Situation:  The European Parliament and Council of ministers is now considering whether to pass new EU law abolishing the need for businesses under 1 million Euro turnover to file accounts at official registries. According to Internal market and Services Commissioner, this would relieve micro-businesses of administrative burden in tough economic times. Annual accounts are a valuable tool to banks, credit insurers, credit agencies in order to ascertain the financial solidity of a business. If these no longer exist, how will financial lenders, suppliers and insurers assess the risk of micro-businesses?  Won’t credit dry up even more? In a very uncertain economic world, what the EU seems to want to inject is more uncertainty. In order to get the banks lending to small businesses again, we need more information – not less.

If this becomes law across Europe, it is yet one more step on the road to getting rid of all statutory accounts at Companies house. If this carries on, CRAs in Britain will have to increase their collection of trade payment data from clients’ sales ledgers just to fill the gap caused by the absence of financials at Companies registry. Does anyone really want to wave goodbye to statutory accounts?  This could also lead to a stampede of private businesses (sole traders, partnerships etc) registering as incorporated companies at the CRO. – Private businesses have traditionally stayed private in the past because they didn’t want to reveal their financial positions to all and sundry at Companies House. The downside of remaining private is that business owners have unlimited liability for debts. Under the proposed new law, small businesses will be able to register as limited liability companies, and still not reveal their accounts if their turnover is under 1 million Euros per annum. That would be a pretty attractive proposition for many.

The above comment was posted on LinkedIn by Graydon (BIIA Member) with a request to post views:   Subsequently the following comments were posted on LinkedIn

“The proposed EU law would reduce transparency in credit transactions which will be detrimental for small businesses. Lack of transparency will force creditors to revert to subjective credit granting rather than an objective one. We in Asia are working very hard on improving transparency and the proposed EU law will be a poor role model and will not help to bring transparency into developing markets.  A concerted effort by FEBIS, ICISA and BIIA should be undertaken.” 

Posted by Joachim C. Bartels Managing Director; BIIA Business Information Industry Association Asia – Pacific – Middle East

“The current exemptions on P&L details are bad enough. This proposal would be a gift to fraudsters and incompetents alike. This proposal must be resisted at all costs.” 

Posted by Joe Wheatley

BIIA Comment:  This is one of the most irrational suggestions ever made by the EU Commission.  The Financial Credit Cristis should have tought everyone a lesson.  Transparency in credit transaction is essential!