With certain member states consistently ranked as some of the hardest locales in which to incorporate a business, the European Commission has published its long-awaited proposal for EU Inc., a regime intended to simplify corporate formation across the European Union. Whether it will achieve its stated goals is another question entirely, says Aynsley Vaughan, head of global entity management at TMF Group.
Making the European Union less bureaucratic and easier to operate in has long been a key objective. Now, with the European Commission having finally published the proposal for EU Inc., this seems to finally be a step forward.
The proposal aims to introduce a new form of a EU-wide limited liability company, operating under a single set of corporate rules and set the starting point for the long-awaited 28th regime. In short, it’d be an optional, digital-by-default European corporate framework with the goal to make it easier for businesses to start, operate and grow compliantly across the EU.
The objective is clear: to counteract the fragmentation of member states’ regulatory frameworks by creating a common legal structure with a simple but effective ruleset.
Much of the attention so far has been focused on the ambition to enable faster and simpler registration. The goal is for companies, entrepreneurs and founders to be able to establish an EU Inc. company within 48 hours, for less than €100 and with no minimum share capital requirements.
The framework also allows for the creation of an EU Inc. through cross-border conversions, mergers or divisions of existing companies and introduces certain preferential elements for innovative startups, including simplified insolvency processes and an employee stock option regime.
But after an easier and faster incorporation, will EU Inc. actually make it easier for companies to operate across the EU? Some questions are yet to be answered: What will governance look like in this new EU-wide company form? What potential challenges and risks from a compliance point of view can it bring?
Beyond the 48 hours: What happens next?
Several EU countries, including France, Italy and Greece, consistently rank among the most complex jurisdictions to do business in. This highlights the dimension of the challenge to reduce operational complexity.
In practice, once a company begins operating — hiring employees or expanding into new markets, for example — it becomes subject to a range of national requirements. Labor law, taxation, accounting standards and banking practices remain largely governed at a domestic level. In this sense, EU Inc. would sit alongside existing systems rather than replacing them.
This raises questions about how this framework will, in reality, make it easier for companies expanding across the EU to remain compliant. This is particularly relevant given that, instead of creating a fully unified regime, EU Inc. acts as an optional type of company, with member states urged to integrate it into their existing national regulatory frameworks.
In addition, national courts will remain in charge of interpreting the practical application of the new provisions locally, with potential divergences in interpretation and dispute resolution. This can lead to ambiguity and introduce compliance challenges, as well as operational and reputational risks. In this respect, the current proposal might fall short in guaranteeing a harmonized application across the EU.
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Read moreDetailsGovernance and compliance challenges beyond registration
While the proposal covers the process up to incorporation, afterwards, it will need to function and interact directly with the regulatory framework of each member state. This raises the question: How would this new approach to incorporation and registration impact existing risk and compliance measures? In theory, existing processes should not change, as all local provisions would still apply under EU Inc.
However, could, for example, bank account opening or the onboarding of such a company as a client by external service providers keep pace with that speed? Will steps not taken or documentation not prepared during incorporation simply need to be addressed at that stage? Could processes that usually begin at the point of initial registrations start to fall behind and cause additional delays?
The answers to these questions are not set out in the proposal, but they are among some of the first practical considerations that need to be addressed before any form of EU Inc. can go live.
This starts with whether such matters will be left to each member state to resolve independently, or whether changes to existing EU directives will be introduced to ensure the framework can work as intended.
A step in the right direction
As this is only a first draft that will go through several revisions, its ultimate impact remains unclear. Yet, regardless of its final form or level of success and besides the areas where it may fall short, the proposal is a clear indication that the EU is moving toward the right direction: greater digitalization, centralization and alignment.
A good example of this could be the infrastructure that would have to go along with the implementation of EU Inc.
Beyond the legal framework, the proposal also lays the groundwork for a centralized EU interface, building on the Business Registers Interconnection System (BRIS). This would act as a common portal for registrations and filings for every EU Inc., regardless of where the company is based in the EU.
The development of EU-wide portals and the continued push for digital processes may prove to be one of its most lasting outcomes. These can build a strong foundation to support further harmonization of corporate frameworks over time.
In that sense, EU Inc., as a standalone and optional regime, may serve as a relatively safe testing ground, allowing the EU to trial new concepts and assess their impact without directly disrupting existing national systems.
Not a quick fix but a good start
That said, and keeping in mind that EU Inc. is supposed to be the starting point of the 28th regime, it is important to emphasize that, while it has the potential to simplify cross-border growth, this will not be a quick fix. For scaling companies, careful planning, resource allocation and a clear understanding of national obligations will remain essential to ensure compliance and good governance.
Ultimately, whatever form EU Inc. takes, its real significance may lie not only in the regime itself but in the concepts and infrastructure it introduces. Many of these are likely to reappear in different forms as the EU continues its efforts to reduce fragmentation and strengthen its global competitiveness.
Aynsley Vaughan is global head of the global entity management, accounting and tax service practice at TMF Group. She has over 22 years’ experience in the financial services sector working in both the onshore and offshore markets. 
