25.05.2020 Company law

Financial shield – definition of the term small and medium-sized enterprises SMEs?

From 29 April 2020, micro, small and medium-sized enterprises obtained the opportunity to apply for funding in the form of a subsidy under the so-called Financial Shield. Practice has shown that regulations defining small and medium-sized enterprises were not precise, which resulted in multiple interpretations of the regulations.

In response to calls from business, the Polish Development Fund issued communications with additional information on this subject. On 28 May 2020, the amended regulations of the government program enter into force and clarify the definition of a small and medium-sized enterprise entitled to receive a subsidy under the program.


To benefit from the subsidy granted under the Financial Shield, a business entity must first meet the requirements qualifying it as a program beneficiary.

According to the regulations, beneficiaries are entrepreneurs within the meaning of Article 4 (1) and (2) of the Entrepreneurs Act having the status of a micro enterprise or an SME. As part of determining their beneficiary status, entrepreneurs are required to verify that they are not large enterprises as a result of their business relationships or the nature of the owner (an entity whose 25% or more capital or voting rights is controlled directly or indirectly, jointly or individually, by at least one public entity will always be considered a large enterprise).

Who is an entrepreneur?

An entrepreneur is a natural or legal person or an organizational unit not being a legal person that has been granted legal capacity under a separate law, that carries out business activity, or a partner in a civil law partnership in the scope of their business activity.

Status of SME and micro enterprise

SME is an enterprise that as of 31 December 2019 had no more than 249 employees (excluding the owner) and its annual turnover for 2019 did not exceed EUR 50 million, or the balance sheet total for 2019 did not exceed EUR 43 million.

Enterprises exceeding all those three thresholds are considered large enterprises. However, if an enterprise exceeds either an employment threshold or both financial thresholds, it is also considered a large enterprise. Therefore, when an enterprise has more than 249 employees, it will be considered a large enterprise regardless of its turnover or balance sheet total. Consequently, when an enterprise has less than 250 employees but its annual turnover is greater than EUR 50 million and a balance sheet total of more than EUR 43 million, it is also considered a large enterprise. Whereas an enterprise that has less than 250 employees and its annual turnover does not exceed EUR 50 million, then, even if its balance sheet total exceeds EUR 43 million, such enterprise will be considered a medium or small-sized enterprise. The same applies to an enterprise with annal turnover greater than EUR 50 million but balance sheet total of less than EUR 43 million. Such enterprises will be classified as SMEs and will be able to apply for an aid under the Financial Shield.

At the same time, enterprises in SMEs sector must have yearly average employment of at least 10 employees and annual turnover or balance sheet total of at least EUR 2 million. If an enterprise does not achieve these indicators, it will be considered a micro-enterprise.

A micro-enterprise will be an enterprise with 1 to 9 employees (excluding the owner) and annual turnover or balance sheet total of less than EUR 2 million. One of the conditions for recognizing an entrepreneur as a program beneficiary is that it must employ at least 1 person. This means that if an entrepreneur did not have any employees as at 31 December 2019, it will not be entitled to receive a subsidy under the Financial Shield. Therefore, if a micro-enterprise have no employees, an aid under the Financial Shield cannot be granted to it.

In order for an entrepreneur to receive an aid under the Financial Shield, it must prove its status of an SME or a micro-enterprise. Therefore, it cannot be a beneficiary of the financing granted under the government program “Financial Shield of the Polish Development Fund for Large Enterprises”, because it cannot be considered a large enterprise.

In addition, an entrepreneur should determine whether it meets the conditions for recognizing its business as an SME in terms of its links with other entities. This means that in the case of a capital group, when establishing the SME status – a turnover, balance sheet total and the number of employees for all companies in that capital group is taken into consideration.

Who can be considered a worker?

A worker for the purpose of establishing an enterprise status is only a person referred to in Article 2 Labour Code, i.e. a person employed on the basis of an employment contract, an appointment, an election, a nomination or a co-operative employment contract (employed full or part time).

Workers on maternity leave, equivalent maternity leave (for adopting parents), paternity leave, parental leave and childcare leave, employed for vocational training, as well as persons employed under civil law contracts are excluded.

For example, an enterprise which on 31 December 2019 had no workers but employed 3 persons under a contract of mandate (registered for social security) does not comply with the employment condition.

The number of workers for the purpose of establishing the status of an enterprise includes persons registered with ZUS with the following insurance codes: 0110, 0111, 0125, 0126 as of 31 December 2019.

It should be noted that when establishing the status of an enterprise, a cooperating person is not included in the number of workers. Whereas, when determining the value of subsidy for micro-enterprises and remittance of subsidy for SMEs, a cooperating person will be considered a worker.

To calculate the employment in order to determine the status of the enterprise, all full-time and part-time positions should be added up (we do not add up people). The number should always be rounded up, e.g. if you employ 3.2 employees full-time, enter the number 4.

For example, when 2 persons are employed full-time and 3 persons are employed half-time, the employment is 3,5 i.e. 4 employees after rounding up.

An exception to this rule applies to enterprises that as of 31 December 2019 employed only one person part-time (regardless of the time equivalent of that worker e.g. a firm employing only one person in 1/3 of a full-time equivalent will be considered a micro-enterprise).

What is annual turnover and balance sheet total?

Annual turnover is determined by calculating the income generated by the enterprise during the year from the sale of products and the provision of services in the ordinary course of its business, after deducting rebates. The turnover should be calculated net of value added tax (VAT) and other indirect taxes.

The annual balance sheet total is the total net worth of an enterprise.

Learn more: Webinar: Financial Shield for SMEs – practical issues

Related companies

When determining the status of an SME, the beneficiary is obliged to verify whether there exist any business links between it and other enterprises (i.a. as part of capital group).

Only directly related enterprises are taken into account when determining the SME status.  It is also important that in order to determine its status, an enterprise takes into account the data of partner enterprises and related companies abroad and in Poland (i.e. those which have respectively more than 50% of shares in the company or votes between 25% and 50%, which are taken proportionally). In addition, an enterprise should include sister companies abroad and in Poland or persons, if they operate on the same or adjacent (complementary) market.

Relationship information is provided as of 31 December 2019.

If a given company has a related company – the aggregate data of all related companies are added up to its employment data and annual turnover and balance sheet total.

Related companies are companies that are in one of the following relationships:

  • a company has the majority of voting rights in another company as a shareholder or member,
  • a company has the right to appoint or recall the majority of members of the administrative, management or supervisory body of another company,
  • a company has the right to exercise a dominant influence over another company on the basis of a contract concluded with that company or provisions in its articles of association,
  • a company being a shareholder or member of another company individually controls, pursuant to an agreement with other shareholders / members of that company, the majority of shareholders’ or members’ voting rights in that company,

If an enterprise has a partner enterprise – its employment data and the annual turnover and balance sheet total are added to the data of partner enterprises in proportion to the percentage share in the capital or voting rights (except that a higher share should be taken into account) – this is not applicable to public investment corporations, venture capital companies, natural persons or a group of natural persons conducting regular investment activities as “business angels”, provided that total amount of investment of these investors in one enterprise does not exceed EUR 1,250,000; as well as institutional investors, including regional development funds.

Partner enterprises are all enterprises which are not related enterprises but between which there is a relationship whereby:  

  • one upstream enterprise holds, either individually or jointly with one or more related enterprises, 25% or more of the capital or voting rights in another downstream enterprise,

Data of enterprises that are subject to adding up should be determined on the basis of accounting books or consolidated financial statements.

Does this apply to partnerships?

Yes. In the case of partnerships, determination of the status of entrepreneur includes partner companies and partner’s contributions and their percentage ratio analogously to the percentage of share in the capital of companies, if they are companies operating on the same or an adjacent (complementary) market.

How we can support you:

 If you want to take advantage of the PFR financial shield, we can support you in:

  • determining whether your company is a micro-enterprise or SME
  • determining whether there has been a decrease in turnover
  • determining the number of employees
  • resolving discrepancies in Tax Office / Social Insurance Institution in case of a rejection
  • the settlement of subsidies


Grzegorz Witczak
Director of the Commercial Law and Property Department, Advocate
TGC Corporate Lawyers

Michał Fatek
Trainee attorney at-law
TGC Corporate Lawyers

Klaudia Szatan 
Junior Associate 
TGC Corporate Lawyers

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