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Comparing EU institutions' positions on a new legal framework for innovative companies
Comparing EU institutions' positions on a new legal framework for innovative companies
Meenakshi Fernandes and Issam Hallak, Members' Research Service
Summary
This briefing presents a comparative assessment of the European Parliament's resolution with recommendations to the European Commission on the 28th regime, adopted on 20 January 2026; and the European Commission's proposal for a 28th regime corporate legal framework presented on 18 March 2026. While the two institutions are well aligned on the broad objectives of the initiative, there are notable divergences in the proposed measures.
First, the scope of eligible companies following the Commission's proposal is broad without ensuring a clear and consistent definition across the EU. Although all limited liability companies – including publicly listed entities – would be eligible for registration as 28th regime companies, only a subset would qualify for a 'simplified procedure' in the event of insolvency, on the basis of criteria to be determined at Member State level. Second, the proposed 'dual-track' digital registration system would accommodate only a limited range of actions. Third, the Commission proposal does not provide for the establishment of a specialised dispute resolution mechanism.
While seeking to address the fragmentation of corporate legal frameworks in the European Union, the Commission proposal could potentially introduce new sources of fragmentation with detrimental impacts for innovative companies – through a more uneven and less predictable business environment across the EU – and for investors, through reduced access to comprehensive, centralised information and lower legal certainty. The European added value of the Commission's proposal could be limited by these impacts, which could hinder cross-border investment and the scale-up of innovative companies in the EU.
Background
In its 2024-2029 political guidelines and the 2025 competitiveness compass, the European Commission announced its intention to establish a single, harmonised set of EU-wide rules (28th regime) to support the scale-up of innovative companies and boost EU competitiveness. On 20 January 2026, the European Parliament adopted resolution 2025/2079 (INL) which outlined its position on a new legal framework for innovative companies, a 28th regime.
On 18 March 2026, the Commission presented a legislative proposal to establish a 28th regime. The proposal was informed by an impact assessment, for which the Commission claims to have 'draw[n] on an extensive amount of desk research, literature review and wide-ranging consultation activities'.1 The synopsis report notes that the European Parliament's 2025 report above was taken into account. Nonetheless, the assessment identified notable omissions in the evidence that was sought and gathered, thus limiting the strength of the findings and the proposal put forward.
Objectives
The overall objectives of the 28th regime as defined by the Commission and the Parliament are well aligned. According to the two institutions, the 28th regime should contribute towards the EU's competitiveness, reduce fragmentation in the EU single market, support access to finance and investment and modernise the business environment.
However, there are differences between the institutions in how to achieve the objectives. The Parliament takes a broader view, to consider the wide variety of challenges and barriers faced by 'innovation-driven ecosystems', and consequently, the need for a wide variety of measures to address them. The Commission proposal focuses on company law and company operations, which is reflected in its approach to the stakeholder consultation (see Box 1). The Commission proposal appears to give more weight to facilitating company operations rather than to scaling-up innovative companies in the EU.
Box 1 – European Commission proposal may reflect the limited scope of its public consultation
The Commission organised a public consultation from 8 July to 30 September 2025. Although the proposal is a high priority for the 10th legislature, the public consultation received only 1 460 replies, of which about 430 replies were from company founders. A call for evidence, published in parallel to the public consultation, received 879 responses. The synopsis report does not indicate how the public consultation and the call for evidence were advertised to relevant stakeholders. While the call for evidence was translated into all official EU languages, the public consultation was only made available in English.2
In addition, the Commission organised targeted consultations with a range of European and national organisations, representatives of the start-up community, representatives of national authorities and a selection of companies and investors. The synopsis report notes that national organisations representing specific sectors were consulted, but does not detail which ones. Moreover, the results of these targeted consultation activities are not presented in the synopsis report.
Following a 2025 analysis by the European Parliamentary Research Service, the specificities of key innovative sectors – e.g. artificial intelligence technologies, biotech, clean tech and defence tech – could have been investigated further. The synopsis report also makes no mention of consultation of regional and sectoral trade organisations nor of European research universities, including those with incubators to support academic spin-offs and start-ups. It follows that the Commission's proposal has a narrower scope and makes no reference to technology transfer nor linkages with the research ecosystem, which could be highly relevant for the European added value of the proposal.
The European Parliament's position underscores the need for the new EU regime to be attractive to innovative companies and investors. As noted in the explanatory statement of the resolution: 'From the perspective of these private parties, EU rules must be more advantageous for them than the otherwise applicable national law in order to be chosen'. According to a 2025 study prepared by the European Economic and Social Committee, previous initiatives resulted in 'mixed success' due to the 'fail[ure] to articulate a clear value proposition, offering limited practical advantages over existing national frameworks'.
The Commission's proposal does not explicitly highlight this issue, nor does it draw on lessons learnt from the past decades with similar initiatives (e.g. Societas Europaea and the proposed European Private Company). Its impact assessment (Annex 8) reviewed the uptake of simplified legal forms in France, Germany and Greece (Société par Actions Simplifiée, Unternehmergesellschaft and Idiotiki Kefaleouchiki Eteria (IKE) respectively), but did not review the existence, design or uptake of existing simplified legal forms in the EU more widely.
Choice of legal instrument and legal basis
The Commission and the Parliament present similar views on the choice of legal instrument. The Parliament considers a regulation would be 'most appropriate', but a 'maximum harmonisation directive containing a clearly defined set of core matters' could serve the same objective. The Commission proposes a regulation, which could potentially offer greater legal certainty and uniform conditions for businesses and investors across Member States, as compared to a directive. However, the Commission's proposal would leave many key decisions to Member States. For example, it would allow Member States to address legal disputes that may arise for the EU legal company form (Area #5) and to define the conditions allowing a company to launch insolvency proceedings (Area #6). The choice of a regulation may thus in effect offer no meaningful advantage over a directive, especially one of 'maximum harmonisation' as proposed by the Parliament.
There is a notable difference in the Commission and Parliament positions concerning the legal basis. The Parliament notes that Articles 50 and 114(1) of the Treaty on the Functioning of the EU (TFEU) could provide an appropriate legal basis to cover the range of proposed measures. Article 50 TFEU concerns the right of establishment and is relevant insofar as the initiative is mainly concerned with company law. The article could provide a legal basis for proposed safeguards and the structuring of employee stock ownership plans (ESOP). Article 114(1) concerns the approximation of laws and is relevant to the extent that measures are related to the establishment and functioning of the internal market.
In contrast, the Commission's approach relies on Article 114 TFEU. It argues that the proposed measures are intended to remove obstacles to the internal market and ensure the effective exercise of fundamental freedoms. However, the proposal is not only concerned with eliminating obstacles, but about creating a new corporate legal form. Moreover, Article 114 TFEU explicitly excludes workers' rights (paragraph 2), which is a key element in the Parliament's position.
Comparison of proposed measures
The Commission's proposal sets out a legal framework, the provisions of which are structured in terms of the lifecycle of a company. The Parliament's position is structured instead in terms of general and specific principles. The assessment identified key differences between the Commission's proposal in relation to the Parliament's position in six areas: (1) Harmonised legal form; (2) Registration; (3) Attracting talent; (4) Governance and safeguards; (5) Dispute resolution; and (6) Insolvency. The assessment then identified shortcomings in the Commission's proposal and reflected on the implications for generating European added value. The findings are summarised in Table 1 and subsequently developed according to each of the six areas.
Of the shortcomings identified in the Commission proposal, three appear to be especially notable for their negative consequences on the generation of European added value:
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the scope of eligible companies is overly inclusive, without ensuring a clear and consistent definition across the EU (Area #1: Harmonised legal form and Area #6: Insolvency);
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the 'dual-track' digital registration system could accommodate only a limited range of actions (Area #2: Registration and transfers); and
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the lack of measures to establish a specialised dispute resolution mechanism, which could promote efficiency and legal clarity (Area #5: Dispute resolution).
The Commission proposal could introduce new sources of fragmentation with detrimental impacts for innovative companies – through a more uneven and less predictable business environment – and investors, through lower access to comprehensive, centralised information and less legal certainty.The Commission's proposal may thus not realise the full potential of a new legal form to promote cross-border investment and promote a denser and more interconnected ecosystem of innovation across the EU, thus limiting its generation of European added value.
| Area | Similarities between Parliament and Commission | Where the Commission falls short | Implications for European added value |
|---|---|---|---|
| Harmonised legal form | Open limited liability companies (LLCs) registered in a Member State. | Not restricted to unlisted companies which have not yet scaled-up.
Not specified if company identifiers would be interoperable with global initiatives on corruption and fraud. No discussion on 'continuation of legal personality' if company seat moves to another Member State. | As innovative start-ups would not be 'identifiable', their specific challenges – attracting investment and talent – would not be met.
Less flexibility for innovative companies. Lower trust in new EU legal form. |
| Registration | EU digital interface that builds on and complements existing systems (e.g. Business Register Interconnection System)
| Dual-track system.
Costs (up to €100) could vary across Member States. Limited scope of actions possible through EU digital interface. | Divergent business environments for participating companies
Reduced legal certainty for investors and more 'home bias'. Restricted possibilities for cross-border scale-up of innovative companies. |
| Attracting talent | Establish employee stock ownership plans (ESOPs) | Linkages with research ecosystems not made explicit.
No guidelines on vesting periods and valuation on equity. | Employees not provided equal benefits across the EU, which could distort or limit scaling potential.
Limited coherence with strategies to boost the EU's research ecosystem. |
| Governance and safeguards | No minimum capital requirement (Parliament proposes a symbolic €1) | No inclusion (or assessment) of steward ownership and asset locks.
Narrow scope of standardised templates. |
Lower legal certainty and investor familiarity. Lower cross-border investment and potential for scale-up. |
| Dispute resolution | Need for specialised judicial chambers or courts dealing specifically with the new legal form in Member States | No measures to set up an alternative specialised dispute resolution mechanism.
Guidance/requirements for specialised national judicial chambers or courts are not provided. | Less efficiency and legal certainty.
Less attractive for investors. Lower potential for scale-up. |
| Insolvency | Harmonisation of insolvency rules | Differing insolvency rules for 'innovative start-ups' by Member State.
Worker preferential protection overlooked. Conditions to trigger insolvency also vary by Member State. | Less even playing field for companies.
Limited legal certainty for investors. Limited safeguards for workers. |
Data source: European Parliament, Resolution of 20 January 2026 with recommendations to the Commission for a 28th Regime: a new legal framework for innovative companies and European Commission; Proposal for a Regulation of the European Parliament and of the Council on the 28th regime corporate legal framework – 'EU Inc.', 18 March 2026.
Harmonised legal form
The institutions agree on the need to create an 'EU brand', but present differing proposals for the name. The European Commission proposes 'EU Inc.', which recalls the United States' Delaware General Corporation Law (also known as Delaware Inc.), while the European Parliament proposed Societas Europaea Unificata (S.EU) in its resolution. This latter may be more appropriate for the European legal tradition and for contributing to a common EU identity.
Both institutions consider that limited liability companies (LLC) primarily based on the EU could be eligible for the regime. The Parliament's position is distinct in its exclusion of LLCs listed on a stock market.3 Several legal frameworks are already in place in the EU for stock market listed public companies that are not suitable for start-ups. The Parliament's proposal envisages the possibility for an innovative company to continue its legal personality, for example, if its seat is transferred to another Member State, or to convert to a public limited company.
The Parliament's call for the development of a 'single Union company identifier' is reflected in the Commission's proposal for a European Unique Identifier (EUID) to identify companies. The Parliament, however, goes further to encourage interoperability of company identifiers with global initiatives in the fight against fraud and abuse.
Implications for European added value: The broad scope of eligible companies in the Commission's proposal limits the 'identifiability' of innovative start-ups and addressing their specific challenges and needs'. Moreover, it does not facilitate 'continuation of legal personality' to permit companies to scale-up in another Member State. Parliament's proposed interoperability of company identifiers could promote greater trust in the new legal form.
Registration and share transfers
In its resolution, the European Parliament stresses accessibility, harmonisation and speed. It calls for a single-access, harmonised digital interface that builds on existing systems, in particular the Business Register Interconnection System (BRIS).4 It specifically calls to avoid the creation of 'a new separate or parallel register' (paragraph 17). The interface should allow for the completion of a fully digital registration within 48 hours and could be used for other actions such as registering the transfer of shares.
The Commission's proposal largely draws on the Parliament's resolution with respect to the use of BRIS, the invocation of the 'once only principle' and coherence with the European Business Wallet to facilitate the authentication and sharing of certificates. However, the Commission's proposal creates a dual-track system for company registration. A 'fast-track' option could be done within 48 hours for a maximum cost of €100. The Commission also proposes to create a 'central digital register for EU Inc. companies'. The range of possible actions through BRIS appears to be lower in ambition and more oriented towards 'reducing formalities'. For example, the Commission proposes to eliminate the need for apostilles.
Implications for European added value: These differing elements of the Commission's proposal – distinct registers, dual-track system, limited actions, costs of registration that would likely vary across Member States – could create distortions and diverging business environments for participating companies. Such effects could reduce the potential attraction of the legal form for entrepreneurs and investors, especially from other EU Member States, and to boost the potential for scale-up. The target to register companies in a digital manner within 48 hours is nonetheless significant and could have potential to generate high European added value. However, this potential was not elaborated in great detail in the impact assessment (see Box 2).
Box 2 – Time needed to start a business: A key indicator and lever for generating European added value
The fast-track option noted in the Commission's proposal envisages the completion of company registration within 48 hours. The time needed to start a business is a key indicator for innovation. Based on 2019 data from the World Bank's Doing Business project, the 2025 EPRS analysis (Figure 4) shows significant differences across Member States, ranging from 3.5 days in Denmark, Estonia and the Netherlands to 37 days in Poland. It also presents a 'back-of-the-envelope' calculation suggesting that meeting the 48-hour limit could lead to a significant increase in the venture capital invested in European start-ups.
The impact assessment does not present updated estimates for the time to start a business in different Member States, nor investigate the scale of potential investment that could be secured by start-ups as a result. Such evidence, especially in relation to available simplified corporate forms, could have been useful to determine the potential attractiveness of the new EU legal form and the extent to which it may vary across Member States.
Attracting talent
The European Parliament stresses the importance of attracting talent for innovative start-ups and the need to link the 28th regime framework with the research ecosystem (universities and institutes) to support technology transfer from laboratories to markets. It views EU-harmonised rules for employee financial participation – e.g. through the creation of EU employee stock ownership plans (EU-ESOPs) and EU stock options (EU-ESOs) – as a key tool to reach this goal, with the caveat that such financial incentives go 'hand in hand' with social inclusion (paragraph 29) and the valuation of equity and vesting periods follows EU-harmonised guidelines (paragraph 30). The Parliament also highlights the need to promote free movement within the Union, which is relevant in light of the importance of mobility for innovation. Researchers are a highly mobile population within the EU.
The Commission's proposal echoes the Parliament's position by allowing EU Inc. companies to set up employee ownership plans with distinct voting rights and introducing an optional common EU-ESO scheme for EU Inc. companies with harmonised timing for taxation that could work in a cross-border context. Shares could be acquired by the holder at the end of the mandatory waiting period (given in the plan), but taxation would be deferred to the time the shares are sold (Article 79).
Implications for European added value: The Commission's proposal thus appears to be less ambitious in setting a harmonised EU standard, while failing to ensure a low threshold for access and assurance of remuneration, as well as to seek explicit links with strategies to boost the EU's research ecosystem. It is unclear if the Commission approach would address a key entrepreneur demand to provide 'equal benefits to their employees across the internal market', which was noted by the Parliament (paragraph 30). Overlooking this concern could distort or limit the scaling potential of innovative start-ups.
Governance and safeguards
The Commission and Parliament positions are similar in calling for no minimal capital investment requirement. Parliament calls for a symbolic minimum capital requirement of €1.The two institutions note that creditor risks could be addressed by solvency or balance sheet tests.
There is also a high degree of alignment between the two institutions with respect to shareholder rights. Parliament's resolution emphasises the need to 'lock-in' innovative firms in the EU and avoid 'killer acquisitions'. The Commission's proposal responds to this concern. Although 'one-share-one-vote' is the rule by default, a company participating in the new legal form would be allowed to provide for several classes of shares in its Articles 51 and 55, including liquidation priority, multiple voting and veto rights. The articles of the company could also freely modify the voting quorum and majorities set to simple majority by default in the proposal (Article 49).
There are two notable differences between the Parliament and Commission positions. First, Parliament calls for a broader set of standardised multilingual documents (e.g. articles of association and shareholder agreements) to be developed by expert groups and made available on the digital portal.
Second, Parliament demands that the 28th regime should respect EU and national law in the area of labour and social law. The Commission's proposal does not include any measures that pre-empt employees' labour or social rights. There is a difference, however, in the determination of which rules apply. Parliament called for the applicable rules to be those of the 'Member State of employment' (paragraph 24). The Commission, however, indicates that the applicable rules are those related to the registered office (Article 12).
Implications for European added value: The Parliament's call for a broader set of documents could promote investor familiarity within and across national borders, boosting legal certainty, cross-border investment and scale-up. The Parliament's call for workers to be subject to the rules of the Member State of employment could promote flexibility and be considered attractive for workers.
Dispute resolution
The European Parliament highlights the importance of speedy and specialised dispute resolution for the success of the 28th regime, recalling the experience and lessons learned of 'Delaware Inc.' in the US, widely regarded as one of the most successful legal jurisdictions for start-ups that seek financing and to scale-up. It thus calls for the establishment of an 'alternative specialised dispute resolution mechanism'. Parliament also calls on Member States to consider introducing a special panel within national courts to address matters related to the new legal form and to allow for such cases to be conducted in English (paragraph 37).
The Commission's proposal is much weaker in this respect. Despite acknowledging the potential of specialised judicial chambers or courts to support a 'seamless conduct of procedures' (paragraph 81), the proposal features no dedicated chapter or article on the matter. Moreover, the impact assessment did not investigate which Member States already have specialised judicial chambers in place to handle legal disputes related to innovative companies and related issues (e.g. intellectual property, digital technologies), how quickly cases are processed, and whether disputes can be handled in English. Such a review could support a better understanding of the existing variation across Member States and draw possible lessons for a harmonised EU approach for the new legal form.
The Parliament's proposal draws on the 'Delaware Inc.' lessons learned and one of its key success factors: dispute resolution. The corporate form includes a specialised court known as the Court of Chancery, staffed by judges with specialised expertise in corporate law. The Court of Chancery addresses disputes quickly, which promotes predictability. Moreover, given the scale of incorporated firms, it is also a familiar dispute resolution mechanism for investors. While there are significant differences in legal traditions between the US and EU Member States, the principles can still be relevant. Research in the US has argued that specialised courts in corporate law are central and necessary.
Implications for European added value: The Parliament's proposed 'alternative specialised dispute resolution mechanism' could help to promote a harmonised EU-level approach to address disputes related to the new legal form. The availability of specialised chambers at Member-State level could furthermore help to ensure that relevant corporate law expertise is taken into account, and that disputes are handled efficiently and promote legal clarity for investors. The lack of these elements in the Commission's proposal could lead to lower efficiency and legal certainty in particular for investors, and limit the potential for scale-up.
Insolvency
The European Parliament demands that companies participating in the new legal form are not made subject to different insolvency rules (paragraph 14). The Parliament also calls for greater harmonisation of insolvency rules to enable investors to invest without acquiring rights of control (paragraph 34). This could be achieved in part through profit participation rights, silent partnerships, or profit-linked loans.
The Commission's proposal with regard to company closure (Annex X), in contrast, allows for significant fragmentation. First, it proposes a 'simplified procedure' for the insolvent winding-up of innovative start-ups. A detailed definition of 'innovative start-ups' is presented in a recommendation to be adopted by Member States, but it is not binding. As such, Member States could maintain their definitions – which vary, as noted in a 2025 EPRS briefing (see Box 2). Second, the Commission's proposal would harmonise the trigger for insolvency proceedings – namely, the inability to pay debts in the case of innovative start-ups – but would leave the definition of these conditions to the Member States (Article 89). Harmonising the definition of the trigger but not the conditions runs counter to the Parliament's call for harmonised insolvency rules to attract investment (paragraph 32).
Implications for European added value: The Commission's proposal offers different insolvency procedures based on unharmonised definitions that could result in companies across the EU being treated differently, depending on their place of registration. This implies differing business environments for companies across the EU, lower legal certainty for investors and a limited assurance of safeguards for workers.
Other considerations
The European Parliament resolution emphasises the importance of access to capital and ensuring a broad scope of funding sources that extends beyond venture capital typically associated with innovative firms – to include equity, social impact investments, pension schemes, and public investment funds (paragraph 35). In contrast, the Commission's proposal takes a more supply-side perspective, noting that reducing the fragmentation of company law rules across Member States could attract more venture capital investment and early-stage financing. This argument, however, is not substantiated in the impact assessment. The impact assessment does not investigate the extent to which the new legal form could attract different types of investment, including venture capital, or the potential increase in the transition rates from seed funding to series A, series B and onwards.5
The Commission's impact assessment is limited in assessing the potential benefits of the 28th regime framework, including the added value for start-ups and scale-ups and the potential risk of weakening national protection standards as requested by the European Parliament (paragraphs 6 and 38). The impact assessment instead focuses on assessing the reduction of administrative burden, which was not identified as the objective of the proposed action. An EPRS appraisal of the impact assessment, which will delve deeper into the merits and weaknesses, is forthcoming.
Main references
- European Parliament, Report with recommendations to the Commission on the 28th Regime: a new legal framework for innovative companies (2025/2079 (INL)).
- European Commission, EU Inc.: A new harmonised corporate legal regime, 18 March 2026.
- Hallak, I., The 28th regime corporate legal framework, EPRS, European Parliament, April 2026.
- Evroux, C. and Hallak, I, The 28th Regime, EPRS, European Parliament, December 2025.
- Fernandes, M. and Jančová, L, Scaling European Innovation, EPRS, European Parliament, June 2025.
- Capdevila Penalva, J., Appraisal of Commission impact assessment on the 28th regime corporate legal framework – EU Inc. (forthcoming).
Endnotes
Classification
Policy areas: Private International Law and Judicial Cooperation in Civil Matters | European Added Value
Regions: European Union
Committees: Legal Affairs (JURI)
Statement on the use of AI
Any AI-generated content in this text has been reviewed by the authors. Claude Sonnet 4.6 was used to explore differences between the European Commission and European Parliament positions and their implications for generating European added value.
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