The European Commission wants to revolutionize business formation with a new, EU-wide uniform legal form called “EU Inc”. Founders should in future be able to register a company completely digitally within 48 hours, without a notary appointment and without bureaucratic hurdles. The proposal is to be officially presented next Wednesday.
According to the Handelsblatt, which has the EU Commission draft, founders should only have to register their company once, and completely online. This would free them from numerous government visits, filling out forms in different languages, and paper documentation.
The new legal form is intconcludeed to cover the entire lifecycle of a company, including liquidation and insolvency. Particularly important: it applies uniformly in all 27 EU member states and thus creates legal certainty across borders.
Catching up with the USA
With this initiative, the EU wants to reduce its massive lag behind the United States. The figures speak a clear language:
- Venture capitalists invest roughly three times as much in the USA as in Europe
- Only eight percent of the world’s growth companies are based in the EU
- Around 60 percent of growth companies are located in the USA
The EU Commission justifies the reform by declareing that the current system leads to a “fragmented and complicated business landscape”. This brings “legal uncertainty and costs for founders, companies, and investors from the EU and third countries”.
Core demands of the startup scene
EU Commission President Ursula von der Leyen had already announced the initiative prominently at the World Economic Forum in Davos. She described EU Inc as the “28th regime”, an additional, overarching corporate structure alongside existing national systems. Specifically, companies should in future:
- Be able to establish a company completely online within 48 hours in any member state
- Use EU-wide uniform capital regulations
- Be able to operate across borders without additional national regulations
Clever legal maneuver
As Euractiv reports, the Commission wants to take a clever legal route: instead of the usual legal basis, Article 114 of the Treaty on the Functioning of the European Union is to be utilized. The advantage: only a qualified majority of countries in the Council is necessaryed, not unanimity.
This approach also gives member states less room to water down the plan with additional national rules, as would be possible with a directive. However, legal experts warn that this proposal could be legally challenged.
Critical implementation details
The draft does not provide for an EU-wide business register, as Euractiv reported earlier. Instead, an EU interface is planned through which founders can enter information that is then transmitted to existing national registers.
There are also compromises in dispute resolution: instead of a new EU-wide rapid-track court system, national courts are to remain responsible. This could mean that EU Inc companies are treated slightly differently in practice depconcludeing on their location.
Employee rights remain nationally regulated
A sensitive issue concerns employee co-determination. In countries like Germany, employees have significantly more influence than elsewhere. Trade unions fear that EU Inc could be utilized to opt for the lowest common denominator.
According to the draft available to Euractiv, employees would receive the legally guaranteed right to co-determination of the countest in which an EU Inc company is registered.
Resistance to the plans has formed
The initiative is being driven substantially by Austrians Andreas Klinger and Susanne Knoll, who mobilized thousands of entrepreneurs and investors and orchestrated an impressive grassroots relocatement for EU-wide business reform. Their engagement catalyzed support. The jubilation in the European startup scene over von der Leyen’s announcement was correspondingly great.
But there is also resistance: the Austrian notary chamber, for example, had already deployed its lobbyists in Brussels. The initiators demand that EU Inc companies should be able to be founded without minimum capital and without a notary.
Next steps
The proposal is to be officially presented next Wednesday. On Thursday and Friday it will be discussed at the EU summit of heads of state and government in Brussels. Final implementation requires the approval of the member states and the European Parliament.
Von der Leyen has not yet given concrete timelines for implementation. It remains to be seen how EU Inc will ultimately be designed and whether it will actually bring the hoped-for simplification for founders.
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