Founders and Venture Capitalists Back a Pan-European Corporation, but the Path to an 'EU Inc' Looks Complicated.

In the current political landscape, it is often said that Europe needs to take decisive measures to remain competitive. Among the various proposed reforms, one that has gained special relevance is the creation of a new corporate status at the EU level for innovative companies, informally known as the "28th regime." This initiative aims to be Europe’s response to the U.S. Delaware C-Corp and would complement the existing models in the 27 member states of the Union.

A grassroots movement backed by entrepreneurs and venture capitalists has driven this idea, giving it a more appealing name: “EU Inc.” Since its launch on October 14, the petition has garnered nearly 11,000 signatures. The choice of the term “Inc” is not coincidental; as startups and investment funds globally become familiar with the Delaware C Corp, Europe presents a gap in this regard. Although there is a model called ‘Societas Europaea’, aimed at larger companies, its use has been limited and ineffective.

The establishment of a new business vehicle would facilitate cross-border investments in European startups, prompting the EU Inc petition to gain support from venture capital firms and notable founders and investors, including figures like Niklas Zennström and Patrick Collison. Andreas Klinger, one of the leaders of the petition and an entrepreneur turned investor, highlighted that his early companies were registered as UK Ltd due to complications in countries like France or Germany regarding options distribution. Klinger noted that the problems for startups in Europe are “real structural issues.”

The EU Inc movement has presented a plan with the aim of delivering its final petition by December 1, hoping that the new college of EU commissioners will include it in their agenda for the next five years. The campaign has the backing of the European Commission, where recent reports from figures like Enrico Letta and Mario Draghi have advocated for a 28th regime, along with the support of President Ursula von der Leyen.

However, competition for attention among various issues and sectors is intense, so the campaign must ensure it maintains momentum. The French organization France Digitale has been instrumental in mobilizing around this initiative, presenting a document that was already in development before the launch of EU Inc and has received backing from various startup associations across Europe. This national support could be crucial for the proposal’s success.

The proposal titled "EU Inc" aims to create a "regulation" rather than a directive to avoid unwanted divergences in national implementation, a lesson learned from the Societas Europaea model. Despite the enthusiasm for the initiative, some experts are skeptical about the possibility of countries agreeing on a common standard that is simple and non-bureaucratic.

Steve Jeitler, a partner at E+H Rechtsanwälte, emphasized the variations in capital maintenance regimes among EU countries, noting that applying strict regulations from countries like Austria or Germany could disincentivize the creation of an attractive EU Inc in other countries with fewer restrictions. France Digitale has addressed this concern in their non-paper by proposing the creation of a "1€ company."

The path still presents many obstacles, and representatives of EU Inc are aware that success lies in the details. Additionally, the impact of Brexit, although complicated, could open up possibilities for the UK to consider a similar model. In its communication, EU Inc has defined its objectives inclusively, emphasizing that its focus is "Europe, not just the EU."

In an increasingly competitive business environment, where global players like China have emerged strongly, there is growing consensus on the need for Europe to take action to avoid falling behind. Despite the challenges, supporters of EU Inc, like Klinger, share the belief that this change will materialize, symbolizing a union in the industry that seeks to simplify and strengthen the entrepreneurial ecosystem in Europe.