No minimum capital, digital share registers, and a harmonised stock option regime: the EU Inc. rewrites the rulebook for European companies.
The proposal for a Regulation establishing a 28th Regime corporate legal framework, providing for the creation of a new corporate form, the “EU Inc.” (the “Proposal”) envisages to structure the future regulation into eleven chapters (the “Proposed Regulation”), setting out the rules applicable to the EU Inc. throughout its life cycle, from formation to winding-up.
The EU Inc. is conceived broadly along the lines of a public limited liability company, drawing on the principles of EU company law as harmonised, in particular, by Directive (EU) 2017/1132 relating to certain aspects of company law and codifying previous harmonisation efforts in the field of company law (the “Codification Directive”), and therefore closely resembles Luxembourg’s société anonyme (SA), albeit with a number of significant differences. In particular, as with traditional capital companies, shareholders benefit from limited liability and are not personally liable for the obligations of the company.
Applicable Rules
The EU Inc. shall be governed primarily by the provisions of the Proposed Regulation, as supplemented by its articles of association (Article 4). To the extent that a matter is not regulated by either the Proposed Regulation or the articles of association, it shall be governed by the national law of the Member State in which the company has its registered office.
Registration and acquisition of legal personality
The EU Inc. acquires legal personality upon its registration (Article 5), whether it is formed ex nihilo or results from a restructuring operation carried out in accordance with Directive (EU) 2019/2121 on cross-border conversions, mergers and divisions (the “Mobility Directive”), which was transposed into the Luxembourg law of 10 August 1915 on commercial companies, as amended (the “1915 Law”) (already considered in previous contributions).
This constitutes a notable difference when compared to Luxembourg company law. Under the 1915 Law, a company is generally considered to come into existence upon the execution of the incorporation deed before a notary (or, in the context of a reorganisation, upon the execution of the notarial deed recording the transaction), registration and publication formalities being required for its enforceability vis-à-vis third parties.
Upon registration, an EU Inc. is assigned a European Unique Identifier (EUID) and is recognised across all Member States without the need for additional registration formalities (Article 3). The corporate denomination must include the designation “EU Inc.” and be sufficiently distinct from existing company names accessible through the Business Registers Interconnection System (“BRIS”) (Article 6).
Seat of the EU Inc.
An EU Inc. must have both its registered office and its central administration (or principal place of business) within the European Union (Article 9). This represents a departure from the traditional approach under Luxembourg company law, which is generally based on the coincidence between the registered office and the central administration (the so-called “real seat” principle). Under the EU Inc. framework, the place of incorporation may differ from the location of the company’s central administration or principal place of business, provided that both are situated within the Union. This flexibility reflects a broader shift towards incorporation-based models within the internal market, facilitating corporate mobility while maintaining a minimum territorial link with the Union, aligned with long-standing case-law of the Court of Justice of the European Union, such as the Centros, Überseering and Polbud cases.
Digital-by-default architecture
The incorporation of an EU Inc. is, in principle, to be carried out fully online, with any requirement for physical presence limited to exceptional, case-by-case situations justified by public-interest reasons (such as the prevention of identity fraud or the verification of legal capacity). To this end, the Proposal provides for the establishment of a central EU interface, operated by the Commission and built on the BRIS, enabling the formation of EU Inc. entities and the submission of related filings (Article 15).
As in Luxembourg practice, the articles of association may be drafted both in the language of the Member State of incorporation (i.e. French and German) and in a language commonly used in international business, which in practice is likely to be English. The Commission is expected to provide standardised EU templates for articles of association, available in all official Union languages (Article 7). The digital framework further includes functionalities such as real-time tracking of the registration process and online proof of payment.
Where founders make use of the harmonised application form together with the EU template articles of association through the central EU interface, Member States are required to complete preventive control and registration within a maximum of 48 hours and at a capped cost of EUR 100. Where such templates are not used, registration must be completed within five working days. Incorporation may also be carried out fully online directly through national business registers (which remain “connected” to the BRIS), subject to comparable timelines.
The cross-border nature of the EU Inc. is further reflected in the rule according to which a person disqualified from acting as a director in one Member State may not be appointed as a director of an EU Inc. in another Member State.
Once-Only Principle and data sharing
One of the key innovations of the Proposal lies in the streamlining of administrative procedures through the implementation of a “once-only” principle. Under this approach, the burden of collecting and sharing company information is shifted from companies to public authorities, in particular through the EU central interface and the interconnection of national registers (Article 13).
Upon registration, the business register is required to digitally transmit verified company data, including the EUID and information contained in the application, to the relevant authorities, such as those responsible for tax identification numbers, VAT registration, social security and beneficial ownership registers. This mechanism is designed to eliminate the need for companies to resubmit the same information to multiple authorities.
More broadly, in administrative and judicial procedures, authorities should not require EU Inc. entities to provide information that is already available through BRIS or national business registers. This principle applies subject to limited exceptions, in particular where justified on grounds of public policy or public security. Such a shift appears to reflect a broader transformation of administrative law within the Union, whereby interoperability between public authorities replaces repetitive compliance obligations imposed on economic operators.
Governance
The governance framework of entities established in the form of EU Inc. is largely based on national company law principles, as harmonised through EU company law directives and consolidated in the Codification Directive (Article 42). As such, it does not significantly depart from the governance structures applicable to public limited liability companies, such as the Luxembourg société anonyme.
Accordingly, the company is managed by a board of directors composed of one or more natural persons, appointed by the general meeting of shareholders, with at least one director resident within the Union. The general meeting retains the power to appoint and dismiss directors and may issue binding instructions to the board. Directors are subject to duties to act in good faith, in the best interests of the company and with reasonable care, and may incur liability in case of breach thereof, while benefiting from the protection of the business judgment rule for decisions taken in good faith.
Shareholder and board meetings may be held fully online or in hybrid form and Member States may not impose restrictions on the use of electronic meetings or electronic voting. Minority shareholders are granted protection mechanisms, including the possibility to apply to a court for withdrawal (i.e. a court-ordered buyout) in cases of conduct considered oppressive.
Shares and the Digital Share Register
The Proposal introduces significant innovations with respect to shares and share registers, by endorsing a fully digitalised model. Shares are dematerialised and recorded in a digital share register, which has constitutive effect for the ownership of shares and the exercise of shareholder rights. The register must be accessible to shareholders and to third parties demonstrating a legitimate interest, in compliance with the General Data Protection Regulation.
As in traditional capital companies under the 1915 Law, the articles of association may provide for multiple classes of shares, including shares with multiple voting rights or non-voting shares, carrying different rights and obligations. Shares are, by default, freely transferable and share transfers may be effected fully online, including through electronic signatures in accordance with Regulation (EU) 910/2014 of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market (the “eIDAS Regulation”), and Member States may not impose additional formal requirements such as notarial deeds. The transfer takes effect upon its recording in the digital share register.
From a Luxembourg law perspective, this represents a noteworthy development. In the absence of specific national legislation formally recognising digital share registers, the Proposed Regulation would constitute the first binding legal instrument expressly providing for their use, thereby potentially accelerating the digitalisation of shareholding records in Luxembourg practice.
Capital and financing regime
The Proposal introduces significant changes to the traditional capital regime. In particular, shares are, by default, issued without nominal value, and EU Inc. entities are not subject to a minimum capital requirement, subject instead to alternative creditor protection mechanisms. This reflects a clear departure from the traditional conception of share capital as the primary guarantee for creditors, in favour of a more functional approach based on the company’s net assets and solvency, as increasingly reflected in market practice.
Distributions are permitted only where the directors certify compliance with both a balance sheet test and a forward-looking solvency test covering a period of 12 months. Directors may incur joint and several liability in the event of unlawful distributions, and shareholders may be required to return improperly distributed amounts in certain circumstances. The same dual-test framework applies to other capital operations, including reductions of capital, redemptions and share buy-backs.
In this respect, the EU Inc. framework goes beyond traditional capital maintenance rules, such as those applicable to sociétés anonymes under Article 461-2 of the 1915 Law, by complementing the balance sheet test with an explicit solvency assessment for which the board assumes responsibility. This shift aligns the EU Inc. with a broader evolution in company law, whereby creditor protection is increasingly ensured through solvency-based mechanisms and director responsibility, rather than through rigid capital maintenance rules.
Finally, the Proposal facilitates access to modern financing instruments commonly used in early-stage investment, such as Simple Agreements for Future Equity (SAFE) and Keep It Simple Securities (KISS) and also enables fully digital capital increases, share issuances and transfers, without the need for intermediaries.
Employee stock options (EU-ESO)
EU Inc. entities may implement an EU employee stock option plan (“EU-ESO”), under which warrants may be granted to eligible employees and members of the board of directors, including those of subsidiaries (Article 78). The regime provides for a mandatory vesting period of at least 24 months, as well as certain eligibility restrictions, notably the exclusion of individuals holding more than 25% of the company’s capital.
From a tax perspective, income derived from EU-ESO warrants is subject to taxation only upon the disposal of the shares acquired following their exercise, and not at the time of grant, vesting or exercise. Member States are required to ensure that EU-ESO schemes are not treated less favourably than comparable national employee share option regimes.
Closure and insolvency
The Proposal provides for a solvent liquidation procedure designed on a digital-by-default basis (Article 82). This includes online filing with the business register, real-time status updates, once-only exchanges of liquidation data with relevant authorities, and the possibility for creditors to submit claims entirely online.
In addition, a simplified fast-track liquidation procedure is available for companies meeting certain conditions, typically where the company has ceased activity and has no assets or liabilities, or where any remaining liabilities have been settled or approved by creditors, and no proceedings are pending (Article 83). This procedure is intended to be completed within approximately three months. It includes, inter alia, a 30-day period for creditor opposition and a 30-day (extendable) period for tax authority clearance.
Following the completion of the liquidation, company records must be retained for a period of six years. Board members may remain personally liable, and where applicable jointly and severally liable, for certain outstanding or unsatisfied claims.
Simplified winding-up for innovative startups
The Proposal introduces a simplified winding-up procedure for EU Inc. entities qualifying as “innovative startups,” aimed at enabling swift and cost-effective closure through predominantly digital processes. The procedure may incorporate elements akin to a debtor-in-possession approach, allowing for a streamlined management of the winding-up process (Article 88).
The application may be filed either by the debtor or by a creditor, using a standardised form and without the need for mandatory legal representation. Member States are required to establish electronic auction platforms for the realisation of assets, while the Commission is tasked with ensuring the interconnection of national auction systems through the European e-Justice portal.
Employee Participation and Labour Law Safeguards
Employee participation rules applicable to EU Inc. entities are, in principle, those of the Member State in which the company has its registered office, where the company is formed ex nihilo or through purely domestic operations. In the context of cross-border conversions, mergers or divisions, employee participation rights are protected in accordance with the procedures laid down in EU company law, in particular those reflected in the Codification Directive.
More broadly, the Proposed Regulation does not affect the application of Union or national employment law. Likewise, obligations relating to anti-money laundering and counter-terrorist financing (AML/CFT), as well as Member State anti-fraud controls and enforcement mechanisms, remain fully applicable.
Non-discrimination and prohibited requirements
In view of ensuring the full enhancement of the EU Inc. and boost its potentials, the Proposal includes a non-discrimination principle and a list of prohibited requirements to prevent Member States from treating entities established in the form of EU Inc. less favourably without objective justification, including restrictions tied to the location of the registered office, such as conditions on eligibility for public support, authorisation requirements, forced local representative or physical presence requirements, or denial of access to a payment account in another Member State. Thus, these provisions reflect the logic of the internal market freedoms, ensuring that the EU Inc. can operate across Member States without being subject to disguised restrictions or regulatory fragmentation.
Timeline
Once adopted, the Proposed Regulation shall apply 12 months after its entry into force, which occurs 20 days following its publication in the Official Journal of the European Union. An indicative timeline provides for the adoption of the Proposed Regulation in 2026 or 2027, followed by the adoption of implementing measures in 2027, and a date of application in 2028.
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