The European startup scene has developed considerably in recent years and is increasingly playing an important role in global competition. However, despite promising innovation and creativity, startups in Europe often face major challenges, especially when they want to expand their business across national borders. The EU Inc initiative was launched to address these challenges and create a standardized, pan-European company form for startups.
EU Inc’s goal is to reduce bureaucratic hurdles and the complexity of national regulations to enable founders to fully focus on the growth and success of their companies. This article explains the details of the initiative, the benefits of an EU-wide company structure and a review of similar projects in the past.
What is the EU Inc initiative?
EU Inc is an initiative that aims to create a uniform, Europe-wide company structure for startups. The basic idea behind it is that startups that operate across borders often face complicated national laws, tax regulations and investment structures. An EU-wide company form is intended to make it easier for startups to raise capital, to standardize employee participation and to simplify business activities in multiple countries.
The proposal is supported by a broad coalition of prominent entrepreneurs and investors, including founders of successful European startups such as Personio and DeepL. This initiative calls on the European Commission to introduce the so-called “28th regime”, a harmonized, voluntary set of rules that does not replace national laws, but complements them and thus becomes applicable to all companies in the EU.
The advantages of EU Inc
The advantages of a Europe-wide company form such as EU Inc would be manifold and could have a significant impact on the competitiveness and growth of the European startup scene:
1. Simplification of the start-up and growth processes
EU Inc would create a uniform start-up process that applies in all EU member states. Startups could be founded with less bureaucracy and expand faster. This would especially help smaller companies that have so far been afraid to expand into multiple markets due to the complexity of national laws.
2. Standardized investment processes
For investors, the diversity of national laws is often a deterrent when it comes to financing startups in several countries. EU Inc would make it possible to create a standardized investment structure that is recognized in all EU countries and could therefore also reduce the cost of capital. Investors would have more clarity and legal certainty, which makes investing more attractive and easier.
3. Cross-border employee participation
Employee participation programs are a crucial incentive for qualified professionals who want to start or continue their careers in a startup. However, due to national differences in tax treatment and legal requirements, it is often difficult to set up a uniform and attractive program for employees in several countries. EU Inc could create a harmonized framework for employee participation that would keep talented professionals in Europe and strengthen the competitiveness of European startups.
4. Reduced costs and increased efficiency
By standardizing administrative processes and harmonizing legal requirements, companies could save administrative costs and simplify their operational processes. This means that more resources would be available for research, development and growth.
5. Strengthening European competitiveness
Europe is competing with other regions such as the US and China, where startups often have to overcome significantly fewer bureaucratic hurdles. EU Inc could strengthen the European startup ecosystem and make it more attractive for entrepreneurs to set up and scale their companies in the EU. In the long term, this could help establish Europe as an attractive location for innovation and technology companies.
Similar initiatives and their impact
The idea of a single company form for the EU is not new. In fact, there are several precedents that show how such a harmonization of the company structure has changed the business environment:
1. European Company (SE)
The introduction of the European Company (Societas Europaea, SE) in 2004 was a first step towards a single European company form. This form offered large companies operating in several countries a clear advantage. Companies have the opportunity to standardize their structure and operate an SE as a single legal entity across the EU. The result was a simplified administrative structure and increased mobility within the EU, which encouraged companies such as Allianz and E.ON to adopt the SE structure. However, the SE was geared more towards larger companies from the outset and was only partially suitable for startups.
2. European Cooperative Society (SCE)
The European Cooperative Society (SCE) was also created to facilitate cross-border activities. It was particularly interesting for small and medium-sized companies that maintain cooperative business models. Here too, standardized structures were shown to bring advantages, but the concept met with little response from startups as it was often not attractive enough for technology-driven companies.
The role of GRC in the EU Inc context
1. Uniform structures and clear responsibilities
- Simplified corporate governance: An EU-wide corporate structure such as EU Inc would standardize governance requirements. Startups could use standardized rules that are applicable across Europe and centralize legal responsibilities. This would help establish clearer and more efficient management processes, which is especially important for high-growth companies that need to scale their governance structures.
- Standardized reporting requirements: EU Inc could introduce standardized reporting requirements, which would increase the efficiency of internal and external communication and transparency for investors and stakeholders.
- Facilitation for cross-border boards: A unified framework could also facilitate the establishment and management of corporate boards, strengthening and standardizing participation rights of investors, employees and other stakeholders.
2. Reducing cross-border risks
- Reducing legal risks: Different national regulations and their complexity increase the risk of startups accidentally committing compliance violations. With EU Inc, legal requirements could be centralized and simplified, minimizing the risk of legal conflicts or penalties.
- Increased risk transparency: A uniform structure would enable startups to assess their risks uniformly across borders and develop effective risk management strategies that are valid across the EU. This would be particularly helpful if companies operate in several EU countries at the same time and have previously had to manage their risks individually.
- Better access to risk protection: EU Inc could make it easier for companies to access standardized insurance and protection mechanisms that cover cross-border activities. Insurers could calculate better because standardized regulations and uniform reporting formats enable them to assess risks more clearly.
3. Uniform requirements and less bureaucracy
- Uniform compliance requirements: The biggest advantage from a compliance perspective would be the introduction of uniform regulations that apply in all EU countries. This would offer startups the advantage of only having to implement compliance requirements once and still being compliant across the EU. The effort required for regulatory audits and certifications would be reduced.
- Cost savings and efficiency: Harmonization of regulations such as data protection requirements or labor law would lead to significant cost savings as there would be no need for duplicate or multiple processes. Companies could reduce their compliance costs and make compliance with centralized regulations more efficient.
- Simplified regulatory reviews and audits: EU Inc could create uniform standards for audits and review procedures, which would simplify cross-border audits and their implementation and improve cooperation with regulators in multiple countries. For example, a startup could take a central exam that is accepted in all EU countries.
4. Improved control and transparency for investors and regulators
- Attractiveness for investors: Increased transparency and a uniform structure would enable investors to better assess the risk and would have greater trust in the company thanks to the clear governance structure. A uniform framework promotes trust in the company’s compliance ability, which increases its attractiveness for EU and global investors.
- Better compliance with ESG standards: The EU has increasingly high expectations for ESG (Environmental, Social, Governance) standards. A unified corporate structure could make it easier for startups to meet these requirements and integrate sustainable practices, which in turn would improve reporting and Review for ESG criteria improved.
5. Simplification of cross-border data compliance
- Consolidation of data protection requirements: EU Inc would enable startups to implement a uniform data protection strategy based on the GDPR for all EU countries. The handling of user data, international data transfers and legal requirements could be better controlled without the need for individual adaptation for each country.
- Central solutions for cybersecurity: Uniform requirements for IT security and the control of digital business processes would also be easier to implement. Startups could develop and use standardized security concepts that are accepted across the EU.
Conclusion
The EU Inc initiative could be a decisive turning point for the European startup scene. The harmonized corporate structure would promote the growth of young companies and strengthen Europe as a location for entrepreneurship and innovation. Models such as the European Company show that uniform structures can have positive effects on competitiveness and mobility. For startups in Europe, this could mean a new era of expansion and networking.
The support of leading entrepreneurs and investors from across Europe suggests that the initiative is not just a vision, but a real opportunity to strengthen Europe’s innovation capacity in the long term. A successful launch of EU Inc could become a model for further standardization and for a real European innovation union that makes it easier for startups to scale and consolidates Europe’s position in global competition.
From a GRC perspective, EU Inc represents a potentially transformative initiative that would make it much easier for European startups to comply with legal and regulatory standards. Standardizing the corporate form would not only promote growth, but also minimize compliance risks and optimize risk management. The initiative could make the EU a more attractive location for startups and investors, as they would gain clarity and confidence in a stable regulatory environment.