Build It and They Will Come? Why EU Inc Needs a Pilot

EU Inc is the talk of the town. But the question is not whether founders can set up a company in 48 hours. The challenge starts after that: can firms grow, raise money or fail without being pulled back into 27 different legal systems? The Commission’s proposal does not clearly answer that. Paper design is not market reality. That is why EU Inc needs a pilot: test the rules, measure their effects, then scale what works or drop what does not.

The aim is clear. Europe wants start-ups and scale-ups to operate across the Single Market with lower structural frictions. EU Inc advances this goal. It provides a common company framework with features such as digital procedures, standard templates, flexible financing tools, and an employee stock option plan. These are real gains. But will EU Inc operate as one European company form?

The answer depends mostly on Article 4(2): if the Regulation or the articles of incorporation do not cover an issue, the national law of the Member State of registration applies. This creates the risk of 27 national variants with a European label. It also means that investors must still ask which national law governs director duties, capital maintenance, shareholder remedies, restructuring, and enforcement. This outcome is not accidental. EU Inc illustrates what I call the ‘competence trap’: the Treaties do not yet provide a sufficient basis for a fully autonomous European company law regime. As a result, integration proceeds through political compromise, and national law re-enters precisely where legal certainty matters most.

A genuinely European company form would probably require constitutional and fiscal reform at EU level. But there seems to be little political appetite for that. Thus, the EU will continue to govern through hybrid structures. Whether this is economically efficient is a different question. National law operates through institutions, not just rules. How courts decide cases, how registries process filings, and how authorities enforce obligations all shape timing, cost, and outcomes. For firms and investors, these institutional differences matter. EU Inc may therefore reduce the cost of incorporation without necessarily reducing the cost of scaling. 

At the same time, Article 4(2) should not be dismissed too quickly as a drafting mistake. Some national variation may still be justified. Member States may understand their own institutional and economic conditions better than Brussels. The problem is more nuanced. The Commission’s proposal does not distinguish between national-law interfaces that preserve useful safeguards and those that recreate avoidable costs. The Regulation cannot fully tell us which is which, particularly not ex ante. Market use can.

That is why I propose a pilot regime. A pilot would allow the EU to test deeper integration under controlled conditions rather than negotiate it abstractly in advance. A pilot would generate empirical evidence about where national law remains justified and where it recreates the transaction costs that EU Inc is meant to remove. The objective is not only to collect data but also to assess whether more concentrated interpretive practices can produce greater cross-border predictability. The focus should be on areas where uncertainty is most critical to scaling. This includes, in particular, financing, employee equity, and insolvency.

Financing may be the first of these tests. A company form succeeds only if investors trust it. EU Inc may attract early-stage firms, but its wider success depends on its acceptance across capital markets, including venture capital. If investors cannot predict how key rights and outcomes will be treated, they will discount the company, demand extra protections, or refuse to invest. Thus, legal fragmentation becomes a cost-of-capital problem. 

The Delaware comparison is useful in here. Delaware works because market actors can predict legal outcomes with relative confidence. That predictability reduces uncertainty and lowers the cost of capital. But it does not rest on the corporate statute alone. It depends on how courts decide cases, how financing terms are interpreted, and how insolvency is handled. In other words, Delaware is not just a body of corporate law. It is an institutional ecosystem built on specialised courts, extensive precedent, and established market practice. Digitalisation and partial harmonisation cannot reproduce those conditions, as  Enriques, Nigro & Tröger and Denga show.

This gap extends to corporate financing. The Commission’s proposal introduces flexibility for no-par value shares, convertible instruments, and warrants. Strampelli rightly notes that Article 68 can facilitate SAFE-like and KISS-like instruments by removing certain corporate-law constraints. But permission is not standardisation, and standardisation is not market acceptance. A pilot could ask: how many local-law modifications are required? How many legal opinions do investors request? To what extent do investors accept standard documents without jurisdiction-specific qualifications?

The second test may be employee equity. High-growth companies need to hire and retain talent. The proposal recognises this through the EU employee stock option plan. But it does not harmonise labour law, tax law, or employee participation. Nor should it. The problem is that a broad EU Inc regime may intensify conflict around employee participation and registered-office arbitrage. Firms still need predictability, however. They need to know whether employee equity can be implemented across borders without extensive redesign, and when participation rights are triggered. A pilot could test these questions without weakening labour protection.

Insolvency may be the third test. Alfaro Águila-Real makes a clear point: Europe’s scaling problem is not only a formation problem, but also about restructuring and winding firms down efficiently. Downside predictability also affects valuation, credit terms, and investor willingness to provide capital. If investors cannot predict how cross-border disputes and restructurings will be handled, they will price that uncertainty. An insolvency pilot could test to what extend partial harmonisation can reduce that uncertainty. The pilot could measure outcomes such as restructuring time, procedural costs, recovery rates, and cross-border recognition.

Overall, the pilot mechanism should not be understood as vague monitoring or deregulation by another name. It is a time-bound learning mechanism built into the Regulation. The purpose is to test specific Article 4(2) interfaces in cross-border companies. This includes clearly defined KPIs, safeguards, and sunset clauses. Each module should lead to one of three outcomes: integration into Union law where benchmarks are met, adjustment where results are inconclusive, or expiry where costs outweigh benefits. 

What matters is not simply whether EU Inc attracts users, but why. High uptake may reflect genuine efficiency gains, or regulatory arbitrage; low uptake may reflect poor design, persistent legal uncertainty, or investor caution. A pilot would help distinguish between those outcomes and show whether EU Inc can become an investable European product.

Silvie Rohr is a PhD Candidate and Research Associate at the Institute of Law & Economics at the University of Hamburg.