Can EU Inc Keep a Secret? Disclosure, Opacity, and the Competitive Logic of Startup Law

The EU Inc Proposal (the ‘Proposal’) has reopened the European policy debate on what makes the institutional environment hospitable to high-tech startups. The discussion has chiefly focused on whether the Proposal delivers what venture capital expects from a startup-friendly legal environment: a flexible corporate law regime (see, eg, Enriques et al, 2026). One dimension has remained largely outside the frame: the disclosure environment under which an EU Inc company will operate. The Proposal harmonises only certain aspects of the new corporate form, leaving national company laws to fill the gaps. One such gap is the disclosure regime. As a result, EU Inc inherits, untouched, the more transparent disclosure architecture imposed by European law on startups relative to their Delaware counterparts.

Informational opacity—the degree to which startups can avoid public disclosure of strategically sensitive information—can itself be a competitive asset. The regulatory architecture governing private companies in the United States allows startups to operate in a near-stealth mode for as long as they choose to remain private. By contrast, the company law regimes in force across EU Member States—shaped by the Accounting and Anti-Money-Laundering Directives—impose a significantly more transparent environment from the moment of incorporation.

This post traces this gap. It is, we argue, one of the most consequential of those the Proposal leaves untouched—and the hardest to close, because closing it would require reconsidering issues settled under the Accounting and the Anti-Money-Laundering Directives.

Why Opacity Matters for Startups

Disclosure is a foundational tool of corporate governance and financial market regulation, and the scholarly conversation around it has centred on public companies. For non-public companies, the calculus is different. For startups in particular, staying private is not merely a way to avoid the out-of-pocket compliance costs of public-company status; it may become a condition of survival.

Four mechanisms are particularly important. First, information leakage. Disclosed information generally becomes available to competitors, suppliers, customers, strategic acquirers, employees, and other market actors who may use it against the firm (Verrecchia, 1983; Dye, 1985), including through competitive predation by established conglomerates (Bernard, 2016; Guo et al, 2004). Early-stage firms frequently compete against incumbents with vastly superior resources, and the disclosure they would have to make is asymmetrically informative. A startup’s disclosure concerns a single nascent business, at a level of granularity competitors can act on. A large, diversified rival’s disclosure, by contrast, is consolidated across many businesses and reveals little about the specific segment in which the rival competes with the startup. The flow of competitively useful information runs from the startup to the incumbent, not the reverse.

Second, bargaining asymmetry. Disclosure affects bargaining dynamics with the thin set of counterparties a startup works with (Pollman, 2019). Information drawn from accounts, equity filings, shareholder identities, ownership structures, or disclosed financial positions can materially shape negotiations. A large customer who learns that the startup depends on its revenue can negotiate harder on price. A supplier who sees signs of liquidity stress can tighten credit terms. A competing recruiter who sees visible financing difficulties can time poaching attempts to coincide with employee anxiety.

Third, protection of experimentation. Opacity allows startups to pivot, abandon projects, revise product strategies, and tolerate failure as part of the innovation process (Aghamolla & Thakor, 2022; Platt, 2022). In a highly transparent environment, unsuccessful experiments leave a permanent and visible record that may affect hiring, fundraising, and commercial credibility. Opacity keeps the cost of failed experiments within bounds the firm can survive.

Fourth, deal anchoring. Disclosure shapes the terms on which the startup will later negotiate with both capital providers and acquirers (Fan, 2016). Publicly observable valuation histories anchor subsequent financing rounds: down rounds, flat rounds, and distressed financings acquire reputational significance once visible, constraining the firm’s bargaining range in later raises. The same information advantages strategic acquirers, who can use observable financial trajectories to time acquisition approaches and to extract better terms.

These concerns are not merely theoretical. Disclosure does generate firm-level benefits—a lower cost of capital, broader access to credit, and greater counterparty trust (Leuz & Wysocki, 2016; Minnis & Shroff, 2017). Recent empirical literature nonetheless suggests that firms value informational opacity. Disclosure costs appear to help keep intangibles-intensive firms private (Davydova et al, 2022); firms strategically slow their growth to remain below the size thresholds that trigger mandatory disclosure regimes (Bernard et al, 2018); disclosure may accelerate the erosion of product-market advantages (Feng et al, 2021); and venture capital intermediaries adjust their investor base to protect portfolio-company confidentiality (Abuzov et al, 2025). This does not mean opacity is necessarily optimal: opacity implies that a firm that discloses nothing still draws on the comparables, benchmarks, and price signals that others’ disclosure generates, enjoying that informational infrastructure without contributing to it (Morris & Phalippou, 2024; see also Gordon & Lund, 2026). Yet the revealed-preference evidence is difficult to ignore: firms appear willing to incur real costs to preserve informational opacity.

Two Regulatory Philosophies

Disclosure regulation on the two shores of the Atlantic responds very differently to startups’ preference for operating in near-stealth mode.

A privately held Delaware corporation faces a remarkably light disclosure regime. Shareholder identities, ownership percentages, cap tables, revenues, and financing structures are generally not accessible through public registers unless voluntarily disclosed or revealed through specific transactions (Fan, 2016). Nor do private corporations in Delaware face any statutory audit requirement: audits become a concern only if investors demand them as a condition for providing financing, or upon going public. Federal anti-money-laundering law does not materially alter this picture: after the 2025 narrowing of the Corporate Transparency Act regime, US-formed entities are exempt from federal beneficial ownership reporting (FinCEN interim final rule, 31 CFR 1010, eff. 26 March 2025), and other AML information is generally held by intermediaries or public authorities, not published in corporate registers (FinCEN, BOI Reporting Requirements, 2022). This is not accidental. The US framework reflects a longstanding policy choice: closely held firms are primarily governed through private ordering rather than mandatory public disclosure. The JOBS Act of 2012 reinforced that orientation by facilitating prolonged private company status for high-growth firms (Cable, 2021). In a move to streamline the path to public markets, the Trump SEC is doubling down on this approach by proposing to subject startups to reduced disclosure requirements for five years following their IPO.

The European model rests on a completely different logic. Under the Accounting Directive, all companies—public or private—are generally subject to public filing obligations from incorporation onwards. Although under such a Directive, national law may allow simplified or abridged accounts for smaller firms, certain accounting information—including core balance-sheet data—remains publicly available through commercial registers. These size-based reliefs do little for the firms this post is concerned with. Eligibility turns on thresholds for balance-sheet total, turnover, and headcount—and venture financing may rapidly eliminate these simplifications: raised capital increases the balance sheet, while scaling the business quickly increases headcount. Thus, the fuller disclosure obligations will normally apply.

The same thresholds trigger a second obligation with no equivalent in Delaware: statutory audit. Under the Accounting Directive and the EU audit framework, medium and large undertakings must have their accounts audited; only micro and small firms may be exempted at Member State option. A startup that outgrows the small-company thresholds thus loses its audit exemption at the very moment it loses its abridged-accounts relief. The result is a compounding burden: fuller accounts, filed publicly, and independently audited (cf Gelter, 2010). 

The EU anti-money-laundering framework likewise requires beneficial ownership registration across Member States. Although the 2022 ruling in the joint cases WM and Sovim struck down the general public access that the Fifth Anti-Money-Laundering Directive had introduced as a disproportionate interference with privacy, the Sixth Anti-Money-Laundering Directive preserves a significant measure of transparency: access is granted to authorities and obliged entities, and to any person demonstrating a legitimate interest in combating money laundering—a category presumed to cover journalists, academic researchers and civil-society organisations. 

Crucially, a purely commercial interest does not qualify, so a competitor cannot use the register to obtain a rival’s ownership information. 

All of this reflects two distinct rationales. Mandatory accounting disclosure has historically been understood as a corollary of limited liability and an instrument of creditor protection (Gelter & Kavame Eroglu, 2014); the beneficial-ownership strand, by contrast, pursues the separate and more recent objective of combating financial crime.

Table 1 — Delaware (Inc.), France (SAS), Luxembourg (SARL), Germany (GmbH)

Table 2 — Italy (Srl), Netherlands (BV), UK (Ltd)

To be sure, variation across European regimes exists, but it is bounded: as the two tables above show, none of the most used start-up forms across Europe—nor any other form available—comes close to offering the informational opacity enjoyed by a Delaware private corporation.

The Silence in the Competitiveness Debate and Pro-competitiveness Initiatives

Europe has chosen a more transparent model—reflecting familiar commitments to creditor protection and the policing of financial crime. The striking point is not that choice itself, but that European policy debates worry extensively about losing startups to more hospitable jurisdictions while saying almost nothing about whether those firms can operate privately enough to protect competitively sensitive information. 

This silence is surprising: the trade-off is neither new nor theoretically unexplored, and European scholarship has increasingly engaged the broader public/private disclosure divide (Schön, 2006; Gözlügöl et al, 2023; Gelter, 2010), recognising both that mandatory disclosure may impose disproportionate costs on closely held firms and that disclosure rules simultaneously pursue important goals of creditor protection, market integrity, AML enforcement, transparency, and anti-arbitrage.

Recent competitiveness discussions have devoted enormous attention to capital markets, scale-up financing, cross-border mobility, regulatory fragmentation, and startup-friendly corporate law. The Letta and Draghi Reports both identify legal and financial fragmentation as obstacles to innovation and growth. Startup-focused initiatives such as the European Startup Nations Alliance Standards likewise concentrate on corporate law, tax, and talent mobility. The disclosure environment in which startups operate from incorporation is largely absent.

The recently proposed EU Inc regime illustrates the point. The Proposal creates an optional European corporate form while leaving disclosure rules largely to the law of the Member State of incorporation. The debate around it is revealing less for what the Proposal gets wrong than for what it leaves unasked. Commentary has focused extensively on whether EU Inc delivers for innovative startups and on complementary institutional questions (see, eg, Enriques et al, 2026; Ringe, 2026; Strampelli, 2026). Informational opacity has attracted far less attention, even though accounting, AML/KYC, beneficial ownership, and related disclosure obligations continue to follow national law (Clifford Chance, 2026). Despite reconsideration of the corporate architecture for startups, the informational environment in which those firms operate remains a marginal design variable.

Conclusion

Informational opacity matters for startups. In Delaware, they can operate in near-stealth mode. Europe offers no comparable degree of informational opacity. However, the issue remains underexplored in European startup-policy debates, including discussions of the EU Inc Proposal. More revealing than any particular flaw in the Proposal is its failure to confront the issue at all.

To be clear, our point is not that Europe should choose opacity over disclosure. Creditor protection, AML enforcement, transparency, and anti-arbitrage concerns all matter. But for startups, disclosure is not just a compliance issue; it can also affect competitiveness. Any serious account of European startup policy should therefore treat disclosure rules as part of the broader competitiveness equation, alongside corporate law, capital markets, and scale-up financing.

Matteo Gatti is a Professor of Law at Rutgers Law School.

Casimiro A Nigro is a Business Law Lecturer at Leeds University.

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