The Limits of the EU Inc-for-All Approach: The Unintended Consequences of Unrestricted Access to Capital Markets

The European Commission’s proposal for a harmonised corporate form, the EU Inc, has attracted considerable attention as part of a broader effort to boost the competitiveness of European businesses. However, as noted by some commentators, it remains unclear, if not dubious, whether the EU Inc regime aligns with the ambitions that inspired it.

Both the Draghi and Letta reports identified the creation of a harmonised corporate form as being primarily intended to meet the financing needs of European start-ups and scale-ups. Needs that existing national frameworks have failed to address. There is compelling evidence that a significant proportion of European start-ups relocate to the United States to raise capital and that a number of European unicorns are listed on US markets rather than European ones.

The driving purpose behind the EU Inc proposal was undoubtedly to boost EU startup finance. The proposal itself, including its name, is partially based on a blueprint for the upcoming 28th regime prepared by the European startup ecosystem. The EU Inc proposal, published on 18 March 2026 by the Commission, explicitly recognises that EU Inc primarily represents a ‘harmonised legal framework for a simplified company corporate form, which aims in particular to serve the needs of start-ups and scale-ups by attracting and retaining talent and investments at the EU level’. Moreover, alongside the proposal, the Commission adopted a dedicated recommendation on innovative enterprises, start-ups, and scale-ups. This recommendation stated that the definitions should reflect the specific characteristics of deep-tech enterprises, whose development cycles tend to be longer and more capital-intensive due to the complexity of their R&D activities, regulatory validation and technology maturation processes. In short, Europe’s start-ups were facing a financing gap, and the EU Inc was expected to provide a harmonised corporate form to address this.

Nevertheless, in terms of scope, the Commission’s proposal falls short of these premises, since the EU Inc is open to companies of all sizes and sectors, regardless of their stage of development. This approach aligns with the suggestion that the 28th regime should prioritise tools that benefit innovative and cross-border firms while remaining open to companies of all sizes and sectors. The Commission appears to have adopted this compromise, with the sole exception being the insolvency liquidation provisions, which apply expressly only to innovative start-ups.

The availability of the EU Inc to all founders and companies that deem it suitable for their business model is not problematic in itself. While flexible governance structures, adaptable financial architecture and a simplified, single incorporation procedure available across all Member States are useful features for start-ups and scale-ups, making these features available to other types of companies does not necessarily diminish their value for innovative firms. As recently contended by the Jacques Delors Friends of Europe Foundation, the transformative effect of the 28th regime will only be realised if all firms facing the barriers it is designed to address are able to benefit from it. However, the universal applicability appears to have influenced specific regulatory choices in a way that undermines the EU Inc’s suitability for start-ups and scale-ups, for which it was primarily designed.

The first problem relates to corporate form. The EU Inc is not defined as a specific type of company. While it does not expressly qualify as a private limited liability company, under Article 4, Member States may implement it as either a private or public limited company. Although this flexibility is intended to accommodate all firms, it increases the risk of insufficient substantive harmonisation. Some provisions of the proposal appear to have been drafted with the joint-stock company model in mind. For instance, the prohibition on contributions in the form of labour or services applies to joint-stock companies as defined in Directive (EU) 2017/1132, but not to private limited companies. The result is a corporate form whose legal regime varies across Member States, which could undermine the cross-border certainty that the proposal was designed to provide.

The second problem relates to the financing of EU Inc. Several provisions are so general that, while they may be appropriate for a generic corporate vehicle, they fall short of the needs of start-ups and their investors. Article 68 on convertible financial instruments is a case in point: in a number of Member States, such instruments continue to be regulated under national law, meaning the provision fails to achieve its intended harmonisation. What is needed instead are more targeted rules, potentially including standardised contractual templates modelled on established market practice, to provide cross-border investors with the legal certainty they require.

More broadly, given also the absence of harmonised tax and labour laws, companies seeking to exploit the EU Inc’s flexibility for acquisitions and corporate reorganisations when forming BidCos or TopCos are likely to be its primary users, rather than start-ups or scale-ups. Furthermore, since the EU Inc can be formed through the transformation, merger or demerger of existing entities, joint-stock companies and, in Member States with stricter regulations for this legal form, limited liability companies may opt for the EU Inc precisely to benefit from its flexibility. This includes the ability to override capital maintenance requirements and the stricter corporate governance regime provided by national laws. While this outcome is not necessarily negative, as it can lead to some harmonisation and facilitate cross-border transactions, it does not align with the original aim of creating a harmonised framework for innovative companies.

The unintended consequences of the EU Inc’s listing

The ‘EU Inc-for-all’ approach poses the greatest challenge in terms of access to capital markets. According to Article 60 of the Proposal, Member States cannot prohibit an EU Inc from seeking admission to trading on a multilateral trading facility (MTF), nor can they prohibit admission to trading on a regulated market. This represents a significant departure from the existing EU corporate law framework. In its legislative initiative of December 2024, the European Parliament explicitly stated that the 28th regime should apply only to non-listed private limited liability companies. The SPE proposal was equally restrictive: shares could not be admitted to trading, and companies that converted into the SPE form were required to delist.

The framework of company law in continental Europe is based on a fundamental distinction: closed companies benefit from maximum flexibility in governance and financial structure, whereas public companies are joint-stock companies that are subject to more stringent regulatory requirements. These requirements include those imposed by EU directives, national implementing legislation, and listing standards. Allowing the EU Inc to access regulated markets undermines this distinction in two ways. Firstly, it creates opportunities for regulatory arbitrage, as companies can use the EU Inc to avoid the capital maintenance and governance rules that apply to listed entities under EU and national law. Conversely, if the EU Inc were subject to the requirements that accompany listed status—such as the Shareholder Rights Directive II (SRD II) provisions on shareholder meetings, proxy voting and related-party transactions—the flexibility that makes the vehicle attractive would be substantially eroded.

In light of the above, Article 60 of the EU Inc Regulation Proposal should be substantially amended. Firstly, access to MTFs and, where permitted by Member States, regulated markets should be restricted to EU Inc companies that qualify as innovative start-ups, as defined in the Commission’s recommendation of 18 March 2026. Secondly, trading in EU Inc shares should take place on a designated MTF segment. Article 33 of MiFID II (as amended by Directive (EU) 2024/2811) already provides a workable mechanism whereby an MTF operator can register an MTF, or a segment of an MTF, as an SME Growth Market, provided that it is clearly distinct from other MTF segments in terms of its name and rulebook. Trading EU Inc shares in a dedicated segment would offer EU Inc better opportunities for growth and expansion within the EU, while preventing the distortions that would result from unrestricted listing. Thirdly, in the case of access to regulated markets, EU Inc companies qualifying as innovative start-ups should necessarily take the form of joint-stock companies. Moreover, the European Commission could establish temporary trading platforms for innovative startups and venture capital investors, following the UK PISCES model, instead of restricting this opportunity to private equity investors, as suggested in the Commission’s targeted consultation on private equity exits of 2 March 2026.

Giovanni Strampelli is a Professor of Business Law at Bocconi University and an ECGI Research Member.