Digital, flexible and investor-friendly – that is what the new corporation is supposed to be. However, it raises difficult questions about co-determination, national law and creditor protection.
A “little sister” of the European Company has been discussed in Europe for decades. The SE is too large, too complex and too inflexible for many companies. For start-ups, scale-ups and cross-border groups of companies, on the other hand, there is still no simple European corporation that can be used as flexibly as a limited liability company but operates according to uniform rules throughout the EU.
The Commission proposal for an “EU Inc.” presented on March 18, 2026 aims to close this gap. The EU Inc. could be a major step forward for the European single market – if the legislator tightens up a few neuralgic points.
What is EU Inc.
The EU Inc. is to become a new harmonized corporation. It would not be a completely supranational company like the SE, but a legal form anchored in the member states with a largely harmonized regulatory framework under EU law.
It can be founded by one or more natural or legal persons. The shareholders are not personally liable for the company’s liabilities. The registered office and head office or principal place of business must be in the EU. It should be possible to split the registered office and head office within the EU.
EU Inc. is thus aimed at companies that think European from the outset: start-ups, scale-ups, venture capital-financed companies and groups of companies that want to quickly set up subsidiaries in different member states.
Guiding principle: digital-only
Perhaps the most important idea behind the proposal is that EU Inc. should function completely digitally.
This does not only apply to incorporation. It should also be possible to process register applications, amendments to the articles of association, shareholder resolutions, share transfers, branch offices and even liquidation and insolvency proceedings digitally.
The planned fast-track procedure is particularly relevant in practice. If standard EU articles of association are used, incorporation should be possible within 48 hours and cost a maximum of EUR 100. If the standard articles of association are not used, registration should take place within five working days.
This would be a significant step forward for company founders. Anyone wishing to set up companies in several EU countries today has to deal with different registers, languages, forms and processing times. EU Inc. wants to break through this patchwork, at least for one legal form.
Guiding principle: once-only
The second guiding principle is equally important: once-only. Data that is available to a public body once should not be requested again and again. After registration, tax authorities, transparency registers and social security institutions, for example, should receive the required information immediately.
This should also apply in the later life cycle of the company: Authorities and courts should retrieve available company data directly via register systems instead of requesting it again from the company.
This sounds technical, but it is crucial in practice. Young companies, in particular, lose a lot of time with repeated official information, registrations and proofs. EU Inc. is intended to create a real reduction in bureaucracy here.
No central EU register – for the time being
A central register for EU Inc. companies only is not planned initially. Instead, a central interface is to be created via which incorporation and register applications can be processed. The actual registration will continue to take place in the national registers.
That is pragmatic. A fully-fledged European company register would be politically and technically difficult to implement in the short term. The proposal therefore proceeds in stages: first common digital access, then possibly a genuine central register.
Relationship with national law remains difficult
EU Inc. is not regulated completely autonomously. The proposed regulation contains many central rules, but refers to the law of a national reference legal form for unregulated issues. In Germany, this is likely to be the GmbH.
This is precisely where one of the biggest practical challenges lies: Where does the EU regulation end and where does national law begin? Many topics are only partially regulated. In the case of shareholders’ meetings, for example, the digital form may be prescribed by European law, while invitation deadlines, voting bans and other details could be left to national law.
In practice, this demarcation is crucial. The more national special rules continue to apply, the less uniform the EU Inc. actually becomes.
Flexible organizational structure
EU Inc. is to have a lean structure: Shareholders’ Meeting and management body. The management body may consist of only one person. Other bodies can obviously be created.
Of particular interest is the expressly provided right of the shareholders to issue instructions to the managing directors. This is particularly relevant for group structures. A parent company could thus control its EU Inc. subsidiary more easily.
However, Schmidt and Teichmann criticize that the proposal does not sufficiently regulate the group dimension. The managing director should be obliged to act in the interests of his company. But what happens if a measure is in the interests of the group but is detrimental to the subsidiary in isolation? This question is particularly important in practice in international groups, in compliance, cash pooling or group-wide financing structures.
Co-determination remains the political point of conflict
Co-determination is traditionally the most difficult issue for European company forms. Even earlier projects such as the SPE have failed.
The proposal generally links co-determination to the registered office of EU Inc. This can be problematic. A company with many employees in Germany could choose an EU Inc. with its registered office in a Member State that does not have comparable corporate co-determination.
The authors see considerable potential for circumvention here. It is true that the typical EU Inc. start-up or subsidiary will often be below the German co-determination thresholds. However, the issue remains politically sensitive.
One possible solution would be a special link to the actual place of work of the employees in the case of artificial arrangements. This would prevent EU Inc. from being used to circumvent national co-determination rules.
Digital shares and simple transmission
Another key point concerns the shares. EU Inc. is to have purely digital shares. These are to be kept in a digital share register. The registration should be constitutive and serve as proof of ownership.
The transfer of shares should also take place completely digitally. Notarization should not be required. From a German perspective, this would be a significant breach of Section 15 GmbHG, which makes the transfer of GmbH shares subject to notarization.
This is attractive for start-ups and venture capital financing. Share transfers, financing rounds and employee shareholdings could be implemented more quickly and more easily across borders.
At the same time, a new problem arises: who checks the validity of the share transfer? If the management has to keep the share register and legally check the transfer, it can be overwhelmed. It would therefore make sense to be able to delegate register management and verification to qualified service providers, such as notaries or specialized providers.
No minimum capital, flexible financing
The EU Inc. should not require any minimum capital. This is in line with a European trend and makes the legal form more attractive in international competition.
It is also intended to enable genuine no-par value shares. These are known from US law, for example, and can facilitate venture capital financing. Flexible share systems are particularly advantageous for convertible instruments such as SAFE or KISS, down rounds or employee shareholdings.
Creditor protection is not to be ensured by means of a rigid minimum capital, but primarily by means of distribution rules. Distributions should only be permitted if both a balance sheet test and a solvency test are passed. The managing directors are personally liable in the event of breaches.
This is more modern than traditional capital protection, but requires the rules to be practicable and enforceable.
Access to the capital market
The shares of an EU Inc. should be able to be traded on a multilateral trading system, such as an SME growth market. Access to the regulated market should only be possible if this is also permitted for the national reference legal form.
This should enable EU Inc. to accompany a company from the start-up stage through to scale-up and possibly to the capital market – without the need to change its legal form. This would be a major advantage for growth-oriented companies.
Employee participation: EU-ESO
A particular advantage of the proposal is the EU employee stock option plan, or EU-ESO for short.
Employee participation is extremely important for start-ups. Young companies are often unable to pay top salaries, but want to attract and retain talent by sharing in the company’s success.
The proposal provides for a European employee stock option program. Subscription rights can be issued to managing directors, employees of EU Inc. and employees of subsidiaries. They are to be free of charge and non-transferable. A minimum holding period of 24 months is envisaged.
The tax regulation is particularly important: taxation should only take place when the shares received are sold, not when the option is issued or exercised. This would alleviate one of the biggest practical problems of employee share ownership: taxation before the employee receives any liquidity.
Liquidation and insolvency
It should also be possible to terminate EU Inc. digitally and in a simplified manner.
A fast-track liquidation procedure is planned for solvent companies. It is to take effect once the company has ceased its activities, there are no longer any problematic assets or liabilities and there are no ongoing proceedings to the contrary.
The proposal also includes a simplified insolvency procedure for “innovative start-ups”. It is precisely this part that the authors find less convincing. Similar regulations were already controversial in the European insolvency law project and were ultimately deleted there. The fact that they have now reappeared for EU Inc. seems to require explanation.
Insolvency proceedings are particularly sensitive. Simplification makes sense, but must not be at the expense of creditors, employees or procedural security.
What does the proposal mean for Germany?
EU Inc. would be a real challenge for Germany.
It would take its place alongside the GmbH, UG and AG, but at the same time would call into question certain basic national decisions: notarized assignment of shares, minimum capital thinking, classic capital maintenance and co-determination links.
For founders and investors, on the other hand, EU Inc. could be very attractive. It promises fast digital start-ups, flexible financing instruments, employee participation that can be used throughout Europe and better scalability.
For established companies, it would be particularly interesting as a digital subsidiary. By using the standard articles of association, groups would be able to establish a subsidiary in any member state within 48 hours.
Practical tip for start-ups and investors
EU Inc. is still only a proposal. Companies should therefore not make hasty plans to convert existing structures.
At the same time, it is worth monitoring developments at an early stage. If the regulation comes into force, EU Inc. could quickly become relevant for start-ups, international financing rounds and employee participation programs.
In particular, start-ups should check whether their articles of association, cap table structure, employee participation and financing instruments can be made EU Inc. compatible in future. Investors should observe whether EU Inc. is establishing itself as the new standard for cross-border early-stage financing.
Lots of potential, but room for improvement
The proposal for an EU Inc. is ambitious and could significantly modernize European company law. Its strengths lie in digitalization, rapid formation, flexible financing, digital shares and an EU-wide employee participation model.
At the same time, there are still major issues to be resolved: the relationship with national law, co-determination, group interests, cash pooling, share registers and simplified insolvency proceedings.
If a balanced improvement can be made here, EU Inc. could actually become what Europe has been lacking for decades: a flexible, digital and investor-friendly corporation for the single market.
