Welcome EU Inc!

An Innovative, truly pan-European Option.

A few days ago, the EU Commission—following the Letta and Draghi reports—issued its long-awaited proposal for an ‘EU Inc.’: a European business form freely adoptable across Member States. The first good news is that the legislative instrument is a Regulation, not a Directive. This alone means greater harmonization. The second is that, while conceived as a useful alternative for start-ups and scale-ups, it is open to all types of businesses, avoiding further fragmentation, questionable distinctions, and ambiguous definitions.

More generally, the proposal is bold—genuinely so—without lapsing into academic abstraction. It shows healthy economic, legal, and political pragmatism. A wave of commentary has already begun: some enthusiastic, some cautious, some deeply sceptical. I belong to the middle camp. But if forced to choose between the other two extremes, I would sit more comfortably with the former. This is not based on the unambitious idea that ‘perfect is the enemy of good’ (attributed to Voltaire, surely someone impatient with naïve optimism), but on a fair assessment of what has been done—and what can still be done—with a constructive attitude. 

Let’s put on a Bing Crosby record, catch the rhythm and spirit of Accentuate the Positive, and see why the lights far exceed the shadows.

A Long and Broad List of Unprecedented Novelties inspired by a flexible Approach.

Substantively, the EU Inc. proposal, for the first time, covers a long list of core matters never touched by the EU corporate law acquis. It fills major gaps in the existing leopard-spot pattern and introduces profound innovations that favor private ordering. To briefly name the major ones: (1) an extremely quick, cheap, fully digitalized incorporation procedure; (2) the first EU-level codification of directors’ duties; (3) a new business judgment rule; (4) a harmonized regime for directors’ conflicts of interest; (5) an unprecedented form of minority shareholders’ withdrawal/appraisal rights; (6) specific rights and prerogatives of shareholders, with a simplified set of rules for shareholders’ meetings, including decisions through written consent and flexible quorums; (7) an entirely new digital share register with a DLT option; (8) displacement of national rules and notarial requirements for share transfer formalities; (9) default rules on non-par shares; (10) zero minimum capital, with less rigid rules for contributions; (11) a modern creditor protection regime for distributions to shareholders, combining a balance-sheet test with a solvency test; (12) a much more flexible system of pre-emption rights, including easier exclusion; (13) lighter rules governing own-share acquisitions; (14) the first explicit accommodation of venture financing instruments (SAFE/KISS)—which might be more or less aptly named, but still shake things up by adding or facilitating new tools; (15) redeemable shares; (16) a first EU-level (default, with opt-out) regulation of related-party transactions applicable to private companies; (17) an unprecedented and convenient harmonized ESOP regime with tax deferral; (18) fast-track liquidation; (19) simplified insolvency rules for micro-enterprises and start-ups; (20) a system of ready-to-adopt articles of association templates that might reduce bargaining costs for small businesses.

The list might be long and dry, but it is worth seeing the full picture. I doubt this can be dismissed as timid or unambitious.

Several of these innovations mark a philosophical break from the European capital-centric tradition and other venerable dogmas of EU directives. Pragmatically, the new rules do not entangle themselves with labor law, and in particular workers’ representation on boards, which is wisely left to different local traditions.

Excessive Fears and Pessimism (if we work constructively).

These rules are far more flexible than most national corporate laws. The value of a truly European form—speaking the same legal language from Hamburg to Oporto—cannot be overstated. Though not identical in every detail, the EU Inc. essentially adopts the Delaware/English enabling model. No single national jurisdiction currently offers this.

One concern targets Article 4(1) and (2), according to which the EU Inc. ‘shall be governed by this Regulation and by its articles of association which shall not contradict this Regulation’, and where a matter is covered neither by the Regulation nor by the articles of association, ‘that matter shall be governed by national law’. The fear is that rigid and mandatory national laws will flood through this opening, replicating the hybrid and unattractive nature of the Societas Europaea (SE). This concern deserves attention, but the risk is clearly smaller than in the SE case, and fears are likely overstated for several reasons. First, the SE regulated only a small part of corporate law; the EU Inc. has a far broader scope. Second, a great deal depends on how bylaws—and standard templates—are drafted: the legislative language allows private ordering to fill additional gaps, thereby limiting the application of divergent local regimes. Third, courts will have an important role in policing the boundary of ‘matters not covered’, but there is room for intelligent interpretation in defining how narrowly that category is drawn. Finally, Article 4 can still be clarified and strengthened in the legislative process to prevent Frankenstein additions from creeping in.

Another critique is that the EU Inc. should be restricted to start-ups rather than opened to all companies, including listed ones. I hold the opposite view: this is an excellent solution. Fragmenting corporate forms based on almost impossible distinctions tied to the life-cycle phase of a business (or to its ‘innovation’ temperature) is ill-advised. It also raises the obvious problem of what happens when that phase ends. The strength of a good corporate statute lies in its neutrality, leaving room for contractual freedom bounded by genuinely necessary protection for minorities and other stakeholders. Broad availability increases adoption and network effects, rather than creating artificial enclosures. It may make sense for tax and incentive policies to single out start-ups and innovative businesses. But that is a different story.

A brief personal note. I have been practicing law for many years, extensively dealing—boots on the ground—with private equity, venture capital, club deals, and new businesses. If I claimed to have heard more than a couple of founders seriously weigh where to start their business based on the applicable corporate law, I would be exaggerating. Some prefer to go to the US or the UK, but the reasons are substantive economic and ecosystem ones, not limits on the duration of shareholders' agreements or the latitude of the business judgment rule. Europe’s answer to Silicon Valley, if anything, does not depend on corporate law as much as corporate law enthusiasts—myself included—might like to think. It would be nice if it were that easy.

It is also unfair to dismiss the apparent savings promised by EU Inc. as trivial. The estimates—let me underline, estimates—refer only to direct administrative costs. They do not capture likely savings from reduced legal complexity, cross-border investment facilitation through a pan-European form more familiar to foreign investors, talent attraction via the EU-ESOP, and signalling effects on national law reforms that might further fuel harmonization. Of course, a new regime brings uncertainty that may deter more cautious minds. But good-faith and capable jurists tend to shrink those areas of doubt quickly, through scholarship, practice, and soft law. That is far more valuable work—and certainly more useful than lamenting how much better this could have been done.

Some colleagues ask why a new business would choose the EU Inc. over, say, incorporating in Delaware with its (allegedly) greater certainty. First, anecdotal evidence indicates that very few SMEs operating in Europe choose Delaware. Delaware ‘flips’ are certainly more common for VC-backed start-ups and top-tier unicorns, especially in high-tech and US-facing sectors—though typically only the parent holding company is a Delaware corporation. But again, corporate law is only part of the story, and rarely the decisive part. Let us also be honest: the Delaware General Corporation Law is a rather convoluted, antiquated, and decidedly incomplete piece of legislation. Its attractiveness depends largely on the approach and efficiency of the judiciary. Access to capital, a deep talent pool, and lighter regulatory burdens in other areas (AI, privacy, taxation, administrative law, labor) may matter even more. In any case, EU Inc. is at minimum a viable alternative that deserves serious consideration.

Uniform interpretation is another important point. The European Court of Justice plays a more immediate role—and is structurally conducive to uniformity—when dealing with directly applicable regulations rather than directives. Its rulings thus carry a more immediate impact across the Union. A regulation also encourages—and to some extent compels—national courts, scholars, and practitioners to pay attention to how the same rules are applied elsewhere in the Union.

Change, with three ‘Cs.’

In short, the EU Inc. scores well on what I have elsewhere called the ‘three Cs’ a 28th regime must satisfy: completeness, convenience, and coherent interpretation and enforcement. This is no patchwork of marginal rules. It covers incorporation, capital, governance, shareholders’ protections and meetings, financial structure, and liquidation—major areas of corporate law that EU legislation has never touched so deeply and broadly. Creative bylaws and intelligent interpretation can further limit recourse to national law, even without a (still possible) clarification of Article 4. The regime is undeniably more flexible and more reliant on private ordering than the existing EU framework and most national systems. More uniform interpretation, even in actual disputes, is within reach. Bylaws themselves might even play a creative role: why not include arbitration clauses for corporate disputes?

Is it perfect? No. Is it timid, disappointing, or merely formalistic? Not at all. We should welcome this step—innovative and bold in many respects—and work to improve it with a constructive approach and a dose of political realism and legal pragmatism, even if it does not align perfectly with our personal wish lists. As Commission President von der Leyen said when presenting the initiative, ‘this is only the beginning’.

Bing Crosby is almost done. He is singing ‘don’t mess with Mister In-Between’ and inviting us to ‘latch on to the affirmative’.

Marco Ventoruzzo is a Professor of Business Law at Bocconi University and Law Area Director at SDA Bocconi.