The European Commission’s proposal for a Regulation on the “28th Regime” Corporate Legal Framework represents a significant step toward deepening integration within the EU single market. At its core, the initiative seeks to overcome one of the most persistent barriers to cross-border business activity in Europe, that is the fragmentation of national corporate laws. By introducing a harmonised legal framework, centered around a new company form known as “EU Inc.”, the proposal aims to simplify company creation, operation, and expansion across Member States while fostering innovation and investment.
A key motivation behind the proposal is the recognition that businesses operating in multiple EU countries face complex and often inconsistent legal requirements. These disparities create administrative burdens, increase costs, and discourage companies, especially startups and scale-ups, from expanding beyond their home markets. The proposed Regulation addresses this challenge by offering a single, optional corporate framework that coexists with national systems but provides a unified set of rules applicable across the EU.
The proposed EU Inc. is a harmonised limited liability company that can be established by one or more individuals or legal entities. It can be created from scratch or through cross-border operations such as mergers, conversions, or divisions. One of its defining features is the use of fully digital procedures throughout the company lifecycle. From incorporation to dissolution, all processes are designed to be completed online, reducing administrative burden and increasing efficiency.
Companies may be established either through a central EU interface linked to the Business Register Interconnection System (BRIS) or via national business registers. A fast-track procedure allows incorporation within 48 hours at a maximum cost of €100, provided standardised articles of association are used. This streamlined process is particularly attractive for startups seeking rapid market entry. Additionally, digital identification and signature requirements are aligned with EU standards under the eIDAS Regulation, ensuring secure and reliable authentication.
Another major innovation lies in the integration of administrative systems. Information submitted during company formation, such as tax identification numbers (TIN), VAT registration, and beneficial ownership data, is automatically shared between relevant authorities. This eliminates the need for multiple applications and reflects the “once-only” principle, whereby companies provide information only once and it is reused across public administrations. Each EU Inc. is assigned a European Unique Identifier (EUID), enabling seamless identification and data exchange across borders.
Transparency and accessibility are also central to the framework. Company information is stored in national business registers and made available at EU level through BRIS via the e-Justice portal. Multilingual access ensures usability across Member States, while certain key documents are provided free of charge. The introduction of an EU Company Certificate further enhances trust by offering a standardized summary of essential company data.
The proposal also simplifies cross-border expansion. EU Inc. companies can establish branches in other Member States entirely through digital procedures, without duplicating administrative steps. Business registers automatically retrieve necessary information through BRIS, thereby reducing redundancy and accelerating market entry.
In terms of corporate governance, the Regulation provides flexibility while maintaining safeguards. Companies are managed by a board of directors, with at least one member required to reside within the EU. Shareholder protections are embedded, including mechanisms to address unfair prejudice against minority investors. Decision-making rules, particularly regarding amendments to the articles of association, are also clearly defined to ensure transparency and accountability.
The financial structure of EU Inc. companies is notably flexible. There is no mandatory minimum capital requirement, and shares generally do not have nominal value. Instead of rigid capital maintenance rules, the framework relies on solvency and balance sheet tests to ensure that distributions do not jeopardise the company’s financial health or creditor interests. This approach aligns with modern business practices and is especially beneficial for high-growth companies that prioritise reinvestment and scalability.
To further support innovation and talent retention, the proposal introduces an EU-wide employee stock option plan (EU-ESO). This allows companies to grant warrants to employees and other eligible individuals, with taxation deferred until shares are sold. Such schemes are widely used in startup ecosystems and are considered essential for attracting skilled workers.
The Regulation also addresses the end of the company lifecycle. For solvent companies, dissolution procedures are fully digital and straightforward. For insolvent companies, particularly startups, a simplified winding-up process is also provided, to reduce costs and delays. Additionally, the proposal includes provisions for electronic auctions of assets, enhancing efficiency in insolvency proceedings.
Importantly, the proposal ensures consistency with existing EU legislation, particularly Directive (EU) 2017/1132, and builds upon established digital infrastructure such as BRIS. It also aligns with broader EU strategies, including the Single Market Strategy and initiatives supporting startups and innovation.
Finally, the Regulation includes safeguards against discrimination. Member States are prohibited from imposing unjustified additional requirements on EU Inc. companies compared to national legal forms. This ensures a level playing field and reinforces the objective of a truly integrated market.
In conclusion, the 28th Regime Corporate Legal Framework represents a forward-looking effort to modernise EU company law. By combining harmonisation, digitalisation, and flexibility, it creates an environment conducive to entrepreneurship, cross-border growth, and investment. If successfully implemented, it could significantly enhance the competitiveness of European businesses and strengthen the foundations of the single market.
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Author: Dr Josef Cachia Fenech Gonzi