EU Inc. - new European company structure?

Scaling a business across Europe could soon become much simpler. The proposed “EU Inc.” or “28th Regime” is gaining momentum, backed by Ursula von der Leyen and recent EU developments. The aim is to create a single, streamlined framework that reduces legal complexity and gives founders greater certainty when expanding across Member States.

Why does Europe need this?

The EU is one of the world’s largest markets. But, unlike uniform markets such as the US or China, companies seeking to expand across the EU are forced to navigate the unique legal systems of 27 Member States. This makes expansion across Member States challenging. In the words of Ursula von der Leyen, the structural barriers have acted “as a handbrake on the growth and profit potential of companies”.

EU Inc. has the potential to become one of the most significant EU developments. By aiming to streamline incorporation, modernise corporate business structures and ease cross-border operations, it could make scaling business across Europe faster, simpler and more attractive.

The “28^th Regime”, could simplify business across Europe. A recent resolution of the European Parliament included recommendations to the European Commission on the framework for the 28^th Regime. It highlights the need to enhance “legal certainty and predictability for companies operating across Member States”. This development was identified as being essential to strengthening the EU’s position as a leading location for entrepreneurship, innovation and sustainable business development.

Will it actually be called an “EU Inc.”?

The European Parliament has proposed that the legal name would be a “Societas Europaea Unificata”.

Why is this good for founders?

• Easier to incorporate. As part of the proposal, the 28^th Regime is aiming for digital incorporation within 48 hours, low formation costs and flexible capital structures with a minimum capital requirement of €1.00. This more standardised approach across Member States could make European companies more user-friendly from an investor perspective helping capital move more efficiently across borders.
• Faster to expand. For founders, one of the biggest structural barriers to conducting business and raising funds across the European market is having to navigate the national legal systems of 27 Member States. Currently, expanding from one Member State to another requires the establishment of a local entity, obtaining local legal advice and implementing tailored governance arrangements.
• Simpler corporate governance. Under the proposals, EU Inc. is to be established as a limited liability company that can operate under one consistent rulebook.
• Improved employee retention. Another significant element of EU Inc. is the ambition to create a more harmonised framework for employee share option schemes. Fast-growing companies often rely on share option schemes to attract and retain talent. However, operating these schemes across multiple jurisdictions can be complex and administratively burdensome. An EU Inc. model that supports more consistent treatment of share option schemes could make it easier for early-stage companies to attract and retain the best talent irrespective of the Member State in which they reside.
• Easier to move. Under the current proposals, an entity governed by the law of a Member State will be permitted to convert into an EU Inc. An EU Inc. may convert into another type of entity governed by the law of the Member State in which the EU Inc.’s registered office is located.

What are the potential hurdles?

The 28^th Regime will not remove all local differences. Tax, employment law and sector-specific regulations will continue to sit largely at national level. According to the resolutions passed by the European Parliament, companies with established infringements of fraud, tax evasion or employer participation rules also cannot opt into the 28^th Regime.

What next?

While the details of the EU Inc. are evolving, founders with cross-border ambitions should begin monitoring developments now and consider how an EU-wide company form might fit into future fundraising rounds, expansion plans or group structuring. Early awareness and planning will be key to taking advantage of the opportunities the 28^th Regime may bring.

We will keep you updated as more details on the 28^th Regime emerge.

For more information and expert advice, contact a member of the Corporate team.

This content is provided for information purposes only and does not constitute legal or other advice.