Why the 28th Regime Proposal Falls Short of Europe's Challenge

On March 18, 2026, the European Commission tabled its long-awaited legislative proposal for the so-called 28th regime—COM(2026) 321 final (hereinafter: the Proposal)—the EU-wide corporate legal framework that was supposed to be Europe's answer to Silicon Valley, its weapon against the ‘Delaware flip’, its instrument for keeping homegrown champions at home and growing. The proposal has landed. And what it reveals is a profound betrayal of the idea's original ambition: a diluted, scope-bloated, rhetoric-heavy instrument that serves the interests of yesterday's corporate establishment far more than it serves Europe's innovative firms of tomorrow.

The Commission has gone through the motions of boldness. It has wrapped a modest administrative tidying exercise in the language of competitiveness revolution. The emperor, on closer inspection, is modestly dressed.

What Was Promised: A Surgical Tool for Innovation

Let's go back to where this began. Both the Letta Report (April 2024) and the Draghi Report (September 2024) were unambiguous about what the 28th regime was supposed to be. Letta called it a ‘transformative step towards a more unified single market’, situated squarely in the context of unleashing startups and scale-ups—firms that are new, technology-driven, and high-growth. Draghi, diagnosing Europe's innovation gap with surgical precision, pointed to the structural barriers preventing European startups from accessing cross-border venture capital, retaining talent through competitive equity compensation, and scaling without drowning in 27 overlapping national regulatory frameworks. His recommendation was similarly targeted: a framework conceived for the specific lifecycle of innovative companies, from incorporation to exit.

The Commission's own Competitiveness Compass of January 2025 placed the 28th regime squarely within its first ‘necessity’: closing the innovation gap. The message was clear. This was a scalpel, not a sledgehammer.

The Proposal tells a different story.

The Scope Trap: Everyone In, Nobody Served?

The Proposal's Explanatory Memorandum is careful to note that the EU Inc. framework ‘responds in particular to the needs of startup and scaleup companies but should be legally open to all founders and companies who see it fit for their business model’. Recital 5 of the actual Regulation text repeats this formula almost verbatim.

Read past the rhetorical frame, and the substance is unambiguous: any natural or legal person can form an EU Inc., existing companies of any size and age can convert into one, and corporate groups can use it as a subsidiary vehicle. The Commission's own 2026 Work Programme had already signalled this, announcing the regime for ‘all companies operating across the Single Market’. What was conceived as a targeted innovation instrument has become a general-purpose corporate vehicle.

The Commission's justification for this universal scope is, it must be said, intellectually honest if strategically revealing. The Explanatory Memorandum notes ‘general agreement among participants, including Member States, business associations and legal professionals, in favour of a broad scope for the corporate framework, i.e. not limited to a sub-set of companies such as start-ups or innovative companies, due to difficulties to establish an appropriate definition, administrative burden to demonstrate compliance and complications when companies no longer meet the definition’.

This is the lobbying consensus of the old economy dressed up as regulatory pragmatism. And it contains a real but badly mis-diagnosed problem.

It is true that defining ‘innovative company’ by regulatory fiat—creating a necessarily underdetermined legal category that firms must qualify for and maintain—would be troublesome. Any such definition would immediately become a battlefield: wasteful litigation, creative circumvention strategies, definitional bickering between member states, and an administrative burden on the very companies the regime was supposed to help. A startup founder in Warsaw does not want to spend legal fees proving she is innovative enough to use the corporate vehicle designed for her.

But the consistent answer to this problem is not to open the regime to all companies indiscriminately. The consistent answer is to build the regime's rules from the ground up around the substantive needs of innovative, high-growth firms—and let the design do the filtering. Here it is worth being precise about what universal scope actually undermines and what it does not.

For the most substantive innovations in the Proposal—zero minimum capital, non-par value shares, SAFE and KISS instrument compatibility, the harmonised EU-ESO with tax deferral to disposal—universal access is largely harmless, because these features will be taken up almost exclusively by startups and scale-ups in any case. A large industrial conglomerate restructuring a European subsidiary has no particular interest in warrant-based employee stock options or SAFE-compatible convertible instruments. The self-selection happens naturally at the level of substantive need. On these provisions, the Commission's choice of universal scope does not meaningfully dilute the innovation-economy value of the tools.

The damage from universal scope is felt elsewhere. It means the regime's procedural and administrative architecture—digital incorporation, simplified registration, the EU central interface, reduced filing costs—must be designed to accommodate the full range of corporate heterogeneity, from a two-person deep tech startup to a multinational group restructuring exercise. This inevitably introduces compromises, escape valves, and member-state-level areas of discretion that would not be necessary with a narrowly targeted instrument. More importantly, universal scope is what invited the old-economy lobbying pressure that shaped the Proposal's weakest features: the preservation of national law gap-filling, the breadth of member state discretions, and the political negotiations around labour and codetermination rules that will complicate the legislative process ahead. The old-economy incumbents who lobbied hardest for universal access did not do so because they need zero-capital SAFEs. They did so because they wanted a cost-efficient corporate building block—and in getting it, they brought their political weight to bear on the instrument's overall design.

The Revival of the Dead: This Film Has Been Screened Before

There is a deeper problem lurking beneath the scope question. The 28th regime, as now conceived, is not new. It is a resurrection—the third attempt, after the failures of 2004 and 2011, to create a pan-European private limited liability company form. The Commission's own Explanatory Memorandum acknowledges the ghost of the Societas Europaea—the pan-European vehicle originally proposed in 1970, which took over three decades to reach the statute book and still sits largely unused today, bloated with political compromise.

The Commission frames the EU Inc. as a clean break from those predecessors. But the structural problem that killed the earlier proposals—the political economy of 27 member states with entrenched national company law traditions, notarial guilds, labour codetermination rules, and sovereign tax prerogatives—has not changed. What has changed is the rhetorical framing and the political momentum behind it.

Universal scope makes this problem significantly worse. By opening the regime to all companies, the Commission has invited back into the room every single interest group that sank the earlier proposals. Trade unions, already alarmed by the prospect of codetermination circumvention, are watching closely. The Proposal's answer—that EU Inc. companies are ‘subject to the employee participation rules applicable in the Member State in which they have their registered office’—is correct but politically incendiary. That is because it does nothing to prevent regulatory arbitrage through strategic registered office choices, a concern that trade unions have been raising loudly throughout the consultation process and will likely prompt them to either kill the proposal or push for changes that make the EU Inc. unattractive for all.

The sirens of the old economy have sung. The ship is heading for the same rocks it hit in 2004 and 2011, just with more modern navigation equipment.

Digital-Only: The Fig Leaf of the Non-Digital Native

The Proposal's most prominent selling point—its relentless insistence on ‘digital-only’ procedures—deserves particular scrutiny, because it reveals something important about the Commission's understanding of what actually impedes innovative companies.

To be sure: fully online incorporation within 48 hours for €100, a pan-EU central interface built on BRIS, digital share registers, electronic shareholder meetings, digital-only insolvency filings—all of this is valid. So much so, that it should have been implemented across the board many years ago, as basic infrastructure for a functioning single market. The 2019 and 2025 Digitalisation Directives moved in this direction, and the Proposal builds sensibly on those foundations.

But the Commission's near-obsessive focus on digital procedures as the headline innovation strikes us as the fig leaf of the non-digital native who wants to appear modern. It is the corporate law equivalent of a government boasting about its new e-filing portal while leaving the underlying bureaucratic requirements intact. The digitisation of a cumbersome process yields a less cumbersome process. It does not yield a different process, let alone a different product.

The substantive corporate law impediments that prevent European startups from scaling—fragmented cap table rules, the absence of standardised early-stage financing instruments, 27 different approaches to employee equity, the lack of predictable cross-border insolvency for young companies—are not, at their core, problems of digitisation. They are problems of substantive legal fragmentation. A founder who cannot structure a Series A  does not need a faster filing portal. She needs harmonised substantive rules.

The SAFE Paradox: When Naming Something Risks Freezing It

One of the Proposal's more intriguing features deserves a closer look—not because it is wrong, but because it illustrates how even well-intentioned legislative drafting can carry unintended risks.

Recitals 45 and 51 of the Proposal explicitly name Simple Agreements for Future Equity (SAFEs) and Keep It Simple Securities (KISS) as the paradigm cases that the EU Inc.'s enabling framework for convertible instruments is designed to accommodate. The operative articles—principally Article 68—do not mention these instruments by name; they simply provide for ‘convertible instruments, warrants or other instruments entitling to new shares’ in general terms. The Commission is technically correct to say the framework is broadly enabling rather than prescriptive.

But the decision to name SAFEs and KISS in the recitals is strange, and potentially counterproductive. Recitals are not binding law, but in the civil law traditions that govern most EU member states, they carry significant interpretive weight. National courts and regulators unfamiliar with early-stage financing mechanics—which is to say, most of them—will reach for the recitals when confronted with a novel instrument structure and ask: does this look like a SAFE or a KISS? If it does not, they may apply the framework more cautiously or restrictively. The explicit naming of today's dominant US venture capital instrument templates as the reference point risks creating an interpretive gravitational pull toward current market practice, subtly discouraging the contractual innovation that efficient capital markets depend on. Legislation that enshrines the status quo of VC contract drafting is not a neutral enabling framework—it is a snapshot that ages.

Worse, this interpretive risk is unevenly distributed across member states. Jurisdictions with more sophisticated capital markets and greater familiarity with US VC practice will apply the general enabling language generously. Those without will anchor on the named examples. The result is yet another vector through which the patchwork of divergent national approaches—the very fragmentation the 28th regime is supposed to eliminate—survives in practice, this time embedded not in statutory rules but in interpretive culture. The Commission has tried to enable contractual freedom and may inadvertently have mapped its limits.

Patchwork Preserved: The Member State Escape Routes

Read the fine print of COM(2026) 321 final, and a pattern emerges: for every harmonised rule, there is room for member state discretion or a gap-filling reference to national law that quietly reintroduces the very fragmentation the regime purports to eliminate.

Article 4 is foundational and devastating: ‘Matters that are not covered by this Regulation or by the articles of association shall be governed by national law, including the provisions transposing Union law, which apply to relevant national legal forms in the Member State in which the EU Inc. has its registered office’. The Commission even requires each member state to designate which national legal form's rules fill these gaps. The result is 27 different versions of the EU Inc., each with its own national legal substrate—precisely what Commissioner McGrath warned against during the parliamentary debate in January.

Employee participation is governed by the national law of the registered office—leaving the codetermination map of Europe fully intact and creating continued incentives for strategic registered office choices. Seemingly uniform rules on directors’ duties explicitly leave scope for additional member-state-level liability rules (article 44(4)). Accounting rules are national. The simplified insolvency provisions in Chapter X apply only to ‘EU Inc. companies that are innovative startups’, creating a definitional sub-category that reintroduces the precise classification problem the Commission claimed to be avoiding by adopting universal scope. Member states retain broad discretion over preventive controls, the involvement of public authorities in formation procedures, and the conditions for fast-track liquidation. The 48-hour, €100 incorporation promise applies only when the standard EU templates are used—and is subject to the caveat that ‘physical presence can be requested by a public authority in exceptional and duly justified circumstances’.

The patchwork does not disappear. It puts on a new suit. Twenty-seven slightly different versions of the EU Inc. will emerge from transposition, each bearing the ‘EU Inc.’ label while operating under substantially different national legal environments. The cross-border legal certainty that investors value—the ability to understand a company's governance, capital structure, and insolvency exposure without jurisdiction-specific legal opinions—will remain elusive.

The Notary Problem: A Bold Move, But Not Bold Enough

On the question of notaries, the Commission deserves genuine credit—and a pointed asterisk.

The Proposal makes a real and courageous push in two critical areas. Article 67(6) explicitly prohibits member states from ‘imposing any additional formalities, including a requirement for a notarial deed, for the subscription [of new shares] to be legally valid’. Article 59(5) does the same for share transfers. This is genuinely significant: future funding rounds, cap table restructurings, and secondary share transfers under the EU Inc. framework cannot be held hostage to notarial involvement. For a startup navigating a Series A or a scale-up managing a complex growth-stage financing round, this removes a real and costly friction that currently deters cross-border investors in notary-heavy jurisdictions like France and Germany. Stripping notaries from these transactions—against the predictable opposition of one of the most effectively organised professional lobbies in European corporate law—took political will, and it should be acknowledged.

But then comes Article 14. Formation of an EU Inc.—the founding moment, the act of birth—must be ‘subject to preventive administrative, judicial or notarial control’. For companies using the standardised EU templates and the fast-track route, this is where the Commission does show real nerve: the entire procedure—registration plus whatever preventive control member states apply—must be completed within 48 hours and at a total cost of no more than €100. The Commission's own Explanatory Memorandum acknowledges this will cause ‘reduced revenue for intermediaries, and in particular notaries’. That is a striking admission, and a genuine one. For the simple, template-based incorporation, notaries are effectively cut off from their traditional fleshpots: the procedure is capped, digitised, and time-bound in a way that leaves little room for customary fee schedules.

But this concession has a hard boundary. The moment a company opts for tailor-made articles of association, Article 17 governs instead, the five-day deadline replaces the 48-hour one, and the cost ceiling disappears. In notary-tradition jurisdictions, this means the full notarial apparatus re-enters the picture with its customary fee schedule intact. The notary is not merely kept at the door for bespoke incorporations; it is restored as full gatekeeper.

How much this matters in practice turns on a question the Proposal conspicuously leaves unanswered. The actual content of the standard EU templates is nowhere defined in COM(2026) 321 final—it is delegated entirely to future implementing acts under Article 8. Whether those templates will accommodate multiple share classes, preferred equity, weighted voting rights, and the other complex features that any high-growth company raising external capital will need from day one—remains to be seen. If the templates are carefully designed to reflect markets’ best practices (and regularly updated to incorporate successful contractual experimentation), a meaningful proportion of innovative companies could benefit from the fast-track, cost-capped procedure, and the notarial fees that come with it would be tightly constrained. If the templates are designed narrowly, as basic single-class, single-tier structures, then virtually every company of commercial significance will be pushed into bespoke articles and the full notarial cost regime. The Commission has handed itself enormous discretion through the implementing act mechanism—and with it, enormous responsibility. The profession's lobbyists will be watching those implementing acts very closely indeed. So should everyone else.

Why Shouting ‘The Emperor Is Half-Naked’ Is the Right Thing to Do

There is a familiar objection to criticism of the kind we have advanced. It goes like this: you are imperilling a laudable project; the 28th regime is directionally correct, meaningfully useful, and politically hard-won; to attack it so fundamentally is to hand ammunition to those who want nothing to change; don't let the perfect be the enemy of the good.

We reject this framing—not despite caring about the project, but precisely because we do.

Europe does not have the luxury of incremental adequacy. We are not debating the optimisation of a stable, well-functioning system with time on its side. We are debating whether Europe can generate the innovative companies, the productive capital markets, and the economic dynamism needed to sustain open societies under conditions of acute geopolitical stress, proliferating populism, and accelerating technological disruption. The Letta and Draghi Reports were not merely technical diagnostics. They were warnings about the trajectory of a civilisational project.

In that context, an ‘okay’ solution—one that modestly improves the status quo, provides marginal administrative savings to companies at large, preserves the notarial profession's most lucrative work, and leaves the patchwork of national law intact in its twenty-seven variations—is a step in the right direction but a very small one. Unless the Council and the European Parliament push for something bolder, this piece of legislation will have squandered scarce political capital that could have been spent on something transformative. The 28th regime will not be legislated again for a generation. The window of opportunity created by Letta, Draghi, and the political momentum of this Commission will not remain open for long.

We are, in a very real sense, spending our last chips. And the question is whether we spend them on a regime that delivers a marginal cost reduction to dinosaurs who sat out every disruption of the past decade without changing their business models—or on one that genuinely changes the odds for the founders, the risk-takers, and the capital allocators who might yet make capitalism deliver for the people who are losing faith in it.

That is why we level this critique. The ambition that animated Letta and Draghi — and that this Commission has the mandate to act on — deserves a vehicle equal to it. EU Inc. could be that vehicle. It is not there yet.

To Conclude: Strong on Rhetoric, Poor on Substance

In sum: step back from the technical details, and a clear picture emerges. The Proposal:

• adopts universal scope under pressure from the old economy lobby, abandoning the targeted design that would have served innovative companies and created natural selection without definitional battles;
• repackages existing digital infrastructure as headline innovation, while leaving the substantive corporate law fragmentation largely intact through cascading references to national law;
• preserves the patchwork through 27 different national implementations, member state discretions, and gap-filling by domestic law;
• delivers real innovations—zero capital, EU-ESO, non-par value shares, SAFE compatibility—which will in practice be taken up almost exclusively by startups and scale-ups regardless of universal eligibility, since large incumbents have little use for these tools; the universal scope causes less damage here than on the regime's procedural architecture, where it invited the political compromises and member state discretion that are the Proposal's greatest weaknesses; and
• is estimated to produce savings of between €328 million and €440 million over ten years for an estimated 308,000 companies—figures that, even taken at face value, amount to rounding-error territory when spread across a decade and a continent-sized competitiveness gap.

The innovation gap will be closed not by giving dinosaurs a slightly more comfortable enclosure but by creating the conditions in which the next generation of European champions can emerge, grow, and stay European.

The Commission had the map, the mandate, and the moment. It threw the map overboard to please the passengers, rebranded the wreckage as ‘EU Inc.’, and has presented it as a competitiveness revolution.

In deciding whether to reincorporate in Delaware, the founders in Warsaw, Tallinn, and Amsterdam will read the Proposal, note that it was designed for someone else, and draw the same rational conclusions as before. Unless, that is, the legislative process delivers a more ambitious, self-sufficient, private-ordering-friendly product.

Luca Enriques is a Professor of Business Law at Bocconi University.

Casimiro A Nigro is a Business Law Lecturer at Leeds University.

Tobias H. Tröger is a Professor of Law and Finance at Goethe University and the Leibniz Institute SAFE.

A previous post of theirs on the prospective 28th regime is available here (in Italian) and here (in English).