsidy was specifically targeted at SMEs in the fishing sector. Although the applicant company itself was small, the Dutch Minister of Economic Affairs rejected the application. The reason: the company was a wholly-owned subsidiary within a large corporate group whose consolidated figures for employees and turnover far exceeded the EU’s SME thresholds.
The company challenged the decision, arguing that much of its parent group’s business occurred outside the European Union and therefore should not distort competition within the internal market. The Dutch Trade and Industry Appeals Tribunal upheld the Minister’s decision, providing a crucial clarification on how SME status is determined. The ruling centered on the EU’s Group Exemption Regulation for the fisheries sector, which sets clear definitions for what constitutes an SME. The regulation mandates that the data of any “linked enterprises” must be fully aggregated with the applicant’s. An enterprise is considered “linked” if another company holds the majority of voting rights—a test based purely on control. In this case, the clear chain of 100% ownership made the applicant and its parent company linked enterprises, requiring their figures to be combined.
This judgment serves as a critical reminder for CEOs and legal counsel across all sectors. The court confirmed that the rules are applied mechanically, leaving no room for economic or geographic nuance. The fact that a parent company is located outside the EU or operates in a completely different industry does not create an exception. For any business that is part of a larger corporate structure, assessing eligibility for SME-targeted funding requires a thorough analysis of the entire ownership chain. A legally distinct subsidiary can be disqualified from valuable subsidies simply because of the size of its parent.
Source
College van Beroep voor het bedrijfsleven (Dutch Trade and Industry Appeals Tribunal)
