In the current political landscape, an urgent call has emerged: Europe must implement bold reforms to maintain its competitive edge. Amid the diverse array of proposals, a particularly promising idea is gaining momentum: the establishment of a unified EU-wide corporate structure tailored for innovative enterprises.
Often referred to, albeit less intuitively, as the “28th regime,” this innovative framework aspires to mirror the famed Delaware C-Corp model, aiming to enhance the existing corporate structures available across the EU’s 27 member nations. This initiative is buoyed by a grassroots movement supported by entrepreneurs and venture capitalists, fostering a new, more appealing name: “EU Inc.” Having been launched on October 14, the EU Inc petition has already garnered impressive support, amassing around 11,000 signatures from advocates across Europe.
The association of the term Inc with the U.S. legal structure is deliberate; unlike startups and venture capitalists worldwide who utilize the Delaware C Corp, Europe is still navigating a significant void in this regard. Although there exists a framework known as ‘Societas Europaea’—a Latin term that resonates deeply with European bureaucracy—this legal form predominantly caters to larger corporations and has struggled to gain traction, which complicates the process for smaller startups wanting to expand continent-wide and increases the rarity of pan-European tech giants.
Recognizing that a new corporate structure could pave the way for greater cross-border investments into European startups, the EU Inc petition has received endorsement from prominent venture capital firms and an impressive roster of startup founders and investors, including notable figures like Niklas Zennström and Patrick Collison.
One of the four petition leaders, entrepreneur-turned-investor Andreas Klinger, reflects on how his early ventures were often registered as UK Ltds due to the burdensome structures for share options in nations such as France and Germany. He articulates that the core challenges facing European startups are rooted in “very fundamental structural problems.” Klinger and his fellow EU Inc advocates are actively engaging with the EU Commission, stating their belief that “A, the startup community needs this and wants this; B, it has urgency; and C, make sure it’s implemented the right way,” in a recent interview with TechCrunch.
In the newly established roadmap, the EU Inc initiative has set a clear objective to submit its finalized petition by December 1. The movement hopes that the newly installed college of EU commissioners will consider it part of their agenda for the forthcoming five years, thus making strides toward a more integrated European startup landscape.
Crucially, the proposed initiative enjoys implicit support from within the European Commission, bolstered by recent reports from influential figures like Enrico Letta and Mario Draghi, both advocating for the 28th regime. Even President Ursula Von der Leyen has voiced her support. However, as various challenges and sectors vie for priority, the campaign must remain vigilant to preserve its momentum, hence the urgent call for unity within the European startup ecosystem around this crucial initiative.
Support appears to be coalescing, significantly driven by the French startup and VC advocacy group France Digitale. Their working document, calling for a 28th regime, was already under development prior to the rise of the EU Inc campaign and has subsequently drawn endorsements from several other startup associations across the continent.
This vital national backing could prove instrumental for success; particularly noteworthy is the depth of detail in the proposal crafted by France Digitale, refined through discussions with industry counterparts. Co-author Antoine Latran emphasized an essential distinction in their approach, advocating for a “regulation” instead of a directive to avoid the pitfalls associated with differing national interpretations—a critical lesson gleaned from the challenges faced by the Societas Europaea, which France Digitale attributes with being largely impracticable for startups, SMEs, and high-growth ventures.
Yet, some industry experts express skepticism regarding the potential for establishing a standardized EU Inc structure that is devoid of excessive bureaucratic hurdles. “When it comes to the EU Inc, I harbor serious doubts about the ability of member states to agree on a common standard that is straightforward and, most importantly, not overly bureaucratic,” cautioned specialist lawyer Steve Jeitler, a partner at law firm E+H Rechtsanwälte based in Austria. He illustrated this concern by highlighting the considerable variations in capital maintenance regulations spanning different EU member nations.
Jeitler added, “Applying the (strict) Austrian or German capital maintenance regime to every single EU Inc would render it unappealing in countries with a less stringent regulatory environment.” In response to this issue, France Digitale’s proposal embraces the concept of a “1€ company” to maintain attractiveness across diverse jurisdictions.
Nevertheless, numerous other hurdles are anticipated along the pathway to realizing the EU Inc vision. “The devil is in the details, and that’s going to be where we have to exercise extreme vigilance,” remarked Mignot, emphasizing the need for scrutiny in the regulatory process.
While Brexit introduces layers of complexity, some advocates maintain hope that the U.K. could align with this initiative, suggesting, “They could say, ‘Look, if you are an EU Inc, it works for us too.’” The EU Inc emphasizes its flexible focus, acknowledging that while solutions centered around the EU hold significant potential, its broader aim encompasses all of Europe.
Amidst the rising call for reform, a consensus is forming that action is imperative for Europe to avoid falling behind in an increasingly competitive global landscape. Deep tech investor Michael Jackson highlights the urgency, stating: “Europe is facing a much more competitive environment than it was 30 to 40 years ago. China is the dominant player in the room. Other regions are bolstering their economies and prioritizing technology and innovation. Europe cannot afford to remain on the sidelines.”
Despite the challenges ahead, EU Inc advocates like Klinger remain optimistic: “The remarkable thing about this initiative is that it’s genuinely going to happen. […] This demonstrates our industry’s unified stance on a crucial issue—focusing our efforts on one fundamental request rather than diluting our message with numerous demands. This initiative could form a foundation for addressing other vital topics like stock options and exits, which are notably complex within the European context.”
