3 answers to 3 questions: EU Inc.

1. What is the EU Inc.?

The EU Inc. is a new, optional corporate form to be introduced within the European Union. The European Commission is proposing a voluntary European legal framework for companies, known as a 28th regime. It will make it easier for businesses to operate across borders without having to adjust to differing provisions in corporate law across the 27 member states. This proposal could strengthen the European Single Market, reduce fragmentation and simplify access to financing. The EU Inc. is an important step on the road to a better integrated European capital market and will help keep Europe competitive.

2. What still needs improvement?

The proposal currently focuses on questions of corporate law and equity financing. It’s a good start, but more is needed. Reliable access to financing in every phase of development is essential to businesses. That means bank loans and other types of external debt funding in addition to equity.

And companies in Europe still face major challenges when attempting to access this type of cross-border funding. Different national rules for financing and collateral agreements often make cross-border financing unnecessarily complex and expensive. The solution is to ensure that financing using bank loans and other debt instruments is part of the framework for the EU Inc. from the very start. Harmonisation will do more than just increase legal certainty, simplify financing and reduce costs; it will help the EU Inc. to expand across Europe and make it an attractive prospect for investors. This is how to truly pave the path to success for this new option.

3. What needs to happen next?

The EU Inc. is an opportunity to further reduce fragmentation on the EU capital market and make it easier for companies to do business within the EU. To fully utilise its potential, the new legal framework must, on the one hand, be simple, practical and genuinely based on company’s needs. On the other, it must adequately take into account the interests of investors in order to ensure that the EU Inc. is more than just an academic exercise.

EU Inc. is a great starting point. To ensure it achieves its goals, it must accurately reflect the realities of financing for European entities for the entire business life cycle. Ensuring this, will be a decisive factor in whether or not the EU Inc. will truly become a success.