Europe needs a 28th regime that enables growth

The European Commission will today present its proposals for a 28th regime in company law. The key element: the new, optional and uniform legal form of an EU company, known as EU Inc.

“Europe needs strong, integrated capital markets. This is the only way to secure growth, innovation and competitiveness,” said Heiner Herkenhoff, CEO of the Association of German Banks. “The Commission’s proposed 28th regime could be a building block towards that goal. We need less fragmentation, better financing and more integration.”

The Commission’s proposal is a step in the right direction, but needs to be refined in key areas:

• Firstly, the EU Inc. must function as a real growth instrument. “We need a legal framework that makes it easier to set up businesses and mobilises capital. Clear and reliable rules for financing contracts and collateral are key.”
   
• Secondly, there needs to a functioning link to external funding. “Particularly in Europe, businesses are unable to grow without capital. The 28th regime must also take credit-financed models into account and more closely harmonise financing conditions.”
   
• Thirdly, there should be no separate resolution regime for small businesses with moratoriums. “Investors should be given comparable standards across Europe, including enforceable collateral agreements, so that financing costs are reduced.”
   
• Fourthly, EU Inc. offers the opportunity to introduce new structures such as ‘compartments’, which clearly separate risks and appeal to additional investors. The European Union should seize this opportunity.