What is the EU Inc.?

The EU Inc. is not intended to be a fully autonomous supranational company form. Rather, it is a harmonised form anchored in the legal orders of the Member States, with its registered office in the EU. Its legal framework is (essentially) built on three layers: the Regulation itself, the company’s articles of association, and supplementary national law.

This architecture is central in practice. On the one hand, it creates an EU-wide uniform framework in the areas expressly covered by the proposal. On the other hand, the national law of the registered office remains relevant wherever the Regulation leaves gaps. The EU Inc. therefore promises more standardisation than existing national forms - but not a fully uniform regime.

The practical appeal lies in digital execution

One of the proposal’s strongest impulses is the consistent digitisation of the EU Inc.’s entire life cycle: from incorporation to register filings and decision-making, all the way to liquidation and insolvency, everything is intended to work digitally.

Three points are particularly relevant in practice.

Incorporation should be fully digital. Where an EU standard set of articles is used, the proposal even envisages an accelerated procedure to be completed within 48 hours at a cost of no more than EUR 100. For the start-up context, the more relevant case - incorporation with customised articles - should still be possible within no more than five days.
The “once-only” principle is intended to make register data usable for further administrative processes, for example tax registrations or other subsequent dealings with authorities.
Ongoing register filings should also be possible exclusively online.

In this respect, the proposal is clearly designed not only to harmonise standard corporate processes legally, but also to make them more operationally compatible.

Governance: familiar in principle, but not without open questions

The EU Inc.’s governance structure is intentionally kept simple. It provides for a general meeting and a management body, which can consist of only one person. Supervisory bodies such as advisory boards are expressly permitted and are common in VC contexts in any event. Meetings should be possible digitally; written resolutions are also envisaged. For written resolutions, only those shareholders who are entitled to vote need to be taken into account - an important practical simplification.

From a venture perspective, this is fundamentally attractive because the structure appears internationally intelligible and organisationally easy to handle. At the same time, the proposal leaves room for differentiation in the articles of association, for example regarding majorities or share classes. Notably, the majority required for amendments to the articles is set by the Regulation at only two thirds, rather than the three quarters of votes cast that is familiar from German corporate law.

It is welcome that the draft expressly regulates directors’ duties and liability. Directors are required to comply with the articles of association, act in good faith and in the company’s best interests, and apply an appropriate level of care and expertise. If they breach their duties, they are liable to the company for the resulting damage. For entrepreneurial decisions, the business judgment rule applies: a director who acts in good faith, with the care of a prudent manager, and on a reasonable belief that they are acting in the company’s interest is not liable. This aligns the proposed liability regime with international standards. There is likewise no liability for damage resulting from implementing a lawful shareholders’ resolution. Beyond that, key aspects of the liability regime - such as limitation periods - remain governed by national law. In addition, the draft contains a conflict-of-interest rule: directors must disclose conflicts and, as a rule, must not participate in the relevant decision.

For transactions between the EU Inc. and its directors, shareholders or related parties, the draft largely leaves the protective architecture to the articles of association: the articles may require approvals or prohibit certain transactions entirely. If a director or shareholder violates such rules, they are liable to the company for the resulting damage.

Shares and transfers: a key lever

A particularly practice-relevant part of the proposal concerns the design of shares. Shares in the EU Inc. are to be purely digital; physical certificates are excluded. The centrepiece is a digital share register that is intended to have constitutive effect. Rights in shares are generally to arise upon entry in the share register. This applies to both original issuance and subsequent transfers.

For venture and M&A processes, this is significant. In international transactions in particular, a reliable digitally maintained register would often be far closer to real-life deal practice than traditional, highly formalised transfer mechanisms (in Germany, see section 15 of the German Limited Liability Companies Act (GmbHG)). In addition, share transfers are also intended to be carried out purely digitally, and national requirements for notarisation would be excluded to that extent.

This could materially simplify transactions. At the same time, the proposal shifts verification tasks onto the company itself: for transfers, the company is to check, among other things, whether the seller has authority to dispose of the shares and whether the transfer is compatible with the articles of association. From a German perspective in particular, this raises the question of how far such tasks can and should be outsourced in practice to specialised service providers.

Financing: high flexibility, but with its own model

On the financing side as well, the EU Inc. is clearly designed to be compatible with international growth financing. The proposal does not require minimum capital and is generally based on true no-par value shares. From an EU-law perspective, this is notable and is intended to provide greater flexibility particularly for early-stage financings, convertible instruments and down rounds.

At the same time, the draft allows the issuance of additional instruments that entitle the holder to shares. This creates a framework intended to be functional for VC-typical structures.

This does not create an unregulated space in lieu of classic capital maintenance concepts. Distributions are instead to be tied to a balance-sheet test and a solvency test. Economically, this is more modern; in practice, however, it requires robust decision-making grounds, clean processes and adequate documentation. The simplification therefore lies less in removing constraints altogether than in shifting to a different system of constraints.

Employee participation: a clear advantage of the proposal

Particularly noteworthy is the proposal for an EU employee stock option plan (EU ESOP). Employee participation is regularly strategically important for young companies, but in Europe it often fails due to fragmented civil-law and tax-law requirements.

Here, the draft attempts - at least for the EU Inc. - to create a more uniform basis, especially through the proposed tax mechanism: taxation is not intended to arise upon grant or exercise of the rights, but only upon disposal of the shares received. This addresses a key practical problem, namely taxation without corresponding liquidity (in Germany, this issue has largely been addressed by the revised section 19a of the German Income Tax Act (EStG) effective as of 1 January 2025).

Whether this model will in fact achieve the desired effect in practice will, of course, depend on how smoothly it can be integrated with national tax law. Moreover, it appears questionable whether the EU has legislative competence for such a mechanism in the form envisaged.

Open issues: national law, co-determination and implementation

As convincing as individual elements of the proposal may be, it is equally clear that the EU Inc. will not eliminate all frictions. A first uncertainty factor is the continuing relevance of national law. Precisely because the Regulation does not constitute a complete code, there remains scope for Member State supplementation on numerous questions. This can and will dilute the intended uniformity.

A second point concerns employee co-determination. The proposal ties this to the registered office. This is legally coherent, but politically sensitive, because it can also facilitate structures that create tension between the state of the registered office and the company’s actual centre of employment.

A third point is practical implementation. A “digital-only” approach delivers value only if registers, interfaces and verification processes are in fact reliable, fast and interoperable. In addition, there is initially to be no central EU register, but only a central interface. This, too, suggests that the efficiency promises should be assessed with a degree of caution.

Conclusion

The EU Inc. is more than a symbolic initiative. The proposal contains a range of elements that can be practically relevant for venture-backed companies and cross-border group structures: digital incorporation and register management, simplified share transfers, flexible financing instruments, and a potentially attractive framework for employee participation.

Whether this will in fact become a new standard for venture structures in Europe remains open at this stage. What will be decisive is how much of the announced digital consistency survives in the final text, how extensive the fallback to national legal systems will be, and whether the open questions around co-determination, governance, liability and tax interoperability can be resolved in a workable way.

The EU Inc. is therefore, above all, one thing: a proposal that deserves to be taken seriously.