Can EU Inc Make European Corporate Law 'Good Enough'?

The European Commission’s proposed EU Inc seeks to create a new optional corporate form that can operate across the European Union as a 28th regime alongside national company laws. The proposal forms part of the broader competitiveness agenda associated with the Letta and Draghi reports and reflects growing concern among European policymakers that many of Europe’s most promising startups and scaleups ultimately adopt Delaware or other US holding company structures as they mature and raise global capital. Call them 'EUxits'.

Whether EU Inc can realistically prevent EUxits remains an open question. Much commentary has focused on what the proposal does not do. It does not establish a fully autonomous supranational corporate law regime, leaving substantial room for national corporate law and national courts. It does not create a European equivalent to the Delaware Court of Chancery. This is true.

Yet focusing exclusively on those limitations may obscure a more interesting possibility. EU Inc may alter the structure of jurisdictional competition within the EU itself. At present, incorporation decisions within Europe are generally framed in purely national terms: the German GmbH versus the Dutch BV, the French SAS versus the Italian Srl, and so on. To be sure, following the Court of Justice of the European Union decisions in Centros, Überseering and Inspire Art, companies already possess significant freedom to incorporate in one Member State while operating primarily in another, subject to the uncertainty associated with Gebhard. EU Inc would therefore not create materially new regulatory arbitrage opportunities, as further explained below. Its potential effect is subtler. If more aspects of the incorporation decision are standardized through a common European form, the remaining differences among Member States may become easier to isolate and compare. As a result, incorporation choices may become less about selecting among national corporate forms and more about selecting among the corporate law frameworks that remain beneath what is, in effect, a 28th regime offered in 27 different flavours.

If that shift proves meaningful, it could create new forms of regulatory competition within the EU. Member States with comparatively flexible corporate law regimes, sophisticated courts, and internationally oriented legal infrastructures may emerge as focal points for EU Inc incorporations. The Netherlands is perhaps the most obvious candidate. Dutch corporate law is already regarded by many investors and practitioners as relatively flexible and commercially sophisticated. The Enterprise Chamber offers a degree of specialization unusual in Europe and relatively modest institutional reforms such as broader availability of English language proceedings could further strengthen the Netherlands’ position as a preferred jurisdiction for scaling companies. Of course, no Member State currently combines the scale, adjudicative centralization, and capital market dominance that underpin Delaware’s position in the United States.

To understand why this possibility nevertheless matters, one must first understand what makes Delaware attractive in the first place. Investors choose Delaware because it offers familiarity, predictability, and institutional coherence. Venture capital and growth equity financing depend heavily on private ordering. Liquidation preferences, anti-dilution protections, drag along rights, hybrid securities, and complex board control arrangements are not peripheral terms. They are central elements of the investment bargain. Investors want confidence not only that such arrangements can be drafted, but that courts will interpret and enforce them consistently.

Corporate law is, of course, only one component of the broader ecosystem that attracts global capital alongside securities regulation, liquidity, analyst coverage, and exit markets. But governance predictability still matters enormously in the allocation of capital, particularly in later stage financings and exit planning.

Delaware provides that confidence through a combination of broad contractual freedom, sophisticated adjudication, and network effects. The Delaware Court of Chancery has generated a dense body of precedent that allows lawyers, founders, and investors to model outcomes with relative confidence. Over time, those dynamics reinforce one another. Investors become increasingly comfortable deploying capital into familiar governance structures while lawyers and founders standardize around established market terms and transactional practices.

This helps explain the persistence of the Delaware 'Topco' and European 'Opco' structure among many European scaleups. The operating business may remain in Paris, Milan, Berlin, or Stockholm while the holding company sits in Delaware. In practice, this often reflects less a desire to 'be American' than an effort to align the governance framework with the expectations of global capital providers.

That said, similar structures are already legally possible within the EU. A Dutch holding company with a German operating subsidiary does not require EU Inc, and for many scaleups the practical significance of Gebhard uncertainty at the holding company level may be very limited. Yet no European jurisdiction has achieved anything close to Delaware’s degree of market centrality or investor familiarity. The question, therefore, is whether EU Inc might help alter those dynamics.

Against this background, the principal criticism of EU Inc is straightforward. It does not establish a complete supranational corporate law regime. Corporate governance, fiduciary duties, shareholder remedies, and much of the adjudicative framework remain dependent on national law and national courts. In many respects, the proposal appears to place a European wrapper around existing domestic systems rather than displacing them.

That criticism is largely correct. Yet the proposal’s incompleteness may still produce an important if more modest shift in the European market for corporate domiciles. If EU Inc succeeds in reframing jurisdictional choice within Europe, Member States may begin competing more directly to attract scaling companies and investment structures. The result may not be a single European corporate law regime, but rather increased pressure on Member States to improve the institutional environments surrounding their own versions of EU Inc.

This dynamic would not replicate Delaware. Nor would it eliminate the fragmentation that currently characterizes European corporate law. But it could, at the margin, begin generating some of the network effects that make Delaware attractive in the first place. Familiarity among investors, accumulated jurisprudence, standardized transactional practice, and concentration of professional expertise tend to reinforce one another over time. A jurisdiction that successfully attracts a critical mass of EU Inc. incorporations may become increasingly attractive precisely because others have already chosen it.

Still, this possibility should not be overstated. The proposal’s structural limitations remain significant and Article 103 is central among them.

Article 103 substantially preserves room for host state intervention through mandatory national rules. In effect, it reproduces much of the uncertainty already associated with the Centros, Überseering, and Inspire Art line of cases and the broader Gebhard framework. A Dutch EU Inc operating primarily in Germany may still face uncertainty regarding the extent to which German mandatory rules could apply in practice.

That uncertainty matters enormously. Regulatory competition functions effectively only if market participants can predict which law will govern the relevant corporate relationship. Investors can adapt to different substantive rules. What they struggle to price is uncertainty over which rules ultimately apply. If host state intervention remains materially available then EU Inc may fall short of generating the predictability and institutional coherence necessary for strong network effects to emerge.

From a transactional perspective this is where the proposal’s limits become most apparent. Investors do not choose jurisdictions primarily because of administrative convenience. What matters is certainty across the corporate lifecycle including governance disputes, financing rounds, restructurings, and exits. Investors can adapt to different substantive rules. What they struggle to price is uncertainty over which rules ultimately apply. The market does not want to re-price governance risk every time a company crosses a border.

The irony is that EU Inc’s incompleteness may simultaneously support and undermine its success. Reliance on national law could permit beneficial jurisdictional competition among Member States and allow particularly sophisticated jurisdictions to emerge as focal points. At the same time, the persistence of host state intervention and fragmented adjudication may prevent the degree of certainty necessary for those network effects fully to develop.

None of this means EU Inc is irrelevant. The proposal may still improve the European market for corporate domiciles at the margins. A standardized European corporate form could increase familiarity among investors, reduce some cross border friction, and make it marginally less necessary for European companies to adopt Delaware holding structures. Even modest standardization at the EU level could reduce some of the informational and coordination costs associated with purely national corporate forms. But if the ambition is genuinely to compete with Delaware for global capital then procedural harmonization alone is unlikely to suffice. Delaware’s advantage is not merely statutory. It is institutional, adjudicative, and deeply embedded in market practice. The more realistic question may therefore not be whether EU Inc. can replicate Delaware, but whether it can make remaining within European corporate law so predictable, familiar, and scalable as to make fewer companies feel compelled to leave it.

Luca Enriques, Professor of Business Law at Bocconi University. 

John C. Friess, Corporate Lawyer at Sullivan & Cromwell LLP in London.

This post is part of the OBLB's series of posts on the EU Inc proposal.