Background

This initiative is part of a wider set of comprehensive actions designed to boost the EU economy's competitiveness. The March 2025 European Council conclusions focused on competitiveness, simplification and reduction of administrative burden, among other key topics, and requested that the European Commission 'propose an optional 28th company law regime allowing innovative companies to scale up, in time to allow the co-legislators to take decisive steps by 2026'. Already, the savings and investments union communication, the single market strategy and the start-up and scale-up strategy put forward several measures to mobilise private investment and access to finance to make the single market a reality and improve EU start-up and scale-up companies' chances of success. At the same time, the European Parliament's resolution (based on a legislative own-initiative report) calls for a 28th regime centred around company law rules to introduce a new corporate form into national laws, simplify company set-up and registration, and help facilitate employee stock ownership (IA, p. 1).

The European Commission and the European Parliament have often highlighted the importance of developing a more integrated legal framework for companies operating across the EU. The Letta report stressed the urgent need to remove the structural barriers preventing start-ups and scale-ups from expanding across borders, and called for a 'simplified European company'. The Draghi report underlined that legal and regulatory differences across Member States limited companies' ability to operate, and requested a new EU-wide legal statute for innovative start-ups – the 'innovative European company'. The European Commission, in accordance with President von der Leyen's political guidelines, the mission letter to Commissioner McGrath and the competitiveness compass announced a 28th regime that 'would provide a single, optional set of rules for companies operating across the EU, developed in a progressive and modular manner' (IA, p. 1).

The initiative examined in the IA responds to these calls by setting out a corporate legal framework for 28th regime companies, referred to as 'EU Inc' companies in the legislative proposal. Moreover, this would be complemented by other initiatives, for example the European Innovation Act and European business wallets, which also aim to address the obstacles companies face in the EU.

Problem definition

The IA clearly defines three main problems (IA, pp. 514) and includes evidence and feedback from the wide-ranging consultative activities undertaken, particularly the public consultation. In accordance with Tool #11 and Tool #13 of the Better Regulation Guidelines (BRG), the IA includes a problem tree illustrating ten drivers, three main problems and four consequences (IA, p. 7). The IA describes the problem consequences by including different stakeholders' views from the public consultation, the call for evidence, the submission of position papers, online workshops, bilateral meetings and targeted interviews (IA, p. 7). The stakeholders most affected are businesses, investors (including venture capitalists and other early-stage investors), public authorities, including business registers, intermediaries, professionals providing private legal or consultancy services, and stakeholders dealing with companies, e.g. creditors, shareholders and consumers (IA, Annex 3, pp. 28‑29). The three problems are:

Ten problem drivers are illustrated in a problem tree (IA, p. 7), underlying the above problems:

The IA approaches the problems horizontally, i.e. not in relation to specific sectors or products, although it does focus on start-ups and scale-ups. The IA does not mention whether all problems and drivers are equally relevant either. The problems and drivers have four consequences:

In terms of problem magnitude, the IA refers to the International Monetary Fund (IMF)¹ estimate that 'legal fragmentation across Member States creates a non-tariff barrier equivalent to a tariff of about 44 % on average for traded goods, keeping the potential of the single market underutilised' (IA, p. 6). In this regard, the problem definition is well substantiated by internal and external sources, including the European Parliament's draft legislative own-initiative report on the 28th regime. The IA summarises this report in Annex 2 (pp. 26‑27).

The IA subscribes to both the Letta and Draghi conclusions and recognises that national rules would continue to fragment without EU action because 'under the current global competition conditions, a European start-up's 'home market' must be of a continental – and not a national – scale' (IA, p. 22).

Subsidiarity/proportionality

The IA argues that the legal basis for addressing the fragmentation of national rules by introducing a unified set of rules could be Article 50 of the Treaty on the Functioning of the EU (TFEU), especially relating to the freedom of establishment objectives. However, Article 114 TFEU could instead be considered the appropriate legal basis for a more multi-pronged initiative consisting of a single act.² This is because the approximation of national laws 'is necessary to ensure the smooth functioning of the internal market for investment and to boost the competitiveness of the EU economy as a whole' (IA, p. 23). Thus, the IA states that the choice of legal instrument would depend on the legal basis chosen for the initiative (IA, p. 23).

The IA explains that EU action is necessary to achieve a coherent, common legal framework for a simplified company legal form, particularly for start-ups and scale-ups, and to attract talent and investment.

This initiative's added value is that it boosts competitiveness by establishing a single corporate legal framework to meet the needs of start-ups and scale-ups across the single market and to provide legal certainty. In addition, the IA states that it aims to build on the business register interconnection system ³ (BRIS), already operational at EU level, and ensure the 'once-only' principle is applied in all Member States.

According to the IA, this initiative is proportionate because it does 'not go beyond what is necessary to achieve its objectives by targeting specific issues that could not be achieved by Member States on their own' (IA, p. 23). Proportionality is also assessed in the policy options. However, the IA is not accompanied by a subsidiarity grid, the tool required by the Better Regulation Guidelines to evaluate whether the principle of subsidiarity in the EU has been applied.

National parliaments have until 22 June 2026 to provide feedback on whether this proposal complies with the subsidiarity principle. At the time of writing, the Czech Senate, the Finnish Parliament, the Italian Senate, the Italian Chamber of Deputies, the Latvian Saeima, the Romanian Senate, the Romanian Chamber of Deputies and the Swedish Parliament are in the process of analysing whether the draft is compliant. The Lithuanian Seimas has completed the scrutiny but not yet issued a reply.

The European Economic and Social Committee is preparing an opinion scheduled to be adopted in July 2026.

Objectives of the initiative

In line with the problems laid out in the previous section and in the problem tree (IA, p. 7), the IA details three general objectives:

These objectives are broken down into three specific objectives:

These objectives correspond directly to problems 1, 2 and 3, respectively. However, the specific objectives are not as specific as the 10 problem drivers identified. Better Regulation Guidelines Tool #15 specifies that the IA should include operational objectives to define the deliverables of specific policy actions in more detail. The IA does not fulfil this requirement, although it provides 12 indicators (IA, pp. 21-22, see the section on 'Monitoring and evaluation' below) to monitor the progress of achieving the above objectives. Therefore, the SMART criteria recommended in the guidelines (i.e. objectives should be specific, measurable, achievable, relevant and time-bound) have not been fully applied, as no quantitative targets have been set for the specific objectives and indicators.

This initiative expects to contribute to three United Nations Sustainable Development Goals (UN SDGs): SDG 8 (decent work and economic growth), SDG 10 (reduce inequalities within and among countries) and SDG 17 (partnership for the goals) (IA, Annex 3, p. 32).

Range of options considered

The IA defines seven different sets of policy options. All options are based on legislative measures because all drivers described are of a legal nature. In addition, each set of options includes a baseline scenario, namely that in the absence of EU action, companies would face different national requirements, limiting their potential to set up, operate and attract investment across the EU.

The IA assigns each combination of policy options, including the baseline, to a specific cluster of problem drivers. The IA provides the intervention logic (IA, p. 36) by linking policy options, problem drivers and policy objectives. The policy options aim to cover the company lifecycle from growth and maturity to closure. However, as the measures are interlinked across different phases, the options are presented by topic instead of company lifecycle.

The IA explains that the policy options are designed based on an assessment of the problems and drivers and a review of regulatory approaches in other jurisdictions and existing practices in Member States (IA, p. 27). However, a comprehensive review of what each Member State does to support innovative companies is not provided. The IA highlights that stakeholders (founders, investors, business associations, legal practitioners and public authorities) have been favourable to the drafting of the measures. In addition, all policy options are built on existing procedures (the 'once-only' registration principle through the BRIS) and digital tools, such as the European unique identifier (EUID), the EU company certificate and the EU digital power of attorney (IA, p. 27).

The IA includes an overview of the discarded policy options: limiting the initiative's scope to innovative companies or start-ups, creation of an EU-level registry for registration of 28th regime companies, harmonisation of employee participation rules for 28th regime companies, harmonisation of the type of taxation (employment income or capital gain), common rules for access to public equity markets, asset locks as an option under the 28th regime and simplified insolvency procedure. The IA explains that these options were discarded after considering both stakeholders' views and political and legal considerations (IA, p. 35) and provides further reasoning in Annex 9.

The IA assesses the policy options with a multi-criteria analysis (MCA) that considers their effectiveness, efficiency, coherence and proportionality (IA, pp. 0‑16). The MCA is based on two components: the assessment scores of each policy option, based on evidence from all consultation activities, and the weights assigned to each impact to represent its relative importance. Effectiveness was weighted at 30 %, efficiency at 60 % and coherence at 10 %. The IA also runs a second MCA scenario applying alternative weights: 45 % for effectiveness, 45 % for efficiency and 10 % for coherence. In both scenarios, the ranking of the preferred options was the same: 1c, 2b, 3c, 4c, 5c, 6b and 7c. The conclusions can therefore be considered robust (IA, pp. 17‑18, Annex 4 pp. 108‑111 and sensitivity analysis, p. 12).

Assessment of impacts

In accordance with BRG Tool #18, an IA needs to consider 'impacts across the economic, environmental, and social pillars'. Annex 4 provides an inventory table with the impacts and direct effects. It first breaks down the impacts into economic, social, environmental, economic and social, economic and environmental, and overarching. It is worth mentioning here a study on the macroeconomic impact of the 28th regime corporate legal framework from the Joint Research Centre (JRC), although the IA did not refer to this. The study concludes that this initiative could generate sizeable macroeconomic gains for the EU economy, as 'even under conservative assumptions, the cumulative GDP impact reaches €2.1 billion over 20 years in the higher scenario'.⁴

The IA breaks down and analyses each impact according to expected magnitude (costs and benefits, number of companies affected, and the dimension of the change expected), likelihood (of positive and negative impacts occurring), stakeholders' relevance and the link to the Commission objectives in the second part of Annex 4 for all policy option sets. This assessment is based on consultations with stakeholders, literature review and expert assessment.

The IA prioritises some impacts according to their link with the problem definition and intervention logic; however, all impacts are relevant, and the IA could have assessed them more deeply. The impacts selected were:

The IA appraises the overall impacts of the preferred options package. However, these should be assessed in the main report instead of in Annex 4. The preferred measures are expected to increase regulatory coherence, transparency and trust in 28th regime companies, because a 'single, consistent corporate legal framework applicable across Member States would enable founders and investors to base long-term organisational and growth decisions on a predictable set of rules' (IA, p. 18). Moreover, an EU brand should increase transparency and trust in 28th regime companies.

In terms of the compliance burden reduction for 28th regime companies, the IA stresses that the preferred options package is expected to bring cost savings for 28th regime company founders of between €850 and €1300 each, depending on the Member State of registration.⁵ Furthermore, the 'once-only' registration principle should lead to additional savings of between €80 and €341 per founder, depending on the Member State of registration (IA, p. 19). In addition, the removal of paid-in minimum share capital at incorporation is expected to create further cost savings of around €400 per company (IA, p. 19). The IA also believes the package would introduce digital tools for corporate law procedures that would simplify operations.

The IA further highlights that the preferred package would improve the investment environment for 28th regime companies by creating legal certainty, standardisation and predictability.

SMEs/Competitiveness

The IA includes a four-step SME test (Annex 6, pp. 36‑38) in the list of initiatives relevant for SMEs, the SME filter (see p. 29), and in accordance with BRG Tool #23. The IA states that SME representatives were widely consulted, but in fact only 36 % of replies to the public consultation were from companies (534), of which 96 % were SMEs. Many participants in the two online workshops were SMEs, and several targeted bilateral meetings were held with SMEs or start-ups. European associations representing or closely related to SME interests also participated in the high-level forum and discussions about the framework. The IA notes that SMEs were supportive of the measures planned for the legal framework during the consultations (Annex 6, p. 37). The IA considers that SMEs would benefit from this initiative because they would represent the vast majority of newly formed 28th regime companies, and the burden reduction is estimated at €328 million to €440 million over 10 years (Annex 6, p. 38). As the IA highlights, 'this would amount to an overall one-off administrative burden reduction between €227 828 649 and €340 256 273 for the estimated 277 958 28th regime companies founded by natural persons (over a period of 10 years)' (IA, p. 19).

The IA includes a competitiveness check (Annex 5, pp. 34‑35) that analyses four dimensions: cost and price competitiveness, international competitiveness, capacity to innovate and SME competitiveness. This initiative should positively impact all dimensions,⁶ especially cost and price, due to reduced legal and administrative fragmentation in company law, which is expected to generate efficiency gains (Annex 5, p. 34 and Annex 4 pp. 32‑35). The 28th regime should also strengthen international competitiveness in the single market, support cross-border scaling strategies and have a positive effect on innovation capacity.

Monitoring and evaluation

As required by BRG Tool #43, the IA provides an overview of how this initiative would be monitored and evaluated. Firstly, the European Commission would ensure the preferred package of options is transposed correctly, with a focus on monitoring its implementation to assess if the specific objectives have been achieved. Secondly, after an implementation period of at least five years, the European Commission would evaluate its effectiveness, efficiency, coherence and EU added value. The IA presents a list of 12 indicators to monitor the achievement of the three objectives, which appear to be relevant, accepted, credible, easy to monitor and robust (RACER). However, the IA does not propose monitoring the time needed to set up a business (which should be less than 48 hours), although this would be a good indicator, also used by the World Bank. The data sources proposed by the IA are relevant and consider data from BRIS, national authorities and consultations (IA, pp. 21‑22).

Stakeholder consultation

In accordance with Chapter 7 of the BRG, Annex 2 to the IA presents a detailed account of the consultation activities (Annex 2, pp. 6‑27) and the methodology used. The consultations were designed to gather evidence on the existing problems and different policy options, and data to assess different policy options' costs and benefits.

The Commission launched a call for evidence (8 July to 30 September) published in all EU languages that received 879 replies, and a parallel public consultation only in English during the same period that received 1 470 replies. EU citizens, mostly founders and investors (47 %) and companies (36 %), especially SMEs, were the main respondents; the 'other' category included notaries, lawyers, organisations representing tax advisers and accountants, chambers of commerce, academics, and research and public authorities. The public consultation received contributions from all EU Member States, particularly from Germany (26 %), the Netherlands (10 %), Italy (10 %), France (6 %), Belgium (6 %) and from third countries.

In addition, the Commission's DG JUST organised targeted consultations, numerous bilateral meetings, several meetings with representatives from the start-up community and from national authorities, and two virtual workshops: one with seven companies on setting up, running or closing a company in the EU, and another on investment with nine companies and investors. The 28th regime corporate legal framework was also discussed in the high-level forum on justice for growth launched by Commissioner McGrath.

The Commission further took into account the discussions held during the Informal Company Law Expert Group (ICLEG), which consisted of 16 company lawyers, academics and practitioners from 12 Member States and EFTA countries, and the JURI committee's draft legislative own-initiative report 'On the 28th regime: a new legal framework for innovative companies'.

In the synopsis report, the IA presents the views of different stakeholder groups on the harmonised company legal form for entrepreneurs, employee participation, the number of shareholders, the setting-up of companies, the 'once-only' submission of information for registration, company operations, company closure, attracting talent, governance and exit operations. Stakeholders' views, particularly on the different policy options, are integrated and analysed in the IA.

Supporting data and analytical methods used

The IA is underpinned by an array of research, literature review and wide-ranging consultation activities. In addition to the consultations, the IA gathers data from the existing EU legal framework, previous impact assessments on related topics, BRIS and Member States' data. The IA combines quantitative and qualitative methods and the expert opinion of the team drafting the impact assessment. No background study from an external consultancy accompanied this initiative. Annex 4 provides good detail on the analytical methods, the standard cost model (which is aligned with BRG Tool #58), the multi-criteria analysis and the sensitivity analysis.

The IA openly describes the limitations of the data and analytical methods (Annex 4, pp. 19‑20). It acknowledges that intangible impacts have not been monetised but qualitatively assessed, and that the assumptions for estimating the costs and benefits have been conservative, 'ensuring that the estimated impacts represent a lower-end estimate of the likely effects of the policy options' (Annex 4, p. 20).

Follow-up to Commission Regulatory Scrutiny Board opinion

On 13 February 2026, the Regulatory Scrutiny Board (RSB) issued a positive opinion on the draft IA. However, it suggested that DG JUST (the Commission's lead DG on this initiative) should:

In line with the BRG requirements, Annex 1 of the IA explains how the points raised by the RSB have been addressed (pp. 2‑4); this appears to have been largely reflected in the final IA. Additional descriptions for policy measures have also been added, and the analysis amended in Annex 4.

Since the previous draft IA is not publicly available, the extent to which the corrections have been incorporated could not be verified.

Coherence between the Commission's legislative proposal and IA

The European Commission's legislative proposal appears to be in line with the IA's preferred policy options. However, comparing the proposal with Parliament's position reveals some shortcomings in the Commission proposal, notably on the scope of eligible companies, the 'dual track' digital registration system and the lack of measures to establish a specialised dispute resolution mechanism. These weaknesses could compromise the generation of European added value.⁷