On 18 March 2026, the European Commission proposed EU Inc., a company-law cornerstone of a broader “28th regime”. This optional European framework would be available alongside existing national company forms. Under the Commission’s proposal, a company could be established or converted into an EU Inc. and use a fully digital incorporation procedure within 48 hours and at a maximum cost of 100 euros when relying on the EU templates. They would also benefit from common rules on shares, financing instruments, governance and employee equity.
The EU Inc. regulation is meant to give founders and investors a lean company-law vehicle they can use anywhere in the EU, instead of navigating 27 different national regimes. It matters most for innovative startups and scaleups, whose growth typically depends on raising venture capital, often across borders. The proposal aims to remove obstacles that prevent innovative European firms from growing. In this blog post, we set out six recommendations for truly eliminating fragmentation across 27 national regimes.
More than fast incorporation
Venture-capital financing is built around a coordinated set of arrangements regarding the allocation of cash-flow, governance and exit rights between founders, venture capitalists and employees. Founders and investors choose these arrangements to minimize the transaction costs of funding and managing highly innovative firms. Incorporation is a one-off event, while financing rounds, board decisions, option grants and exits recur throughout a company’s life.
Company law can either accommodate these arrangements, by deferring to what the parties negotiate, or undercut them, by imposing its own mandatory terms in their place. The practical value of EU Inc. consequently depends not only on whether a company can be incorporated quickly and inexpensively, but also on whether the financing and governance arrangements on which it relies will have the same legal effects throughout the Union.
The July compromise: 27 versions of one company form?
The Council’s first compromise text of the regulation, dated 17 July 2026, keeps welcome features of the Commission’s proposal, such as fast, low-cost digital incorporation. But it also leaves national law much more room to determine whether, and if so how, the arrangements agreed by a company’s founders and investors in its constitutional documents will be given effect.
In practice, this means that an EU Inc. could end up being governed by 27 different versions of national mandatory rules. Identical provisions could be valid and effective in one member state but restricted, reinterpreted or uncertain in another. The compromise would thus risk reproducing, inside the very vehicle meant to solve it, the same fragmentation and legal uncertainty that innovative firms already face when incorporating under ordinary national company law.
A different risk compounds this one. European startup finance is not static: term sheets, articles of association and side letters evolve to adapt to market changes, driven largely by internationally minded venture capital funds rather than by legislators. A regulation that freezes today’s practice into a rigid template risks arresting that evolution.
Six recommendations
We propose six changes to the July compromise, all pursuing the same objective: giving startups more room to rely on the contractual arrangements. The recommendations do not seek to harmonize every aspect of company law or remove national safeguards for employees, creditors and the prevention of abuse. They seek to establish a predictable European core in the areas that determine whether founders and investors can use EU Inc. to finance and grow an innovative company.
- National corporate law should apply to EU Inc. only where the regulation expressly says so, with any limits on private ordering read narrowly.
- An optional EU Startup and Venture Financing Module should validate the standard tools of venture deals, such as preferred shares, liquidation preferences, vesting, drag-along rights and convertible instruments.
- EU templates should cover the full documentation package and act as a legal safe harbor: clauses that follow an approved model would be presumed valid in every member state.
- Formation and conversion should follow common European criteria, with no two-year waiting period for existing companies.
- Governance, directors' liability, distributions and employee equity should rest on uniform rules, including a genuine business judgment rule and cashless option exercise.
- EU Inc. companies should be treated equally across borders, backed by mechanisms that keep the rules interpreted the same way everywhere.
A window for action
The legislative process still offers a window for action. The July compromise is only the Council’s first working text, not the final regulation. The proposed changes can still be incorporated into subsequent Council compromise texts or into the European Parliament’s committee report, before the two institutions adopt their negotiating mandates and enter interinstitutional negotiations. Once the regulation has been adopted, implementing acts may maintain and update templates and other technical requirements, but they will not be able to create substantive corporate rights on matters that the basic legislation has left to national law.
Without these changes, EU Inc. risks becoming a label rather than a genuine 28th regime: attractive on paper and useful for rapid incorporation, but of little practical value to the firms it was built for.
Find the corresponding SAFE White Paper No. 122
Authors:
Luca Enriques is Professor of Business Law at Bocconi University
Casimiro A. Nigro is Assistant Professor (Senior Lecturer) in Business Law at University of Leeds School of Law
Tobias Tröger is Director of the Law and Finance Cluster at the Leibniz Institute for Financial Research SAFE and Professor of Private Law, Commercial and Business Law at Goethe University Frankfurt
Blog entries represent the authors’ personal opinion and do not necessarily reflect the views of the Leibniz Institute for Financial Research SAFE or its staff.
