Nicoleta Cherciu
Răzvan Puscuta
INTRODUCTION
The EU Inc. initiative and proposal (Initiative) represents a groundbreaking effort to create a harmonized corporate framework across the European Union (EU), seeking to establish a pan-EU standardized limited liability company structure known as the “28th regime” and to harmonize national corporate laws.
The Initiative was started in 2024 by the industry, for the industry, namely by a group of VC operators (including Andreas Klinger, Philipp Herkelmann, and Iwona Anna Biernat) and since then, it has come a long way through incredible awareness-raising and policy-related activities, all driven by the industry’s main players. (e.g. Index Ventures).
The Initiative started getting solid traction when in May 2025 it was included by the Commission in its Startup & Scaleup Strategy. In Romania, Nicoleta Cherciu had the first discussion on the EU Inc. in October last year with Iwona at the How to Web Conference.
The Initiative entered the legislative forum in May 2025 when the European Parliament (EP), through its JURI Committee, provided a draft report on the Initiative suggesting a way forward (EP Report).
The EP’s Report was met with criticism due to several reasons, the most notable being that it suggested the adoption of a directive rather than an EU regulation. We will see below the differences between the two forms of legislating and the limits the EU faces, based on international treaties, in relation therewith.
In January 2026, the EP Report was voted on favourably by the members of the EP via a resolution adopted with 492 for, 144 against, and 28 abstentions (EP Resolution).
Concomitantly, the 28th regime was presented at Davos by Ursula von der Leyen as an important strategic EU initiative.
Fast forward, the European Commission is expected to issue the first legislative proposal (be it a directive, regulation, or combination of both on different matters) by the end of Q1 2026.
Now that the legislative process is underway and the main institutional players have started laying out their positions, it is a good moment to take a closer look at what the Initiative proposes and the legal and political constraints the EU operates under in relation therewith. This understanding is key for anyone looking to advocate for the Initiative effectively and to push the conversation forward on solid ground.
We will look below critically and yet in a simplified manner to:
- the Initiative’s objectives;
- the EP Resolution and Report policy and regulatory proposals,
- the legal pathways for implementation, given core regulatory limitations arising from the Treaty on the Functioning of the EU (TFEU) and the Treaty on the EU (TUE) (Treaties).
WHAT DOES THE INITIATIVE ACTUALLY PROPOSE?
Briefly, the Initiative requests:
The adoption of an EU regulation to provide for:
- an EU-wide company structure with a single set of rules on formation, capital, and governance. This structure should allow, among others, a corporate setup that is normally used by startups, such as the possibility to issue non-voting shares, veto rights/preferred shares, and multiple-voting shares;
- a digital-first approach, i.e. (i) the company would be registered in 48 hours, fully online via a single registration platform; (ii) all company details would be available in a unified registry (vs. in a national trade registry portal); (iii) a dashboard allowing the centralised and digitalised filing of shareholders' resolutions, share issuances and transfers, annual statements, etc.;
- an EU-wide employee share option scheme (ESOP) allowing, among others, the issuance of non-voting shares to employees and the taxing ESOP-related income only upon exit;
- standardized investment documents such as shareholders' agreements and convertible loan agreements.
THE REGULATION VS. DIRECTIVE QUESTION AND WHY THE EU DOESN'T HAVE A FREE HAND
The initiators requested that the 28th regime framework be adopted through a regulation. However, the 2025 EP Report suggested legislating through a directive instead.
The 2026 EP Resolution leaves the door open for a regulation on certain topics, but also suggests that the majority of corporate law-related matters be addressed in the form of a “maximum harmonisation directive” “containing a clearly defined set of core matters” (see General Principles 1 and 4).
The directive approach has faced criticism from the industry, primarily because it would fail to provide the unified legal framework that startups need.
A directive, while an EU legislative act, requires transposition into national law through domestic legislation, which often results in textual differences, implementation delays, and inconsistencies across Member States.
But the core question is: Does the EU have discretion to choose between a regulation and a directive? Or is the EU’s power to regulate in corporate law limited by the Treaties which allow the EU to exist and function?
The European Union is not a sovereign state with general legislative competence.
It exercises only those powers conferred upon it by the Member States in the Treaties. This is known as the principle of conferral.
The Treaties also underline that competences not conferred upon the Union remain with the Member States, as states are sovereign.
The principles of sovereignty and conferral are fundamental to the Union's constitutional architecture.
There is a longer analysis to be made here, but for brevity, it should be noted that in the area of corporate law, the TFEU allows the EU to legislate via a directive (Articles 50 and 114(1) TFEU).
The exception to this rule may be that of the EU legislating via a regulation adopted by the Council with unanimous voting (art. 352 TFEU).
The EP, in both the Report and the Resolution, advises against using this path of unanimous consent. There may be two reasons for it.
First, relying on Article 352 TFEU may entail a lengthy negotiation process. Article 352 requires that all Member States agree with this proposal. When has this been achieved lately? Not only that, but this triggers national procedures. For example, Germany requires that any measure adopted under this provision be passed with a two-thirds majority in both the Bundestag and the Bundesrat.
It took roughly 30 years for the Societas Europaea (a form on EU company rarely used) to be adopted on the basis of this art. 352.
Second, this is a burdensome requirement that may demand the approval of multiple, often opposing, political parties in national parliaments across different Member States. It is enough for one state to oppose it, and the initiative could fail, should this legislative path be followed.
While considerable work is being done to ensure that national parliaments and governments would support even an Article 352 procedure (see in Romania the https://eu-inc.ro/), we have to be mindful of existing political and legal limitations.
That is why, in the 2026 Resolution, the EP recommends adopting a directive for most corporate law matters, and a regulation for others where the EU has powers to regulate without unanimous consent.
It remains to be seen, therefore, whether we will in the end have a directive, a regulation, or both. Nonetheless, the choice to be made by the EU institutions is not simple, nor discretionary.
BREAKING DOWN THE INITIATIVE’S REQUESTS AND WHERE DO THINGS STAND TODAY
Further, it is worth looking at what the Initiative is actually asking for on the ground and how some of these requests compare to frameworks that already exist at EU or national level.
Multiple voting shares
The Initiative requests a corporate framework suitable for fundraising. This may include, for example, a company’s option to issue preferred shares (including shares with veto rights), non-voting shares, and multiple voting shares/dual-class shares.
As for dual-class shares, there is already a directive adopted at EU level in 2024 which allows the issuance of multiple-vote share structures, but only in companies that seek admission to trading of their shares on a unregulated multilateral trading facility. It does not afford this right to companies listed on regulated exchanges or to non-listed companies. Therefore, its applicability is limited and not suitable for startups. It is to be noted though that the adoption of this directive involved a lengthy negotiation process, albeit its narrow scope. We hope the EU Inc. will benefit of a shorter and smoother process.
No voting shares
As for the right to issue non-voting shares, this is long overdue and could and should have been achieved a while ago. Similar initiatives in this respect have been pursued at EU level for a while now, with little success (see the Startup Nations Standard).
In Romania, Cherciu&Co was one of the main drafters of a legislative initiative allowing the issuance of non-voting shares in both SRLs and SAs, which unfortunately was never adopted, albeit its thorough and accurate reasoning and proposals.
This class of shares (non-voting) is crucial for ESOP purposes so that companies can issue shares to employees to attract talent, without being forced to involve employees in the company’s decision-making process. This is a key requirement for fully functional ESOP schemes.
Digital first approach
As for the request to create a fully online registry and application process, such a framework would be particularly welcome in countries like Germany, Austria, and Spain, where company-related registration operations (incorporation, share transfers, etc.) still require the notarisation of documents.
In Romania, while there is room for improvement, we already have a functional online application process with few notarisation requirements — and in most cases, the 48-hour mark is achieved.
That said, a recent leak reported by Euractiv suggests that the online registry may be left out of the forthcoming Commission proposal. This would not be entirely surprising, given the resistance likely from countries where notarisation remains deeply embedded in their corporate practice.
ESOP
When it comes to ESOP, the most important matter is taxation. In many countries (e.g. Slovenia), ESOP shares are taxed at the moment they are vested and issued to the employee, based on the company’s valuation at that time (see Index Ventures for an in-depth analysis). This means, that in some Member States, employees pay taxes even when there is no exit on the horizon.
In Romania, we have a very good ESOP tax frameworks as ESOP is taxed only at exit, i.e. when the employee sells the shares. We also have no limitations on strike prices.
The challenge with harmonising taxation at EU level, however, is that direct taxation is not an EU competence under the Treaties.
The Initiative attempts to navigate this constraint by framing the proposal not as imposing specific tax rates or amounts, but rather as establishing uniform rules on the timing of taxation (i.e., when the taxable event occurs).
Whether this distinction is sufficient to support EU-level action, or whether it still impinges on Member States’ fiscal sovereignty will ultimately depend on the Commission's assessment and, potentially, the legal basis invoked.
Standardized templates
Lastly, the Initiative contemplates standardized model documents for (i) Articles of Association (AoA), (ii) Shareholders’ Agreements (SHA), and (iii) Convertible loan agreements.
With this the Initiative addresses several practical challenges faced by founders in the early stages of a business by reducing the time spent negotiating legal documentation, lowering the associated costs (it being well established that these can represent a significant burden for an early-stage company) and ensuring an adequate level of protection for all parties involved.
While this initiative is great and standardization may be achieved to a certain level, some harmonization limitations may still arise.
Unlike the Articles of Association, which will be mainly governed by the new 28th regime as a corporate document, both the Shareholders’ Agreement and the convertible loan agreements will be mainly a contractual instrument subject to contract law. Because there is no unified EU contract law, contractual obligations remain subject to the national law chosen by the parties, with each Member State maintaining its own distinct rules on contracts formation, performance, and termination. Thus, these agreements will remain subject to certain variations arising from the national contractual governing law.
CONCLUSION
The EU Inc. Initiative represents a rare alignment of industry needs and political momentum. For the first time, there is genuine institutional interest and willingness to address the fragmentation that has long slowed European startups from scaling as efficiently as their counterparts.
Yet, as this analysis shows, the path forward is far from straightforward. The EU does not have a free hand as the choice between a directive and a regulation is not merely political, it is constitutionally constrained. Direct taxation remains a Member State competence, and the absence of a unified EU contract law means that key investment documents may continue to require jurisdiction-specific adaptation.
None of this should discourage support for the Initiative. Rather, it should inform how that support is channelled. Advocates must engage not only with the Commission and Parliament, but also with national governments and parliaments.
CALL TO ACTION
Now is the time to act. Whether you are a founder, investor, legal practitioner, or policymaker, your voice matters in shaping this legislation. Engage with national representatives, participate in public consultations, and support coordinated efforts such as eu-inc.ro.
