(BRUSSELS) - The European Commission sought on Wednesday to make it easier for small and mid-sized companies to do business across Europe's borders with proposals for a single EU legal status.

"If SMEs want to do business in several member states, they have to set up subsidiaries using different company forms," said EU Internal Market Commissioner Charlie McCreevy.

"Setting up and running subsidiaries, for example, as an SARL in France, a Limited company in the UK and a GmbH in Germany requires knowledge of three different legal systems. This is time-consuming. It is also very expensive."

To fix the problem, the commission proposed a new EU legal status for small and mid-sized businesses to be known as the European Private Company, or SPE from the 'Societas Privata Europaea.'

The commission estimates that having a single EU legal status could save between 2,000 and 10,000 euros on setting-up companies and between 750 and 8,000 euros in day-to-day operating costs.

The new status would only relate to a company's legal registration and firms would remain subject to labour, tax, accounting and insolvency laws of where they operate in the EU.

Although the SPE status was designed with smaller companies in mind, in principle larger groups could also use it as long as they did not offer shares to the public or were publicly traded.

A similar statute, the Societas Europaea, already exists for larger publiclly traded European companies, although few have opted to use it.

In order to encourage start-ups, an entrepeneur could put up as little as one euro in capital to found an SPE under the commission's proposals, compared with as much as 30,000 euros currently in some European countries.

McCreevy said he was hopeful that EU governments and the European Parliament would back the plans before the end of May 2009.

The proposal is part of broader initiative from the commission to boost small and mid-sized companies, which it defines as firms employing 250 people or less and which it estimates to number 23 million in Europe.

The Small Business Act, as it is known, sets out guidelines and proposals, including plans to simplfiy state aid procedures for small firms and a reduced sales tax for locally supplied services.

It also includes plans that would require SMEs to be paid within 30 days.

The initiative was welcomed by associations representing small businesses, which consider themselves to be long neglected by policy makers.

"Europe's craft and SMEs account for 99 percent of all businesses so it makes perfect sense to conceive legislation with smaller realities in mind since the very beginning," said Andrea Benassi, head of the UAEPME small business lobby.

"The European Commission is moving today from a logic that sees SMEs as exemptions, to a stronger, more solid theoretical approach that will quickly bear fruit if fully endorsed also at member state level," he added.

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