EU-Inc’s 28th Regime proposal for startups challenges Europe’s inertia

The EU’s 27 nations rarely feel tightly knit together. Yet, when 16,000 founders, investors and enthusiasts signed the EU-inc policy solution that seeks to fix fragmentation in the European startup ecosystem, it was a rare glimpse of what a united Europe rowing together can achieve. 

The proposal wants a regulation to be issued which establishes a single, simple rulebook for companies across Europe. At the core is the “EU–INC” pan-European legal entity that is digital-first, easy to incorporate and will ensure standardization of investment processes across the Union.

I propose a new EU- wide legal status to help innovative companies grow. This will take the form of a so-called 28th regime to allow companies to benefit from a simpler, harmonised set of rules in certain areas” – Ursula von der Leyen

We live in a reality where two global superpowers, the US and China are locked in a strategic and technological chess match. The EU is faltering on two fronts: it is not innovating at scale in tech, and it fails to allocate capital to its local champions so much so that many of these growth stage companies are emigrating to the US. 

The EU-Inc proposal’s chief promoter, Andreas Klinger  recently shared in a keynote that in effect Europe cannot be truly considered as a singular bloc. Whilst the US, China and India propose a unified market solution, Europe is effectively a fragmented solution that culturally is risk-averse and frequently prefers local solutions to pan-European opportunities. 

Amid concerns that Europe lags in scaling innovative firms, former leaders Mario Draghi and Enrico Letta advocated a 28th regime to allow companies to “opt out from national regulatory frameworks and follow rules valid everywhere in the EU”. The goal is to overcome regulatory fragmentation that stifles growth. Their recommendations, echoed by President von der Leyen’s political guidelines and the new EU Startup & Scaleup Strategy, emphasize that a unified startup regime is critical for European competitiveness. The European Commission has committed to propose this regime by early 2026, with broad political momentum and community support.

Central proposals include:
(1) an EU-wide corporate entity recognized across all Member States,
(2) a fully online incorporation process (target: registration in <48 hours, in English) using a digital dashboard to manage governance and corporate matters
(3) a standardized EU Employee Stock Option Plan (EU-ESOP) to allow talent to share in equity under uniform, favorable conditions;
(4) simplified company structure with aligned share classes, capital maintenance, and open-source investment instruments like EU-wide SAFE notes;
(5) harmonized insolvency procedures with fast-track restructuring and a “second chance” policy for failed entrepreneurs. 

These measures aim to let a startup incorporate once and “operate across all 27 member states under a single, unified set of rules” analogous to how a Delaware corporation in the U.S. can seamlessly do business in all 50 states.

Creating a “virtual 28th Member State” of company law raises concerns about Member State sovereignty particularly in corporate, tax, and labor domains long guarded by national governments. Some member states voiced fear that a new regime could enable regulatory arbitrage: companies might choose the EU statute to sidestep stricter local standards, potentially undermining worker protections or national tax bases. Smaller Member States (e.g. Malta, Cyprus, Luxembourg), which often compete by offering business-friendly incorporation regimes or tax treatment, are wary of losing their competitive edge or fiscal revenue if a one-size-fits-all EU system prevails.

The concerns whilst founded do not actually reflect what is being proposed. Through the 28th regime “corridor”, startups registering under the EU-Inc label will be required to select a member state under which to be registered and governed. Therefore a startup whose founders may be German nationals, may register under the Maltese regime, and thus be regulated under Malta’s taxation rules. Therefore, this results in a business opportunity for a small state like Malta to win startup business by embracing the 28th regime proposal and align itself to the regulation as a business friendly solution which most closely reflects the spirit of Europe’s quest for the startup ecosystem dream.   

As Klinger described it, the solution is simple:

• A new single pan-European legal entity “EU-Inc”
• One central digital-first EU-level registry
• Standardised investment documents & EU-wide stock options
• Taxes & employment etc. still on a local level

Basically ONE STANDARD to scale startups across ONE EUROPE. If achieved, this proposal could be the biggest step function improvement for startups in our lifetime for Europe.

It is a statement that Europe is willing to innovate in governance to enable innovation in industry. This is a chance to be the architects of Europe’s tech renaissance, rather than footnotes in a history of missed opportunities

Source: https://www.eu-inc.org/faq

How to take action:

• Fill the online petition
• Participate in the consultation by September 30th
• Ask your local member of parliament to pay attention to the EU-Inc 28th Regime and reach out to its promoters