EU Inc. – The Proposed 28th Corporate Law Regime
The European Union is developing one of the most significant corporate law initiatives of recent years, EU Incorporated (EU Inc.), also known as the “28th Regime”.
On March 18th, the European Commission presented its proposal for the EU Inc. regime. An initiative to create a legal framework for the founding of companies as single EU-based companies, rather as legal persons of a select member state.
The process is planned to be a fully digitalised low-barrier option for the founding of a company. Registration procedures should take up to 48 hours and cost less than EUR 100, without a set minimum share capital. Consequently, liquidation processes are also to be simplified, allowing for greater agility for start ups, and economic exploration.
For businesses operating internationally or planning cross-border expansion within the EU, this initiative may change how corporate structures are established and managed. Despite years of harmonisation, companies operating across the EU still face a fragmented legal environment. Corporate governance rules, incorporation requirements, shareholder rights and restructuring procedures continue to be different between Member States.
The 28th Regime is structured as a voluntary, EU-level corporate law framework that would exist next to national company laws. It would offer companies the option to operate under a single, harmonised set of rules across the entire EU. However, some national provisions will remain in place.
EU Inc. will not free the companies from national employment and social laws. What will be easier is that employees can be hired across the block, with only the applicable law of the employee’s place of residence / work being in force, regardless of where the EU Inc. company is based.
The base of the EU Inc. company will however determine its taxation policy. While the Business in Europe: Framework for Income Taxation (BEFIT) initiative aims to standardise corporate taxation across the EU, the proposal for EU Inc. includes an exception for small and medium sized entreprises (SMEs) to use their national taxation system, in order to remain competitive on their local market.
One of the objectives of the initiative is to strengthen the competitiveness of European companies in the global market. The regulation is intended to facilitate innovation and cross-border operational activities by European companies, but also to enable easier access to the European market by foreign companies.
For foreign companies entering the EU market EU Inc. will change the dynamics of decision making when choosing a member state to start operations from, since certain factors, previously based on national law, will be eliminated. This will change the landscape across industries. Furthermore, under the EU Inc. companies will be able to operate as a single legal entity, without the need for subsidiary structures to set up operations in other member states.
Unter the current slogan, the 28th Regime is to be introduced by 2028, with a timeline yet to be laid out as discussions of the proposal commence. The Commission’s presentation will move to the European Parliament for further discussion.
Stefan Radaković
Grzegorz Kłodkowski