The Week in One Line

A new company category called Small Mid-Cap (SMC) could soon give growing businesses access to compliance simplifications that were previously available only to small and medium-sized businesses.

What the Act Actually Says

The EU AI Act already gives small and medium-sized enterprises (SMEs) some compliance advantages, such as simpler documentation requirements and lower conformity assessment fees.

The Digital Omnibus package (the EU's proposal to simplify business regulations, including parts of the AI Act) expands some of these benefits to a new category called Small Mid-Cap (SMC).

An SMC is a company that has grown beyond the EU's SME size limits but is still much smaller than a large enterprise. The goal is to support businesses that have outgrown SME status but don't yet have the legal and compliance resources of larger organisations.

Under the proposal, eligible Small Mid-Caps would also have greater access to AI regulatory sandboxes and real-world testing environments. These are supervised programmes that allow businesses to test AI systems with regulatory guidance before wider deployment.

The aim is to reduce administrative work without changing the core requirements of the AI Act.

Like the revised timelines for high-risk AI systems, these changes are not yet final. They still need to complete the EU legislative process:

  • Provisional political agreement reached
  • Formal adoption and publication still pending
  • Expected before 2 August 2026

Sources: Council of the EU (7 May 2026 Digital Omnibus press release); Hogan Lovells; Dastra.

What This Means for Your Business

If your organisation has recently grown beyond the SME thresholds, it's worth checking whether you would qualify as a Small Mid-Cap under the proposed rules.

If you do, you may benefit from:

  • Simpler documentation requirements
  • Reduced administrative burden
  • Greater access to regulatory support
  • Easier participation in AI regulatory sandboxes

The proposal does not remove your obligations under the AI Act.

Where applicable, organisations must still comply with:

  • Rules on prohibited AI practices
  • Requirements for high-risk AI systems
  • General-Purpose AI (GPAI) obligations

For businesses developing new AI products, expanded access to regulatory sandboxes could be especially valuable. These programmes help organisations test AI systems and identify compliance issues before launching them more widely.

This Week's Action Point

Ask these three questions:

  • Are we still an SME?
  • Would we qualify as a Small Mid-Cap under the proposed rules?
  • Which AI Act compliance simplifications could become available to us?

If your organisation sits between the SME and large enterprise categories, this is a good time to discuss the proposed changes with whoever is responsible for AI governance or compliance.

If adopted, the new rules could reduce documentation requirements and administrative work while keeping the same core AI Act obligations.

Further Reading

  • Council of the EU – Digital Omnibus on AI press release
  • artificialintelligenceact.eu – Small Business Guide

Next Tuesday

AI Literacy Obligations

The AI Act requirement that already applies today, even if your organisation doesn't use high-risk AI systems.