Policy Brief 64 - A Single EU Inc. Across 27 Member States

Executive Summary 

European startups can sell, hire and raise capital across the Single Market, but they must still incorporate and organise their financing under one of 27 national company-law regimes. The Letta and Draghi reports identified this fragmentation as one of the obstacles preventing innovative European firms from growing to scale, as it generates costs and legal uncertainty each time a company raises capital, changes its governance structure or expands across borders.

The Commission responded on 18 March 2026 by proposing EU Inc., the company-law cornerstone of a broader “28th regime”. The expression captures the basic idea: an optional European framework that companies could choose alongside existing national company forms. Under the Commission’s proposal, a company could be established or converted into an EU Inc., use a fully digital incorporation procedure within 48 hours and at a maximum cost of EUR 100 when relying on the EU templates, and benefit from common rules on shares, financing instruments, governance and employee equity.

The EU Inc. Regulation is therefore 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.

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 minimise 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 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 start-up 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.

This Policy Brief proposes six changes to the July compromise, all pursuing the same objective: giving startups more room to rely on the contractual arrangements that make venture-capital financing work and ensuring that those arrangements are enforced across the EU once agreed. The recommendations do not seek to harmonise 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.

In short, the changes would fix the rule that allows national law to override the parties’ agreement; protect standard financing documents so they can be used without uncertainty as to their validity; make founders’ and investors’ negotiated rights over cash flows, control and exit effective as written; make directors’ liability and distribution rules compatible with startups’ risks and financial needs; make employee equity plans and insolvency rules workable and predictable; and guarantee that an EU Inc. can operate freely across the Union without being treated as a foreign company.

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.

IEP Bocconi does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the authors.

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