The EU Inc—Half European, Fully Digital, and Genuinely Innovative

The EU Inc is designed to establish a harmonised limited liability company that offers a high degree of flexibility, particularly for start-ups and scale-ups, and is built on the guiding principles of ‘digital-only’ and ‘once-only’. In our article 'The EU Inc. – half European, fully digital, and genuinely innovative' (also forthcoming in ECFR) we examine the principal features of the European Commission’s proposal for a Regulation on the EU Inc (EUIncR), presented on 18 March 2026, and assess them in the context of both national and European company law.

Half European

The EU Inc will not constitute a fully self-sustaining supranational legal entity; rather, it will take the form of a ‘hybrid’, relying in part on gap-filling by national law. Some commentators therefore do not consider the EU Inc to be the ‘real game changer’ promised by the European Commission. In our view, however, and in the absence of a fully developed system of European company law, it is inevitable that the EU Inc should—at least to some extent—remain linked to its national legal environment. Notwithstanding this, the EU Inc will be significantly more ‘European’ than any of the supranational legal entities discussed to date.

For the EU Inc to function properly, however, it is essential to delineate more clearly the boundary between European and national rules. Pursuant to Article 4, matters governed by the Regulation are not to be subject to national law. Yet, throughout the text of the Regulation, it is not always evident whether a matter is exhaustively regulated or not and where national law shall be allowed to step in. In our paper, we identify several key areas—such as shareholder meetings and directors’ duties—where further clarification would be highly desirable. We also advocate a stronger commitment to the self-regulation of internal affairs by shareholders. Finally, a procedural mechanism is needed to support the development of a coherent body of case law. Each Member State should be required to establish specialised judicial chambers whose decisions could take account of the case law developed by their counterparts in other Member States—something that national courts otherwise rarely do.

Fully digital

Within its fully digital ecosystem, it is possible to establish an EU Inc within 48 hours by adopting model articles of association in digital form. The application form will be made available in a digital, machine-readable format in all official EU languages. This feature will be welcomed not only by the start-up community, but also by established companies, which may use this ‘off-the-shelf’ solution when setting up a subsidiary in the form of an EU Inc in another Member State.

Another key element of the EU Inc’s digital ecosystem is that shares exist entirely in digital form. They are recorded in a share register maintained by the company and may be transferred exclusively by digital means, in particular without the need for a notarial deed. Entries in the share register will have legal effect. This represents a novelty for many Member States and has already given rise to certain concerns. However, as we explain in greater detail in our paper, these challenges can be addressed in a practical and reliable manner. In particular, it is essential to ensure that the legal aspects of share transfers are subject to professional oversight and verification, rather than being handled solely by the company’s directors.

Genuinely innovative and flexible

Another advantage of the EU Inc lies in the considerable flexibility it offers with regard to organisational design. It requires only a board of directors (which may consist of a single individual) and a general meeting. It goes without saying that meetings of both the board and the general meeting may be held entirely online or in hybrid form. Beyond this, the EUIncR establishes only a general framework, leaving substantial discretion to the articles of association; while this legislative approach is to be welcomed, it—as noted above—calls for further clarification in the wording of the Regulation.

Group management is facilitated by the expressly provided right to issue instructions. This approach aligns with increasing compliance requirements—many of which are rooted in EU law—that must be observed by cross-border groups. However, additional rules on group interest and cash pooling would be highly desirable in order to provide clearer guidance in cross-border contexts.

The EUIncR’s framework for financing is both highly flexible and innovative: it doesn’t require minimum capital, adopts true no-par value shares as the default rule (unless otherwise stipulated in the articles of association), and allows extensive flexibility in the design of share classes. It also offers considerable freedom with regard to the issuance of new shares and instruments conferring rights to acquire shares (such as convertible bonds), as well as the possibility of redeemable shares. Taken together, these features make the EU Inc particularly attractive for venture capital and early-stage financing, while also enabling all companies to develop tailored financing solutions. At the same time, the requirement that distributions be subject to a ‘double test’—comprising both a balance sheet test and a solvency test—ensures a comparatively high level of creditor protection.

The broad range of financing options is complemented by access to capital markets: shares in an EU Inc may be admitted to trading on a multilateral trading facility (MTF) and—where permitted for the relevant national reference form—also on a regulated market.

Employee share participation, which is often crucial for young and growing companies, is further facilitated by the EU employee stock option plan (EU-ESO). In particular, this mechanism addresses the significant practical issue of ‘dry income’ taxation.

The elephant in the room: codetermination

Employee codetermination remains a politically sensitive issue. As discussed in greater detail in our paper, linking codetermination rights to the employees’ actual place of work—particularly in situations where the registered office and the principal place of business are artificially separated—could offer a viable and balanced solution. Ultimately, however, codetermination appears to be less problematic in practice than is often assumed. Even in Member States with comparatively low thresholds, codetermination is typically not introduced until the workforce has reached several hundred employees. The typical EU Inc—whether established as a start-up or as a subsidiary—will generally operate well below the thresholds that trigger codetermination.

Going beyond the EU acquis

Notably, the EUIncR goes significantly beyond the existing EU acquis in several respects—particularly when compared with the Company Law Directive (CLD)—by embracing a range of modern and innovative approaches. At the same time, especially with regard to the capital regime, it adopts a markedly more liberal stance. Against this backdrop, the ongoing legislative process relating to the EUIncR presents a valuable opportunity to undertake a systematic re-evaluation of the EU acquis. The aim should be to enhance coherence and consistency between the established body of EU company law and the emerging EU Inc framework, insofar as such alignment is normatively justified.

Jessica Schmidt is a Professor of Law at the University of Bayreuth.

Christoph Teichmann is a Professor of Law at the University of Würzburg.