Will “EU Inc” become a booster for European startups?
Planned new legal form under discussion
Ursula von der Leyen caused a stir at the World Economic Forum with five letters: EU Inc – the name for a new pan-European legal form announced by the EU Commission President in Davos. What reactions there have been to this, how the initiative is to be assessed and what problems the planned new legal form solves and does not solve, more on this in this article.
“Ultimately, it is about creating a new, truly European corporate structure. It comprises a single and simple set of rules that applies seamlessly throughout our Union. So that companies can operate much more easily in all member states.” The establishment of an EU Inc should be possible within 48 hours in any member state and completely online. The same regulation should apply to share capital throughout the EU. “At the end of the day, we need a system where companies can do business and raise finance seamlessly across Europe – just as easily as in unified markets such as the US or China. If we can do that – and move fast enough – it will not only help EU businesses to grow. Rather, it will attract investment from all over the world,” von der Leyen said. The draft law is to be adopted in the first quarter of 2026 and passed on to the EU Parliament, the Commission said. If the policy-making process goes smoothly, the EU Inc could potentially be launched as early as 2027.
Open points for implementation
How it is introduced, however, is one of several open points that are of great importance for the success of this legal form:
1) Implementation as a regulation or directive? In the latter case, each EU member state would have individual leeway, with the consequence that there could be different variants in the future. In order to achieve the intended standardisation within the EU, a regulation would be required that would be directly applicable in all EU member states. It is currently unclear which approach can be implemented politically and also depends on particular interests in individual member states. And here, for example, chambers of lawyers and notaries or chambers of industry and commerce could exert their influence.
2) How can abuse be prevented? Even if the corporate law standard is set, there is need for parallel dovetailing, among other things, with money laundering prevention, regulations to avoid misuse of subsidies, circumvention of employee participation or making use of differences in insolvency or tax law between EU member states.
First reactions from the market
In the first reactions from the market, the EU Inc is generally welcomed. In an interview with the Board Journal, venture capital expert Michael Boshammer emphasizes that EU Inc addresses one of the biggest structural deficits of the European venture capital market: “Legal fragmentation, slowing down scaling and making capital more expensive.” The consultant and former managing director of the investment company and Deutsche Telekom subsidiary T-Venture Holding GmbH therefore sees potential in the initiative. “A single European social framework can standardise investment processes, simplify governance and make Europe much more competitive for international growth capital.” However, the success of EU Inc is not measured by the idea, but by the implementation. “Especially when it comes to employee participation, investor rights and tax planning across national borders.”
Dutch fintech entrepreneur Marcel van Oost also thinks EU Inc is a good approach. “If founders can incorporate in days, hire across borders under one stock-option framework, and raise capital without rebuilding their legal setup every time they expand, they’ll move faster, with more confidence and ambition“, van Oost writes on LinkedIn.
However, this only works if it remains “simple, optional, and founder-first. No extra layers. No half measures. No new maze.“ If this succeeds, Europe “becomes the best place in the world to turn an idea into a real company.“
Unsolved problems for founders
However, it is questionable whether and to what extent the EU Inc will solve urgent problems of the foundation. The duration of the formation of a German GmbH, for example, depends less on corporate law formalities: depending on the registration court, it takes about a month for the newly founded company to be entered in the commercial register, and even during this time the GmbH can be active in formation. In addition, the costs for the foundation are manageable at a total of about EUR 1,000 for notary fees and court fees. The biggest challenges currently lie in:
- the sometimes extremely long processes in banks when opening a corporate account due to KYC or money laundering checks. This can sometimes take eight weeks. Until then, it is not possible to inject the share capital – with the result that the notary cannot yet submit the documents to the commercial register and therefore the incorporation process is delayed.
- the slow processing on the part of the tax offices. In some cases, it takes a month or more to obtain a tax number – this is a problem because invoices to customers can only be issued once the tax number is available.
- labor law and tax law hurdles when it comes to hiring remote employees and employing freelancers. Young companies are often faced with the problem that they want to avoid a permanent establishment abroad if they have employees there. In addition, they are dependent on a variabilization of their costs, especially in the start-up phase, and therefore prefer freelancers, but then face the problem of bogus self-employment.
In order to make the EU Inc attractive to international founders and investors, a holistic approach is therefore required that takes into account not only the founding process itself, but also tax and employment law aspects and includes fast track processes at banks.
Michael Boshammer, Venture Capital expert and Managing Partner at CABOA.