A 28th Regime to support businesses: Three design choices that will make or break it

On 18 March 2026, the European Commission is expected to present its legislative proposal for a 28th Regime for Innovative Companies, announced in its 2026 Work Programme and foreshadowed by the Letta and Draghi Reports. In January 2026, the European Parliament adopted a resolution based on the Repasi report of June 2025. The initiative promises a genuine step forward. But whether it delivers depends almost entirely on three foundational design choices. Get them wrong, and the 28th regime will become another label attached to a vehicle that 27 legal systems will, as quietly as unavoidably, make unusable.

What is at Stake

The heterogeneity of national rules on company law, taxation, labour law, and authorisation procedures imposes significant transaction costs on SMEs. For innovative firms structurally oriented towards rapid scaling, these frictions are a structural handicap. For instance, empirical evidence shows that even within formally harmonised legal environments, rigidities in corporate law generate material inefficiencies in the financing of VC-backed firms. Inefficiencies that contribute to what is increasingly described as ‘innovation drain’: the relocation of high-growth companies to more normatively integrated jurisdictions notably the United States and China. As underlined by the European Business and Innovation Centre Network (EBN), the result is not merely inefficiency, but a systemic failure in the Union’s innovation ecosystem.

The European Parliament’s resolution envisages the creation of a Unified European Company (Societas Europaea Unificata – S.EU) through a framework Directive, optional in adoption but binding once selected. It emphasises procedural simplification—digital incorporation within 48 hours, a strengthened Business Registers Interconnection System (BRIS)—and substantive features suited to VC-backed firms: model articles, differentiated voting rights, hybrid equity instruments, and specialised dispute resolution with English-language proceedings. Notably, the Parliament has dropped the earlier proposal to restrict the regime to ‘innovative’ companies, avoiding definitional controversies that would themselves generate friction.

Some failure Modes of Harmonisation-Based Design

The central difficulty lies in the chosen legislative technique. By opting for a Directive, the Parliament’s approach embeds the S.EU within national legal systems. Even formally harmonised rules can unravel through distinct failure modes.

Implementation divergence. Member States will decide whether to integrate the S.EU into existing company forms or create a new domestic type. That choice alone generates variation in creditor expectations, governance defaults, and litigation posture. Even where rules are formally harmonised, interpretation and practical application remain shaped by national legal cultures, judicial traditions, and corporate governance practices (eg Enriques). The result is familiar: differentiated outcomes across jurisdictions and renewed regulatory arbitrage.

Oudin has argued that even a regulation-based European form could be neutralised through the interpretive methods of national courts, reintroducing fragmentation through the backdoor. We share this concern—and take it as a design imperative. The answer is not lower ambition but building the anti-fragmentation architecture into the statute from the outset.

Normative incompleteness. The more the 28th regime relies on cross-references to national law for core matters, the more it replicates the structural weakness of earlier European vehicles—the SE, the EEIG, the European Cooperative Society: formally European, but materially tethered to national law. 

Commission President von der Leyen’s preparatory letter of 11 February 2026—announcing the ‘EU Inc.’ label and signalling openness to enhanced cooperation if unanimity proves unattainable—suggests the Commission shares this diagnosis. It should have the courage to act on it.

Three Foundational Choices

If the 28th regime is to avoid becoming another incomplete experiment, three structural choices are essential.

First, optional uniformity via regulation. The regime should be established by Regulation, creating a genuinely European corporate statute that stands alongside national laws without integrating into them—freely selectable at incorporation or during corporate life. This can be framed as voluntariness: no Member State loses its domestic forms; firms gain a credible additional option. The political obstacles should not be underestimated: Member States have historically resisted European corporate law initiatives perceived as encroaching on domestic legal traditions. But enhanced cooperation—explicitly flagged in the Draghi Report and by President von der Leyen—should be treated as a feature, not a fallback: a willing coalition can create a credible nucleus that generates network effects and progressively expands.

Second, legal self-sufficiency. A genuine 28th regime must be normatively self-contained on the matters that drive investor expectations and founder incentives: formation, capital structure, governance, minority protection, directors’ duties, and restructuring pathways. Cross-references to national law should be avoided. This is what differentiates the proposed instrument from the SE and its successors, which remain dependent on national implementing provisions and consequently produce the patchwork of outcomes that the 28th regime is meant to overcome (eg Delavenne & Goncalves).

Third, anti-fragmentation mechanisms. The statute should combine: a prohibition on national gold-plating where EU rules set the applicable standard; safe harbours for market-standard documentation (model articles, shareholder agreements, convertible instruments) tied to a presumption of compliance; and calibrated opt-in flexibility for start-ups and scale-ups on voting structures and founder control. This would help mitigate—though not entirely eliminate—the risk of divergent interpretations of EU law by national courts. In the medium-to-long-term, elimination of divergent interpretations would require a redefinition of the functioning of the Court of Justice of the European Union, including, at a minimum, an increase in the number of judges and the development of additional expertise capable of addressing the growing complexity of EU law.

What the Simplified European Corporation Should Look Like

The ultimate objective of the 28th regime, if properly designed, should be a simplified, non-listed European Corporation—lighter than the current SE Regulation and clearly distinct from its regulatory density. Two foundational features define what ‘simplified’ must mean in practice.

Scope: not just start-ups. Restricting the regime to innovative companies, as earlier proposals suggested, is a mistake on two counts. It shrinks the pool of eligible firms too drastically, and it creates a moving-target problem: companies may lose qualifying status as they mature. The regime should be available to all non-listed companies—with enhanced flexibility provisions specifically designed for start-ups and scale-ups. This mirrors the Parliament’s own evolution away from a narrow innovation filter (eg Sanders).

Floor rules, not ceilings. The statute should adopt a floor-setting logic: minimum mandatory protections for creditors and minorities, coupled with a strict prohibition on Member States imposing additional requirements (gold-plating). Above the floor, private ordering should govern. This means broad opt-in space for shareholders. Particular flexibility should be designed for start-ups and scale-ups, especially concerning voting structures, founder control mechanisms, and venture capital compatibility. The objective is to reconcile investor protection with maximum contractual freedom: not a deregulated shell, but a framework that trusts parties to allocate risk and return without the state second-guessing every clause.

A model law effect over time. A statute so designed would have a secondary value beyond its direct users. By demonstrating that a self-contained, innovation-friendly corporate framework is viable and attractive, it could function as a model law for national legislators—fostering bottom-up convergence across Member States through voluntary emulation, without coercive harmonisation. This is how the US Model Business Corporation Act has shaped corporate law across states: not by mandate, but by the gravitational pull of a well-designed template. It is also how a 28th regime, conceived as a first step, could eventually lay the groundwork for a broader European codification of commercial law.

Conclusion

A carefully designed 28th regime would not eliminate all internal market fragmentation. But it would represent a decisive methodological shift: from approximation to optional uniformity; from rhetorical ambition to operational usability. If properly structured—as a regulation, normatively self-sufficient, and equipped with credible anti-fragmentation devices—it would offer European firms a corporate vehicle they can actually use to scale within the Union, rather than leaving it to find legal certainty elsewhere. That would be a modest beginning—but a foundational one.

This post is based on the authors’ recent paper published in the Italian law journal Analisi Giuridica dell’Economia (AGE).

Gian Domenico Mosco is a Full Professor (retired) in Business Law at LUISS University.

Salvatore Lopreiato is an Assistant Professor in Business Law at Mediterranea University of Reggio Calabria.