Founding start-ups digitally and scaling across Europe with EU Inc. – EU plans new legal form

With EU Inc., the EU Commission has proposed a new, Europe-wide standardized company form that is intended to make company formations faster, cheaper and completely digital. The target group is primarily young, growth-oriented companies and start-ups that are thinking about international scaling at an early stage.

What is behind EU Inc.

EU Inc. is designed within the framework of the 28th regime – a voluntary EU-wide legal framework that applies alongside national legislation. These rules are uniform in all member states. The new company form is a new alternative to existing national legal forms such as the GmbH and does not replace them. In contrast to the existing legal form of the European Company (SE), the EU Inc. is intended to be significantly leaner and tailored to fast start-ups, while at the same time limiting liability to the company’s assets.

According to the EU Commission’s proposal, EU Inc. will be established completely digitally via a central portal or national interfaces. Registration is to take place within 48 hours; fees are to be limited to a maximum of EUR 100.

The EU Inc. is to operate without a classic minimum share capital. Nevertheless, liability remains limited to the company’s assets. It should be possible to manage and transfer shares digitally. The registered office and head office must be in the EU. Purely formal “letterbox” models are to be prevented.

Benefits for start-ups, scale-ups, investors and employees

EU Inc. offers advantages for founders, investors and employees.

Fast foundation and Europe-wide recognition attractive for start-ups

Start-ups are particularly interested in the combination of speed, costs and standardization. Founding a company within two days, completely online and at manageable fees, is much closer to international models than current procedures in many member states.

If you think internationally from the outset, you could choose an EU Inc. as a legal form that functions according to the same basic rules in all EU countries and facilitates cross-border business models.

EU Inc. can simplify investments

The proposal also offers interesting starting points from the perspective of venture capital investors and business angels. A uniform legal form across Europe with largely standardized structures can simplify due diligence checks, contract design and subsequent financing rounds because fewer national peculiarities need to be taken into account. If digital shares and standardized mechanisms for share issues and transfers are actually implemented in practice, this could make secondary transactions and exit structures in particular more efficient.

Facilitation for employee shareholdings

The EU Commission is planning an EU-wide framework for employee share ownership programs that will enable start-ups to attract talent with shares without employees having to bear high tax burdens at an early stage. The main idea is to only tax profits from employee share ownership when the shares are actually sold, i.e. on exit. This could be an important location factor for many tech start-ups. However, it remains to be seen exactly what this framework will look like and how it will interact with the tax and social security laws of the member states.

For growing companies, it is also relevant that expansion within the EU should become easier. It should be possible to register branches and, if necessary, subsidiaries using standard digital procedures. For international corporate groups or family offices, EU Inc. could also become interesting as a holding structure in the long term if clear rules on conversion, creditor protection and corporate governance are established.

Open questions and next steps

Much is still unclear. For example, the details of identity verification, money laundering prevention, responsibilities for KYC checks and the interaction with creditor protection, directors’ and officers’ liability and existing EU law have not yet been clarified with regard to purely digital incorporation. The framework for employee participation also raises detailed questions – for example, how the interface between the new EU-wide framework for participation programs and national tax and social security rules will be structured in the future.

The legislative process is still in its infancy. Following the publication of the proposal by the Commission, discussions will now take place in the European Parliament and the Council. Politically, the aim is to reach an agreement by the end of 2026. Entry into force from 2027 or 2028 is conceivable, but by no means certain. Changes to the draft are to be expected, particularly with regard to protection against abuse, employee rights, corporate governance issues and the structure of employee participation.

What does the proposal mean in concrete terms for today’s start-up decisions?

It is worthwhile for start-ups, founders and investors to follow the discussion at an early stage. However, concrete structural decisions should only be made on the basis of an adopted regulation and start-ups should not be postponed at this time. It can be useful to keep an eye on internal processes for digital incorporation and registration, to examine your own investment programs for their future viability and to identify possible applications of EU Inc. in the company – always assuming that the current draft version may still change.

Read also: How the EU Inc. is changing the transaction market – five theses for M&A, venture capital and private equity