New proposed company form: EU Inc.

The proposed regulation is seen as the key legislative measure of a wider response from the EU institutions to the demands of the European startup ecosystem, which is further laid out in the accompanying “Communication towards a 28th regime”. The regulation is also accompanied by a Recommendation providing first-ever EU-wide definitions of “innovative enterprises”, “innovative startups” and “innovative scaleups”.

Why does it matter?

The EC recognizes that the EU lacks an innovation-friendly corporate framework, and far too many entrepreneurs and innovative companies wishing to expand across EU borders face navigating a fragmented corporate legal landscape with 27 national legal systems. This complexity can delay setting up a company, slow growth, raise costs and discourage scaling up.

According to the EC’s own data, the EU hosts over 40,000 venture capital (VC)-backed tech startups and creates more of them than any other region globally. Yet, at the same time, the EU had only 331 unicorns compared to 1963 in the U.S. as of 2025. The proposed regulation is the direct result of a grassroots campaign (which initially coined the term “EU Inc”), backed by some of the most relevant VC funds and many startup associations in the EU.

Key measures included in the EU Inc. corporate framework

The EU Inc. regime introduces a new framework with rules, among other things, on the following key areas:

Incorporation and registration

The proposal introduces a fully digital “fast-track” procedure for the online registration of EU Inc. companies. EU Inc. companies can be incorporated through a new single EU central interface, based on the existing Business Registers Interconnection System (BRIS), within 48 hours, without any minimum capital requirement, and for a maximum cost of EUR100. This fast track is only available when founders use the EC’s standard EU templates for articles of association, which will be issued by the EC.

EU Inc. companies would still be incorporated in a member state and registered in its national business register, but they are primarily governed by the regulation itself and their articles of association. National law will apply only residually for matters not covered by the Regulation. The articles of association at the time of formation as well as any amendments shall be subject to preventive administrative, judicial and/or notarial control in the member state. The proposal introduces a “once-only” submission of information followed by the digital transmission of company information from business registers to other relevant authorities, e.g. authorities in charge of issuing the tax identification number (TIN) and the VAT identification number, social security authorities and beneficial ownership (UBO) registers.

An EU Inc. can also be created through a domestic or cross-border conversion, merger or division.

Digitalization and governance

EU Inc. company law procedures will be fully digital, with no paper-based alternatives, including online shareholder and board of director meetings, and for issuing shares, increases of capital and share transfers. Member states may not impose any additional formalities, such as a notarial deed. Where certified translations of EU Inc. documents are required cross-border, the proposal allows for the use of agentic AI translation services whenever the service in question has been approved by the relevant member state.

The EU Inc. board must consist of one or more natural persons, and at least one of them must reside in the EU. The EU Inc. may have additional bodies, such as a supervisory board. However, these are not regulated by the proposal.

The proposed regulation also sets out the minimum content required for articles of association of an EU Inc., specifying that they shall be digital, machine-readable, store information as structured data, and drawn up (i) in the official language(s) of the member state of registration, and (ii) in a language “customary in the sphere of international business and finance”. This would allow for the use of English, without imposing it.

Financing and investment

EU Inc. shares have no nominal value unless the articles of association provide otherwise. An EU Inc. may issue shares with multiple voting rights or no voting rights, allowing founders to take new investors on board while staying in charge. The transfer of shares of an EU Inc. may be made subject to conditions, such as the company's consent. In absence of minimum capital rules, the framework replaces traditional capital maintenance rules with a balance sheet test and solvency test system for distribution purposes, to protect creditors.

The proposal facilitates early-stage investment by enabling the use of financing instruments like Simple Agreements for Future Equity (SAFEs), which are currently unavailable in certain EU jurisdictions. In terms of market access: EU Inc. companies have a right to seek admission to trading of their shares on multilateral trading facilities (including SME growth markets), subject to the applicable requirements under EU and national law. By contrast, member states have the discretion, but are not obliged, to permit EU Inc. companies to seek admission to trading on their regulated market to meet their equity financing needs. Where a member state does elect to allow such access, any admission to trading must be accompanied by full compliance with all relevant EU and national legal requirements.

Harmonized EU employee stock option (EU-ESO)

EU Inc. companies can opt into the EU common scheme for employee stock options (EU-ESO). The employees who have been granted warrants under EU-ESO will be subject to taxation only at the time of disposal of the underlying shares. This prevents a situation where taxes are payable upfront at a time where no income has been received. Exercising the warrants shall require a minimum 24-month waiting period.

Streamlining closure and insolvency procedures

The proposal includes provisions on dissolution and liquidation of EU Inc. companies, including a “fast-track” (six months, extendable up to one year) for the closure of solvent EU Inc. companies that have:

• ceased economic activity
• no assets
• no liabilities
• no pending proceedings.

The EC also introduces simplified insolvency procedures limited to those EU Inc. companies meeting the “innovative startups” criteria. The trigger is a “cessation-of-payments” test: a company shall be deemed insolvent when it is generally unable to pay its debts as they mature. The EC shall introduce the standard form to request the opening of simplified insolvency procedures within the first two years after the entry into force of the regulation.

Mandatory “digital and once-only” communication principles apply in both insolvency and closure procedures.

Cross-border protections

Since EU Inc. companies shall enjoy full freedom of establishment, the proposed Regulation includes a blacklist of prohibited national practices to ensure that the EU Inc. companies, wherever in the EU they are incorporated or headquartered, are treated in the same way as other limited liability companies formed under EU member state laws. This blacklist includes the following prohibited national practices:

 

It is also proposed that company documents and register extracts would be exempt from legalization/apostille requirements.

Expectations vs. outcome: key gaps in the EC proposal

Scope of simplified insolvency

The startup community advocated for broad access to simplified insolvency procedures. However, the final text restricts this to "innovative startups", excluding many small EU Inc. companies that do not meet research and development (R&D) intensity thresholds in the EC definition. Additionally, embedding the definition in a non-binding instrument (the Recommendation) creates uncertainty regarding which companies will qualify for simplified insolvency procedures, and could result in divergent application across jurisdictions.

Taxation beyond ESO timing harmonization

While there is harmonization as to the timing of EU-ESO taxation, the proposed regulation does not address how EU-ESO income should be taxed or eliminate the complexity of operating across multiple tax jurisdictions. The EC only encourages member states to treat EU-ESO income as capital gains instead of employment income, with no mandatory obligation to do so.

Beyond ESOs, the EC notes that other tax proposals, such as the Head Office Tax (HOT) system that would allow small and medium-sized enterprises (SMEs) to apply the tax rules of their home country and the Business in Europe Framework for Income Taxation (BEFIT) initiative that aims to establish a single legislative framework for corporate taxation in the EU, would better support companies, especially startups and scale ups. However, so far these proposals have failed to gain traction.

Pan-EU dispute resolution mechanism

The proposal does not include the setting up of specialized EU judicial chambers for a uniform application of the EU Inc. rules. The communication addresses this shortfall and, instead, encourages member states to designate specialized judicial chambers or courts with the authority to handle disputes on EU Inc. company law, but this remains voluntary and still bears the risk of diverging interpretations.

Employment law not harmonized

The proposal expressly disclaims harmonization of employment law. EU and member states’ national employment law applies to the EU Inc. as they apply to any other limited liability company in a member state. It also specifies that, in those member states where employees' rights to participation in company boards (co-determination) exist, they also apply to any EU Inc. company registered there. In the communication, the EC recognizes that the EU Inc. also needs favorable employment conditions to retain and attract talent and swiftly operate across borders. The EC will explore the possibility of allowing 100% cross-border telework for startups and scaleups across the EU in the upcoming Fair Labour Mobility Package. The EC also mentions other initiatives, such as facilitating automatic recognition of qualifications, which could be addressed in the Skills Portability Initiative.

Access to finance

The proposal deflects the issue of providing rapid access to capital to the measures being adopted under the Savings and Investments Union, the European Competitiveness Fund, and the Scaleup Europe Fund, the upcoming review of the European Venture Capital Funds Regulation (EuVECA), and the revision of investment rules of pension funds, highlighting amongst other things that this will strengthen business capacity to invest in listed and unlisted equity.

Next steps

The proposal will now enter the ordinary legislative procedure and will be subject to series of amendments by EU member states and the European Parliament before the final compromise text is agreed on. The measures outlined in the section above, not introduced in the EC’s proposal, might be incorporated into the European Council or the European Parliament’s approach. Stakeholders may also expect push-back from labor and trade unions, who fear worker rights may be impacted. The European Trade Union Confederation, for instance, has argued that employees' rights are insufficiently safeguarded. They are calling for the proposed regulation to be redrafted to align with the EC’s stated intention not to damage employment rights.

While the legislative process normally takes 12–18 months, there is strong political will to finalize and adopt the proposed Regulation by the end of 2026, as evidenced by the latest European Council Conclusions from March 19, 2026.

The regulation’s legal basis (art. 114 of the Treaty on the Functioning of the EU or TFEU) would allow the European Council to approve the proposal via qualified majority, rather than unanimity, which could also expedite the process.