European startups do not only face a funding problem. Fragmentation of the European market is also a structural constraint — and the European Commission's proposal for a new EU Inc. regulation offers a useful but modest starting point to address it.
Startups and scaleups can sell across the single market, but they still have to navigate different national legal, tax and administrative systems as they grow. That makes it harder for firms to start, scale and stay in the European Union.
EU Inc. — which would create a single set of rules to digitalize and expedite company formation — should not be treated as a complete solution. Instead, it is the first building block of a broader 28th regime.
Building on the foundations
The Commission's proposal deserves support. EU Inc. would create a common legal form for companies across Europe, with shared rules on how they are set up, governed, financed, transferred and closed.
The proposal also includes practical improvements. First, the Commission opted for a regulation rather than another directive. This legal instrument helps reduce fragmentation by preventing member states from implementing it through national legislations.
Company registration would be faster and cheaper — ideally within 48 hours — and procedures would be digital by default. There would be no minimum capital requirement. Firms could use more flexible share structures and transfer shares more easily in digital form.
EU Inc. also points in the direction of strengthening Europe's capital markets. Legal simplicity and access to funding must go together. A company should be able to start under a simple framework, grow without constantly hitting national barriers and raise capital in Europe.
That is the shared logic behind both EU Inc. and the Capital Markets Union and the Savings and Investments Union: to better integrate European financial markets. Europe needs a system in which legal rules and funding markets support each other.
The definition matters
Nonetheless, EU Inc.'s objective of enhancing financial integration also marks the point where the Commission starts to oversell its proposal. EU Inc. is not a full 28th regime — it is the company-law part of one.
A real 28th regime would provide firms with a more complete cross-border operating environment. The Commission's impact assessment makes this clear, describing the initiative as only "one of the first deliverables" of a broader 28th regime, to be complemented in areas such as tax, employment and innovation.
Tax is the clearest example. EU Inc. improves the treatment of employee stock options by taxing them once shares are sold, rather than before. However, it does not create a common tax system for firms operating across borders, nor does it remove the wider tax differences companies still face across member states.
The same applies in other areas. Accounting requirements, audit arrangements, insolvency frameworks and labor rules remain outside the proposal.
Moreover, companies would still operate within largely national systems as they grow. A fully central EU registry was, in fact, considered and rejected — meaning EU Inc. would still rely on national administrative systems.
Firms do not experience fragmentation as separate legal chapters, but as a single business reality. What slows a company down is not only how it is incorporated, but how easily it can hire, reward staff, comply with tax rules, attract investors, restructure or exit, and resolve disputes as it expands across borders.
That is why EU Inc. is good policy, overdue and should be adopted. But Europe should stop presenting it as if it had already solved the wider problem.
The real solution is to build on EU Inc. with further action on tax, labor and enforcement, while deepening capital markets so that legal simplification is matched by real access to scale finance.
That would be a true 28th regime: not just a simpler company form, but a more workable European business environment.
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