EU Inc: Commission proposes single company structure for all 27 member states

Europe has the talent but it lacks the framework. The Draghi and Letta reports, two of the most influential diagnoses of European competitiveness in recent years, identified the issue. So did Atomico's State of European Tech 2025 report: regulatory fragmentation acts as an invisible tariff on growth. A founder in California incorporates once and operates across a market of 340 million people. A founder in Barcelona, Warsaw or Amsterdam must navigate 27 different legal systems to hire, go to market, raise capital and grow.

European founders are, by any measure, as capable as their global peers of building $1 billion-plus ventures. Yet the system breaks where it matters most: at scale.

The European Commission’s response is EU Inc, a proposed pan-European corporate form sitting alongside existing national legal forms: the so-called "28th regime". The proposal was published on 18 March 2026 and is now moving through the legislative procedure.

What the Commission proposes

The proposal focuses on corporate formalities, with the clear aim of reducing bureaucratic obstacles:

• Creation of a single type of legal entity and single set of rules applying equally in all 27 jurisdictions. Incorporation and registration within 48 hours, at a cost of no more than €100, through a fully digital EU central interface and registry. There would be no notarial intervention, no minimum share capital and automatic transmission of company data to tax and social security authorities.
• Shares would be recorded in a digital register and freely transferable online, without the involvement of notary publics, national registries or equivalent intermediaries.
• Light governance framework, based on online capabilities.
• Company financing through both nominal value and non-par value shares.
• Common rules applicable to dividend distribution and treasury shares.
• Simplified dissolution procedures.

These are all relevant measures and any simplification allowing founders to focus on their business is a welcome step forward. But are these the big hurdles driving European companies to Delaware?

Stock options regime

It has been a long-standing request from the European entrepreneurial community. Employees' access to equity is not a secondary concern for the start-up ecosystem. It is a key tool for early-stage companies to attract and retain talent they cannot yet pay at market rates. It is the mechanism through which employees can participate in the value they create, aligning shareholders and workforce interests.

The proposal introduces the EU Employee Stock Option Plan (EU-ESO): a harmonised scheme for the issuance of warrants to employees and board members. The key feature is the deferral of taxation to the moment of disposal of the shares acquired upon exercise of the warrant. No tax at grant, no tax at vesting, no tax at exercise.

Several European jurisdictions have been struggling for years to implement an attractive stock option regime applicable to private companies. In Spain, corporate barriers (limitations on treasury shares, formalities required to increase share capital) and tax inefficiencies (the so-called "dry income") led the market to rely on phantom shares as a systematic workaround: a cash bonus linked to the company’s share price at exit. The absence of  equity ownership and burdensome taxation render phantom shares a second-best solution for a mechanism the market demands.

Spain’s Startups Law (Ley 28/2022) introduced well-intended but not sufficiently effective measures. Taxation of stock option-related income is now deferred to the moment of disposal of the shares, but subject to certain limitations:

• The regime applies to startups certified by an administrative agency (ENISA) with annual revenues below €10,000,000.
• It is limited to a period of five years following incorporation (seven years for core technology companies in biotech, energy and industrial sectors).
• A 10-year caducity of the deferment also applies: after that period, the beneficiary is taxed, irrespective of whether the shares had been sold or not, and at what price.

These have limited the acceptance of the instrument in the market. In practice, phantom shares continue to be used as the primary employee incentive mechanism.

EU-ESO intends to go further: universal deferral with no ceiling, no caducity, no company age requirement and no revenue cap, applicable uniformly across all 27 member states.

There are, however, important caveats:

Characterisation of the income

Article 79.3 of the proposal establishes that income derived from the warrants, upon disposal of the shares arising from the exercise of the warrant "shall be subject to taxation in accordance with national law". EU Inc harmonises "when" the taxable event occurs and "how" the taxable amount is calculated, but it does not determine whether the income constitutes employment income or capital gain and, accordingly, the applicable tax rate.

Different characterisation of the income derived from EU-ESO across the national jurisdictions would jeopardise the harmonisation intentions of the proposal. A company offering EU-ESO warrants to employees across different jurisdictions would still face different outcomes arising from the same instrument, rendering it attractive in some jurisdictions but not in others. Without a coordinated EU-wide implementation, the risk remains of ending up in the same position as today.

Eligibility

Article 78.2 of the proposal provides that the eligibility to receive EU-ESO stock options "is restricted to members of the board and employees". This lack of flexibility can be problematic in practice, since frequently stock options are granted to consultants, advisors, influencers or service providers under commercial agreements, who do not have an employment or directorship relationship with the company.

These, amongst others, are points we will closely monitor as the legislative process moves forward.

Regulation or directive: the "technicality" that can really define the result

The Commission has proposed EU Inc in the form of a regulation, directly applicable in all member states, without need for national transposition. The legal form it creates would directly and seamlessly apply in Madrid, Berlin and Lisbon. That is the architecture required to deliver a genuinely unified framework.

The European Parliament has signalled a preference for a directive, an instrument that would set the framework, but leave member states room for its implementation. The consequence is familiar: 27 transposition processes and 27 opportunities to reintroduce the fragmentation that EU Inc is designed to eliminate.

In either case, article 4.2 of the proposal provides that national corporate laws will continue to apply on a subsidiary basis to any matter not specifically covered by the regulation. The commitment of each member state to this standardisation effort will determine the success of the project. That commitment will be reflected in the depth of implementation – not only in relation to corporate matters but also to other key aspects of the company lifecycle such as tax, social security and employment.

Osborne Clarke comment

Geopolitics, AI, the battle for talent in a digital and decentralised work environment: the forces calling for a stronger and more unified European entrepreneurial ecosystem continue to mount. The timing is right and the direction proposed by the Commission is unquestionably correct. EU Inc represents a bold effort to offer European founders and investors the kind of legal framework their US counterparts take for granted.

The political consensus, at both European and national levels, will ultimately determine if a founder in Rome or Brussels can finally find it simpler, cheaper and more efficient to build a pan-European company than to incorporate and scale in Delaware. It is to be hoped that these considerations outlined will help forge that consensus and prevent EU Inc from suffering the same fate as its predecessors (Societas Europaea, Societas Privata Europaea, Societas Unius Personae).

The legislative process is at an early stage. The proposal is currently being discussed at the level of the European Council and the European Parliament. The Commission has set the objective of reaching political agreement by the end of 2026, which is highly ambitious given the complexity of the outstanding issues.