The European Commission has unveiled plans to simplify setting up and running companies across the EU.
The initiative aims to cut through the legal and administrative complexity that startups and small firms face when expanding across borders.
“It can still take weeks or months to set up a company in Europe,” commission president Ursula von der Leyen told press on Wednesday (18 March). “Barriers on the inside hurt us more than tariffs from the outside.”
The so-called 28th regime is intended to create a single European business code applicable across the EU.
EU Inc.
The centrepiece of the plan is EU Inc., an optional EU-wide registry that lets anyone in Europe set up a company within 48 hours for under €100.
Share transfers and financing operations will move to a “fully digital environment,” said von der Leyen, removing the need for lawyers to physically sign off the documentation.
The regime is open to “all companies in Europe, no matter their size and corporate purpose,” and the commission estimates companies to save “between €328m and €440m” in administrative costs “over 10 years.”
To retain or attract talent, companies operating under the rules can offer staff stock options that will be taxed only once sold, not before.
And if a startup fails, simplified insolvency rules mean founders can wind down and start again faster.
European start-ups had pushed hard for having a single EU registry ahead of Wednesday’s announcement, calling it “non-negotiable.”
“The law could become the most significant EU reform for businesses in over two decades,” the EU start-up alliance wrote in a press release on Monday.
Registering in the EU system “must be at least as straightforward as under existing national frameworks,” it added. At the behest of start-ups, von der Leyen said incorporation would have to be done “only once” at the EU level.
27 different 28th regimes?
Having a single set of rules would allow smaller and medium-sized companies to “finally tap into the full potential of the single market,” prime minister Enrico Letta wrote in his 2024 report on the single market that revived the decades-old plan.
But critics note the current proposal doesn’t actually accomplish this.
The EU register does create a simpler legal overlay across the bloc. But companies are still incorporated in the national legal system, leaving any potential legal wrangling to national courts.
“Deferring to national law” will “de-facto result in 27 different 28th regimes,” Luis Garicano a professor at the London School of Economic and Ulrike Malmendier is a professor at the University of California, Berkeley argued in an op-ed earlier this week.
Large corporations already have access to a European company form, called the Societas Europaea.
But uptake since its introduction in 2004 has been limited because “the law contains so many referrals to national law that it is more complex than the national systems it was meant to avoid,” economist Luis Garicano argued.
Tax and labour
Stakeholders participating in the commission’s public consultation identified “gaps in alignment in tax and labour” laws as important “barriers to cross-border scaling.”
But these mostly fall outside the scope of the rules. Labour harmonisation is not included, and the only tax element in the new proposal is deferred taxation on employee stock options, after Ireland pushed to exclude taxes completely.
Limiting the scope may make agreement among member states easier. Earlier attempts to create EU-wide company rules in 2011 and 2014 collapsed over labour and tax concerns.
But ignoring taxes leaves a major source of complexity unaddressed and could “make or break” actual uptake of the rules, Apostolos Tomadakis, a financial markets expert at the Centre for European Policy Studies, told the EU parliament in February.
Likewise, an analysis for the parliament’s legal committee found that uncertainty and fragmentation in labour laws is a cause that currently undermines long-term planning and investment, as firms are forced to "replicate compliance and legal operations in each member state they enter."
When asked why the current proposal would succeed where all previous attempts have failed, commissioner Michael McGrath, responsible for the file, said the difference is a stronger “political will to deliver.”
“We know internal barriers are holding us back,” he told reporters. “EU Inc. is an important contribution in resolving those issues.”
Wester van Gaal