The European Commission’s announcement in January 2026 that it would soon propose „EU Inc.” – a pan-European legal framework for innovative companies – marks an inflection point in the Union’s long-standing struggle to reconcile regulatory harmonisation with Member State sovereignty.[1] Commission President Ursula von der Leyen framed the initiative, formally designated the „28th regime,” as a singular response to Europe’s competitiveness crisis: a single set of rules applicable seamlessly across all twenty-seven jurisdictions, enabling entrepreneurs to register a company within forty-eight hours and operate under uniform capital, governance and compliance standards.[2] The ambition is clear. Between 2008 and 2021, nearly thirty percent of European unicorns relocated outside the EU, most to the United States, where unified Delaware law and deeper venture capital markets offer a regulatory clarity unavailable in Europe’s fragmented landscape.[3] With only eight percent of global scaleups based in Europe and sixty-four EU unicorns having migrated to the US compared to ten moving into the Union, the quantitative case for structural intervention is compelling.[4]
Yet beneath the rhetorical unity lies a deeply contested legislative architecture. The 28th regime does not merely propose technical harmonisation; it engages fundamental questions of legal basis, worker participation, tax coordination, and the allocation of competences under the Treaties. This analysis examines the EU Inc. proposal through three lenses: the structural impediments it seeks to overcome, the institutional design choices it confronts, and the legal and political risks that may render it another iteration of the Union’s failed attempts at optional corporate regimes rather than the transformative instrument its advocates envisage.
The Competitiveness Diagnosis and Fragmentation Costs
Europe’s startup ecosystem suffers from a well-documented pathology. While the continent produces thirty-five thousand early-stage companies and sustains over three thousand growth-stage firms annually, systemic barriers constrain their ability to scale within the Single Market.[5] A European startup seeking market access comparable to that available in the United States must navigate at least twenty-three separate regulatory systems, each with distinct administrative, legal and fiscal requirements.[6] This fragmentation manifests in concrete transaction costs: divergent minimum capital thresholds, ranging from one euro in France to twenty-five thousand euros in Germany for equivalent limited liability structures; inconsistent employee stock option taxation regimes that impede cross-border talent mobility; and irreconcilable insolvency procedures that deter investors unwilling to underwrite legal uncertainty.[7] US startups, by contrast, operate under the unified governance framework of Delaware law across fifty states, accessing a seven-times-deeper late-stage venture capital market and benefiting from standardised acquisition procedures that make exit both predictable and lucrative.[8]
The economic drag is measurable. Compliance costs under the recently implemented AI Act, compounded by fragmented national transposition, are projected to impose a thirty-one billion euro burden over five years, with individual high-risk system certifications costing up to four hundred thousand euros for small and medium enterprises.[9] The Draghi report, commissioned by the European Commission in 2024, identified a persistent investment gap of seven hundred fifty to eight hundred billion euros annually and concluded that regulatory fragmentation, rather than an absence of innovation capacity, constitutes the binding constraint on European competitiveness.[10] The Letta report, published in April 2024, reinforced this diagnosis, arguing that the decline in productivity growth stems primarily from incomplete integration in financial, energy and telecommunications sectors, each of which remains carved into national silos despite decades of Single Market rhetoric.[11] Both reports explicitly advocated for a 28th regime as a politically feasible alternative to mandatory harmonisation – an opt-in framework that would allow companies to bypass twenty-seven divergent national systems without dismantling those systems entirely.[12]
The Institutional Architecture: Regulation, Directive, or Hybrid?
The critical design question confronting the Commission is whether the 28th regime should take the form of a regulation, directly applicable in all Member States, or a directive, requiring national transposition. This choice is not procedural minutiae; it determines whether the regime achieves the uniform applicability that underpins its entire rationale. A regulation, grounded potentially in Article 352 TFEU as the flexibility clause, would create a single European company form, recognised automatically across jurisdictions without need for implementing legislation.[13] Such an instrument would replicate the Societas Europaea structure, established in 2001 under Council Regulation 2157/2001, but would require Council unanimity – a threshold that recent political dynamics render uncertain at best.[14] Alternatively, the Commission could rely on Articles 50 or 114 TFEU, the internal market provisions, to enact a directive under qualified majority voting. This reduces the political barrier but introduces the risk of fragmented transposition. Twenty-seven national parliaments would interpret and implement the directive according to local legal traditions, administrative cultures and stakeholder pressures, thereby recreating precisely the patchwork the regime is designed to eliminate.[15]
The precedent of the Societas Europaea offers a cautionary narrative. Intended to enable pan-European corporate structuring with a minimum subscribed capital of one hundred twenty thousand euros, the SE has seen limited uptake and has been exploited systematically to circumvent national worker participation regimes.[16] The SE Directive’s „before-and-after” principle freezes employee participation rights at the moment of formation, permitting companies to activate empty „shelf-SEs” years later, thereby avoiding governance obligations triggered by workforce thresholds under national law.[17] Similarly, the Commission’s 2008 proposal for a Societas Privata Europaea collapsed under opposition from both labour groups, who feared deregulation, and business lobbies, who found the design too restrictive.[18] The 2014 proposal for a single-member Societas Unius Personae met an identical fate, rejected by the European Parliament’s Employment and Social Affairs Committee by a two-thirds majority on the grounds that it lacked adequate safeguards against undercapitalisation and labour rights circumvention.[19]
These failures underscore a structural dilemma: optional regimes succeed only when they are sufficiently attractive to induce voluntary adoption, yet that attractiveness often derives from relaxed standards that stakeholders perceive as enabling regulatory arbitrage. The European Cooperative Society, the Pan-European Personal Pension Product, and the proposed Common European Sales Law each faltered because of weak fiscal coordination, political resistance over subsidiarity, or excessive complexity that deterred the very SMEs they aimed to assist.[20] The EU Inc. proposal risks repeating these mistakes unless it threads a narrow passage between usability and accountability.
Labour Law and the Ghost of Bolkenstein
The most politically charged dimension of the 28th regime concerns worker participation. The European Trade Union Confederation has issued unequivocal warnings that any attempt to harmonise labour law within the regime would constitute a rerun of the 2006 Bolkenstein Directive controversy, which triggered mass protests across Member States and ultimately required substantial revision.[21] At issue is the principle that companies choosing the 28th regime might operate under a unified European employment framework, effectively applying a „country-of-origin” principle that allows forum shopping and undermines national industrial relations systems.[22] Current advocacy materials circulating among the EU-INC coalition – a grassroots movement of founders and investors that claims over twenty-two thousand signatories – propose that information and consultation rights replace board-level employee representation, and that such obligations be calibrated to company size rather than mandated uniformly.[23] This formulation directly contradicts the SE framework and the 2019 Cross-Border Conversions Directive, both of which seek to preserve board-level participation during corporate restructurings.[24]
The ETUC’s March 2025 position paper explicitly rejects the inclusion of labour provisions in the 28th regime, arguing that greater flexibility for companies must not come at the expense of workers’ rights, trade union autonomy, or the integrity of collective bargaining.[25] Trade unions cite empirical evidence from the SE experience: companies systematically exploit the regime’s static safeguards to freeze worker participation at formation, and once activated, the SE structure renders subsequent expansions of workforce participation rights legally unenforceable.[26] The risk is compounded by dual-class share proposals embedded in several parliamentary drafts. These would permit founders to retain disproportionate voting control even as economic ownership dilutes, a governance model that research from the 2024 US proxy season shows leads to thirty-five percent higher say-on-pay opposition among independent shareholders and systematically understates investor dissent on environmental and social governance matters.[27] While proponents argue that dual-class structures insulate long-term strategy from short-term market pressures, critics warn that in the absence of strong minority shareholder protections, such arrangements entrench insider control and weaken accountability.[28]
Tax Harmonisation and the Limits of EU Competence
A further structural obstacle concerns taxation. The Commission cannot, through a regulation or directive grounded in internal market provisions, harmonise direct tax treatment of companies adopting the 28th regime.[29] Tax policy remains a Member State competence requiring unanimity, and without coordinated fiscal treatment, the regime’s attractiveness diminishes sharply. Legal scholarship has proposed a dual-instrument approach: a regulation creating the corporate form under Articles 50 or 114 TFEU, accompanied by a directive under Article 115 TFEU to approximate corporate tax rules for 28th regime entities.[30] This architecture respects competence boundaries while achieving the fiscal coherence essential for cross-border investment. Yet securing unanimous Council support for tax alignment remains politically uncertain, particularly given recent controversies over the Commission’s proposed Omnibus simplification package, which several Member States and legal scholars have challenged as breaching proportionality requirements and undermining environmental and social safeguards without adequate impact assessment.[31]
The absence of fiscal coordination risks rendering the 28th regime a symbolic gesture. Previous optional instruments, notably the Pan-European Personal Pension Product, suffered negligible uptake precisely because divergent national tax treatments eroded the value of cross-border portability.[32] If a company registered under EU Inc. remains subject to twenty-seven different corporate tax codes, transfer pricing regimes, and R&D incentive structures, founders gain little substantive advantage over navigating national systems bilaterally. Indeed, the complexity of determining applicable tax law for a nominally „European” entity could prove greater than the status quo.
Digital Infrastructure and Implementation Realities
The Commission’s proposal envisions a Union-level digital company register, enabling incorporation within forty-eight hours via a standardised online portal.[33] This builds upon the Business Registers Interconnection System, operational since 2017, which links national registers but does not function as a direct incorporation platform.[34] A genuine EU-level register would require significant administrative infrastructure, including eIDAS-based authentication, multilingual interfaces, automated compliance checks potentially leveraging artificial intelligence, and real-time synchronisation with national beneficial ownership and insolvency registers.[35] The European Parliament’s January 2026 resolution, adopted by a substantial majority, called for such a unified system, alongside standardised templates for articles of association and the elimination of notarial requirements for routine corporate lifecycle events.[36] Yet building this infrastructure demands not only technological capacity but also political will to allocate budget and administrative authority to a supranational body, likely the Commission’s AI Office or a newly established EU Company Registry Authority.
Parallel initiatives offer both synergy and complexity. The European Innovation Act, scheduled for proposal in the first quarter of 2026 alongside the 28th regime, will establish a framework for regulatory sandboxes across Member States, building on the AI Act’s requirement that each Member State operate at least one sandbox by August 2026.[37] These sandboxes could serve as testbeds for 28th regime incorporation procedures, allowing early adopters to refine processes before broader rollout. The Commission has also announced a five-billion-euro Scaleup Europe Fund, targeting late-stage equity investments in strategic sectors such as artificial intelligence, semiconductors, and biotechnology – areas where European firms face the greatest funding gaps relative to US counterparts.[38] Whether these instruments coalesce into a coherent ecosystem or add further layers of administrative complexity depends on implementation discipline that has often eluded the Union’s multi-level governance structures.
Conclusion: Realism versus Aspiration
The EU Inc. proposal embodies a tension inherent to European integration: the aspiration for unified standards confronts entrenched national prerogatives and the Union’s own constitutional limits. If executed as a directly applicable regulation with companion fiscal coordination, robust worker participation safeguards, and credible anti-abuse mechanisms, the 28th regime could indeed reduce the transaction costs that drive European unicorns to Delaware and unlock cross-border scaling for the continent’s thirty-five thousand startups. If, however, political compromise produces a directive riddled with optionality, lacking tax harmonisation, and silent on labour rights circumvention, the regime risks becoming the latest in a series of underutilised instruments – symbolically valuable but operationally marginal.
The legislative proposal expected in the first quarter of 2026 will clarify which trajectory prevails. For policy professionals, the critical questions are not rhetorical but institutional: Does the Commission possess the political capital to secure Council unanimity for a regulation, or will it settle for a directive vulnerable to fragmented transposition? Can fiscal coordination be achieved without reopening debates over tax sovereignty that have paralysed previous initiatives? Will worker participation safeguards survive negotiation with business constituencies that view such provisions as impediments to agility? And can the Union construct, within a realistic timeframe, the digital and administrative infrastructure required to make the regime operationally credible?
The stakes extend beyond startup policy. The 28th regime is a microcosm of Europe’s broader competitiveness challenge: to design institutions flexible enough to accommodate innovation while preserving the social and democratic accountability that distinguish the European model from its competitors. Achieving that balance will determine whether EU Inc. becomes a catalyst for continental scale-up success or another footnote in the Union’s unfinished project of market integration.
[1] European Commission, „Special Address by President von der Leyen: World Economic Forum,” January 2026, https://ec.europa.eu/commission/presscorner/detail/en/speech_26_150.
[2] Ibid.
[3] European Commission, „EU Start-up and Scale-up Strategy: Choose Europe to Start and Scale,” COM(2025) 270 final, 28 May 2025.
[4] Vestbee, „European Unicorns Report: Market Dynamics, Trends, and Key Players,” 29 October 2025, https://vestbee.com/insights/articles/european-unicorns-report; PwC, cited in ibid.
[5] European Parliament Legislative Train Schedule, „EU Start-up and Scale-up Strategy,” December 2025, https://www.europarl.europa.eu/legislative-train/theme-a-new-plan-for-europe-s-sustainable-prosperity-and-competitiveness/file-eu-start-up-and-scale-up-strategy.
[6] Europe Startup Nations Alliance, „Building a Competitive Europe Vol. I: Regulatory Barriers,” 2025, 11.
[7] DLA Piper, „Minimum Capital Around the World,” 2019, https://www.dlapiperrealworld.com/law/index.html?t=corporate-vehicles&s=setting-up-a-corporate-vehicle; Swedish Institute for Startup Professionals, „Proposition Paper: Consultation on the 28th Regime,” October 2025, 3.
[8] Capbase, „Why European Startups Register in the US,” 3 December 2023, https://capbase.com/why-european-startups-register-in-us/; Euperspectives, „Brussels to Spend €5bn to Keep EU Unicorns at Home,” 22 September 2025.
[9] Freshfields Bruckhaus Deringer, „EU Legislative Initiative to Establish a New 28th Regime for Innovative Companies,” 4 February 2025, https://www.freshfields.com/en/our-thinking/briefings/2025/09/eu-legislative-initiative-to-establish-a-new-28th-regime-for-innov.
[10] Mario Draghi, „The Future of European Competitiveness,” report prepared for the European Commission, September 2024, https://commission.europa.eu/topics/eu-competitiveness/draghi-report_en.
[11] Enrico Letta, „Much More Than a Market,” report to the European Council, April 2024.
[12] European Parliament Think Tank, „What Is the 28th Regime, and Is the Parliament Supporting It?” 1 January 2026, https://epthinktank.eu/2026/01/02/what-is-the-28th-regime-and-is-the-parliament-supporting-it/.
[13] Allied For Startups, „The 28th Regime Must Be a Regulation – Not a Directive,” letter to President von der Leyen, 17 October 2025, https://alliedforstartups.org/wp-content/uploads/AFS-28thRegime-Letter-VDL.pdf.
[14] Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a European Company (SE), OJ L 294, 10.11.2001, 1–21.
[15] Delors Centre, „Regime Change Instead of Business as Usual,” 12 June 2025, https://www.delorscentre.eu/en/publications/detail/publication/regime-change-instead-of-business-as-usual.
[16] Europa, „Setting Up a European Company (SE),” https://europa.eu/youreurope/business/running-business/developing-business/setting-up-european-company/index_en.htm.
[17] Martin Meyer-Erdmann, „How a 28th Company Law Regime Jeopardises Workers’ Rights,” ETUI Policy Brief 2025.05, September 2025, 6–7.
[18] Ibid., 3.
[19] Ibid., 4.
[20] Scott Marcus and Anastasios Thomadakis, „The Need for a 28th Regime,” presentation to European Parliament JURI Committee, 5 June 2025, 16.
[21] European Trade Union Confederation, „Response to the Commission’s Plan for a 28th Company Regime for Innovative Companies: Defending Workers and Labour Law,” 4 March 2025, https://www.etuc.org/en/document/response-commissions-plan-28th-company-regime-innovative-companies-defending-workers-and.
[22] Ibid., 2.
[23] Meyer-Erdmann, „How a 28th Company Law Regime Jeopardises Workers’ Rights,” 8.
[24] Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019 amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions, OJ L 321, 12.12.2019, 1–44.
[25] ETUC, „Response to the Commission’s Plan,” 1.
[26] Meyer-Erdmann, „How a 28th Company Law Regime Jeopardises Workers’ Rights,” 7.
[27] Sustainalytics, „How Unequal Shareholder Rights Influence Proxy Voting Outcomes,” 3 February 2025, https://www.sustainalytics.com/esg-research/resource/investors-esg-blog/how-unequal-shareholder-rights-influence-proxy-voting-outcomes.
[28] European Central Bank, „Determinants and Consequences of the Unification of Dual Class Shares,” Working Paper No. 465, March 2005.
[29] Legal Blog, Wolters Kluwer, „The EU 28th Regime for Innovative Companies Needs a Dual Instrument Architecture,” 28 December 2025, https://legalblogs.wolterskluwer.com/international-tax-law-blog/the-eu-28th-regime-for-innovative-companies-needs-a-dual-instrument-architecture.
[30] Ibid.
[31] Alberto Alemanno, „The Omnibus Conflicts with EU Core Constitutional Principles,” legal analysis, November 2025, cited in EUobserver, „Deregulation Plans Break EU Law, Legal Scholars Warn,” 9 November 2025.
[32] Marcus and Thomadakis, „The Need for a 28th Regime,” 16.
[33] European Parliament, „EU Competitiveness: MEPs Propose New Legal Framework for Innovative Companies,” press release, 19 January 2026, https://www.europarl.europa.eu/news/en/press-room/20260116IPR32438/eu-competitiveness-meps-propose-new-legal-framework-for-innovative-companies.
[34] European Commission Digital Building Blocks, „Business Register Interconnection System (BRIS),” 19 September 2017, https://ec.europa.eu/digital-building-blocks/sites/spaces/DIGITAL/blog/2017/09/19/533365899/Business+Register+Interconnection+System.
[35] European Law Institute, „Response to the European Commission Public Consultation on the 28th Regime: An EU Corporate Legal Framework,” 2025, 8–10.
[36] European Parliament, press release, 19 January 2026.
[37] Science Business, „Commission Sets Out Plan for EU Innovation Act,” 5 November 2025, https://sciencebusiness.net/news/technology-transfer/commission-sets-out-plan-eu-innovation-act; Regulation (EU) 2024/1689 of the European Parliament and of the Council on Artificial Intelligence (AI Act), Article 57.
[38] Euperspectives, „Brussels to Spend €5bn to Keep EU Unicorns at Home.”
