EU INC.: From Announcement to Proposal - What Does It Actually Say?

In our previous newsletter we outlined the expected shape of the proposal based on announcements at the time and the broader policy discussion. Our expectations were: 

• Rapid digital incorporation: entrepreneurs would be able to register an EU Inc. company in any Member State within 48 hours via a fully online process, without notarial requirements and at significantly lower costs.
• Uniform governance framework: a single set of rules for board structure, shareholder rights, capital requirements and reporting obligations across all EU Member States.
• Cross-border mobility: EU Inc. companies would be able to move their registered office from one Member State to another without dissolution and re-incorporation.
• Reduced administrative burden: the elimination of duplicated compliance work through operating under a single legal standard.

2.1    Rapid digital incorporation 

Entrepreneurs, founders and companies can incorporate an EU Inc. company within 48 hours, for less than EUR100 (when using the standard template articles of association), and with no minimum capital requirement (see Section 3.2 of this newsletter for further details). These are binding parameters in the proposal, not aspirational targets. EU Inc. companies need only submit their information once via an EU-level interface connecting national business registers (built on the existing Business Register Interconnection System (BRIS) infrastructure). The interface will be available in a national language and in a language customary in the sphere of international business and finance (which, based on current practice in the EU, is expected to be English), and the articles of association can be standard templates or tailor-made, in machine-readable digital format. EU Inc. companies receive their tax identification number and VAT number without additional paperwork, through automatic once-only data exchange with tax, social security and beneficial ownership registers.

2.2    Uniform framework 

EU Inc. offers one harmonised set of company law rules that businesses can choose instead of navigating multiple national regimes, unlocking the true potential of the Single Market. EU Inc. does not replace national company forms; it is an optional harmonised corporate framework available across the EU to all businesses, including both natural persons and legal entities (e.g. for establishing subsidiaries).

2.3    Cross-border mobility 

EU Inc. companies are free to choose the Member State in which they are incorporated. The proposal includes a blacklist of prohibited practices to ensure EU Inc. companies are treated in the same way as any other national company in the Member State of registration. The applicable safeguards of the Member State of registration, including rules on employee participation, will apply in full to the EU Inc. company.

2.4    Reduced administrative burden

The EU Inc. package is expected to strongly reduce the administrative burdens for companies adopting the EU Inc. form at each step of their lifecycle, benefiting in particular startups and scaleups, as well as companies active across the EU. By operating under a single legal standard, EU Inc. companies would eliminate the duplication of effort and compliance costs associated with navigating multiple jurisdictions, freeing resources for growth and innovation. Companies would benefit from simpler and more efficient registration procedures underpinned by the "once-only principle" for submitting information and the subsequent exchange of information between authorities. At the same time, only limited one-off adjustment costs are expected for companies, in particular for existing companies that would convert into an EU Inc. company and would therefore need to adapt their internal processes to use digital procedures.

Beyond the confirmed elements, the proposal contains a number of concrete and notable provisions that could not be anticipate in detail in January. Some of these provisions are mandatory across all Member States, others are optional, allowing Member States to extend the framework further.

3.1    Cost ceiling of EUR 100

The proposal introduces an explicit and enforceable cost ceiling: incorporation may not cost more than EUR100 (when using the standard template of articles of association). This goes further than the general promise of 'lower incorporation costs' as stated in our earlier analysis and represents a binding commitment.

3.2    Flexible share structure and access to capital

EU Inc. companies can issue shares without par value by default, with no minimum capital requirement. In place of traditional capital maintenance rules, the proposal introduces a balance-sheet test and a solvency test for distributions to shareholders, backed by director’ liability. EU Inc. companies can also issue different classes of shares with distinct economic or voting rights. The proposal also expressly supports modern early-stage financing instruments such as SAFEs (Simple Agreements for Future Equity), reducing legal uncertainty that has historically pushed high-growth companies towards US structures. Share transfers shall be fully digital, with no requirement for a notarial deed or mandatory intermediaries.

3.3    Employee Stock Option Plan (EU-ESO)

EU Inc. companies can set up a standardised EU-wide employee stock option plan (EU-ESO). A key feature of the proposed regime is that taxation of the employee stock options is deferred until the moment the acquired shares are actually disposed of, thereby eliminating the so-called 'dry tax' problem which is the situation in which tax becomes payable before the shares can be sold. Historically this has been a major obstacle to the uptake of employee stock option plans in Europe. This provision is particularly relevant for innovative startups and scaleups looking to attract and retain talent across multiple Member States. It is, however, to be noted that Member States retain discretion over the rate and characterisation of the income on disposal, and more favourable national regimes continue to apply where the EU-ESO meets their criteria.

3.4    Simplified liquidation and insolvency

EU Inc. companies have access to fully digital liquidation procedures, including online creditor claims. A fast-track liquidation option is available for companies with no assets and no debts. For EU Inc. companies that qualify as innovative startups within the meaning of the Commission Recommendation on the definition of innovative enterprises, innovative startups and innovative scaleups (C(2026) 1800), as adopted on 18 March 2026, simplified insolvency procedures apply. This is intended to facilitate an efficient wind-down of activities and enable founders to make a fresh start. Insolvency and liquidation procedures are also fully digitalised, including electronic auctions of assets.

3.5    Access to public markets

Member States may allow EU Inc. companies to access public equity markets (i.e. stock exchange listing), enabling companies to retain the EU Inc. brand even at IPO stage.

3.6    Safeguards against abuse

National employment law is not affected by the proposal. Those rules apply to EU Inc. companies in the same way as to any other company under national company law. The proposal contains a blacklist of prohibited national practices to prevent discriminatory treatment of EU Inc. companies. Preventive control mechanisms are built into the registration process. Employee participation rights applicable in the Member State of registration will remain applicable in full.

EU Inc. is the flagship initiative, but on 18 March 2026, the Commission simultaneously published a separate Communication outlining ongoing and future initiatives to complete the 28th regime across other policy areas. These are distinct from the EU Inc. Regulation but form part of the same policy package. For businesses and advisers, the following elements are particularly relevant:

4.1    European Business Wallet

The Communication proposes maximum digitalisation of interactions between businesses and public authorities, including through a European Business Wallet. In practice, this means businesses make their data digitally available once to all competent authorities across the EU, effectively extending the once-only principle beyond company registration on a structural level.

4.2    Specialised judicial chambers

The Communication calls on Member States to consider establishing specialised judicial chambers or courts with jurisdiction to hear disputes on EU Inc. company law, so that the EU Inc. rules are applied effectively, efficiently and uniformly.

4.3    Cross-border telework

The Commission will further explore enabling 100% cross-border telework for innovative startups and scaleups across the Union, in the context of the forthcoming Fair Labour Mobility Package.

4.4    Tax measures: HOT and BEFIT

On tax, the Commission has proposed a Head Office Taxation (HOT) system that allows SMEs to apply the tax rules of their home Member State. The Business in Europe Framework for Income Taxation (BEFIT) initiative aims to create a single legislative framework for corporate taxation in the EU. The forthcoming Omnibus simplification package for direct taxes is expected to remove further administrative burdens for EU businesses.

4.5    Access to capital

The Communication announces measures to improve access to capital for startups and scaleups, building on the Savings and Investment Union measures, a possible revision of pension fund investment rules, and the forthcoming revision of the European Venture Capital Funds regulation.

4.6    Recommendation on definitions of innovative companies

On 18 March 2026, the Commission also adopted a Recommendation on the definition of innovative enterprises, innovative startups and innovative scaleups (C(2026) 1800), aiming at a coherent approach across the EU to better monitor policy effects and provide certainty to companies, investors and policymakers.

The EU Inc. proposal is now under discussion by the European Parliament and the Council under the ordinary legislative procedure. The Commission has set a target of reaching political agreement by the end of 2026, with formal adoption and entry into force to follow and a date of application currently projected for 2028.

This is an ambitious timetable. Given the complexity and the need for consensus among 27 Member States, the implementation timeline remains subject to uncertainty. That said, the political momentum is greater this time than in earlier attempts: the Draghi Report underscored the urgent need to improve EU competitiveness, and the proposal was already foreshadowed in the Commission's Political Guidelines for 2024–2029 and in President Von der Leyen's State of the Union address.

For businesses and their advisers, now is the time to study the structure of the proposal in depth and assess its strategic relevance both in terms of the company form itself and the broader tax and labour law measures being developed alongside it.

At Lydian, we are closely monitoring developments around EU Inc. and analysing the practical implications for our clients. Now that the proposal is concretely on the table, that analysis is becoming increasingly relevant.

Our team is available to advise on:

1. Assessing strategic fit: Not all businesses will benefit equally. Companies with significant cross-border activities or those seeking international investment are likely to gain the most from a uniform structure. The new elements, such as the EU-ESO and simplified insolvency, make EU Inc. particularly attractive for innovative startups and scaleups.
2. Following the legislative process: Understanding the direction of European company law reform can influence current decisions on company structure and competitive positioning. We are closely monitoring the negotiations between Parliament and Council.
3. Preparing for new opportunities: Even if implementation takes some time, positioning your business to take advantage of EU Inc. once available can create competitive advantages. The broader 28th regime measures (HOT, BEFIT, Business Wallet, etc.) also provide strategic reference points now.

This is a significant moment in European company law that requires careful analysis. We will continue to monitor developments and provide pragmatic, well-informed advice as the legislative process advances.

For more information or to discuss the potential implications of EU Inc. for your business, please contact our corporate law team.