EU Inc.: A 28th Regime of Uncertainty

On 18 March 2026, the European Commission presented a draft regulation on the introduction of an ‘EU Inc.’, thereby putting forward a proposal for a 28^th regime under European company law. The aim of the proposal is to combat the fragmentation of the Single Market and to strengthen Europe’s competitiveness. 

The main focus lies on the idea of an optional legal framework characterised by digital procedures, swift company formation and increased mobility within the European Union. 

By proposing a draft regulation, the Commission has chosen a particularly ambitious regulatory model which, unlike a directive, shall be applied directly and uniformly in all Member States. 

On closer inspection, however, it becomes clear that the draft proposal raises fundamental legal and systemic issues.

Inappropriate Legal Basis: Article 114 TFEU does not support the Introduction of an ‘EU Inc.’

The Commission’s draft proposal relies on Article 114 TFEU as the legal basis for the introduction of the ‘EU Inc.’. This choice raises considerable concerns under EU law.

Article 114 TFEU aims at approximating the laws and administrative provisions of the Member States, not to create independent supranational legal forms. However, the EU Inc. does not constitute harmonisation, but rather the establishment of an additional, optional legal framework alongside national company laws. According to the case law of the European Court of Justice (ECJ) on the European Cooperative Society, this is not a matter of ‘approximation of laws’, but rather a qualitatively different type of regulatory framework. The Council’s Legal Service has come to the same conclusion in a report on the European Association.

Furthermore, Article 114(1) TFEU requires that the measure actually serves to improve the conditions for the establishment and functioning of the Single Market. However, the draft regulation permits the formation of an EU Inc. even in the absence of any cross-border aspects. For such purely domestic activities, it is not clear how the introduction of the EU Inc. is intended to contribute to the establishment or functioning of the Single Market.

The chosen legal basis entails considerable risks to the legal certainty of the entire proposal. If the ECJ were to deny EU competence, the regulation could be annulled, with significant consequences for companies already formed and existing legal relationships. 

Break with the Acquis: Departure from proven Safeguards

Regardless of the question of legal basis, the draft regulation also raises fundamental concerns regarding its content. It claims to be consistent with the existing EU legal framework without actually delivering in this regard. On the contrary, a break with key decisions of the acquis currently in effect becomes apparent.

In the past years, EU law has created a high level of legal certainty and trust in corporate structures. This is particularly due to the reliability and transparency of the registers, as well as the implementation of preventive control mechanisms for important company law transactions. Thus, current EU law, in Article 10 of the Company Law Directive (Directive (EU) 2017/1132) as amended by the Digitalisation Directive II (Directive (EU) 2025/25), explicitly provides for administrative, judicial or notarial control, or a combination thereof, during company formation and any amendment to articles of association, including a comprehensive legality check. Recital (9) of the Digitalisation Directive II emphasises the need for such preventive control across the EU in order to ensure the reliability of company law information in the Single Market and to prevent the circumvention of safeguard provisions. Recital (10) further specifies that Member States may provide for effective identity verification procedures to prevent money laundering and abuse as well as to ensure the reliability of register information.

The draft proposal neither builds on this fundamental decision under EU law nor addresses its content. Instead – contrary to its own justification – it implements a system change leading to a significant reduction of preventive controls. Article 14 of the draft regulation provides neither for a comprehensive legality check nor for an effective identity check. This shift affects the very functioning of the company law system.

Identity Verification

Notaries or other persons acting in their capacity as holders of a public office check identity documents, compare photographs and thereby verify the identity of the parties involved as well as the contract details. Without this official identity verification, there is no guarantee that only authorised persons act. Digital self-identification, as proposed in the draft regulation, is limited to automated data checks and is therefore not equivalent. The resulting lack of transparency facilitates abuse, such as the acquisition of company shares through the use of pirated access data (‘corporate hijacking’), and increases the risks of tax evasion, shell companies and money laundering.

Guarantee of Legality

The preventive validity check is to be abolished in cases where it previously existed. Where, until now, the power of representation, the substantive legality of the transaction as well as the legal capacity and freedom of decision of the parties involved were subject to ex ante notarial verification, this is now prohibited (Art. 59(5); 67(6) of the draft regulation). Without this preventive control, neither the parties involved nor other participants can rely on company law transactions being effectively and accurately reflected in the register (whether public or private). In the case of share transfers, this may lead to shareholder structure becoming unclear and, more generally, to doubts arising about the effectiveness of resolutions and acts of representation. The resulting uncertainty affects the entire life cycle of the company, namely its formation, amendments to the articles of association, transfer of shares and capital increases.

Protection of inexperienced contracting parties

Notaries explain contracts, point out risks and ensure that contracts are drafted in a fair and balanced manner. Without this safeguard, proper clarification is not guaranteed, and one-sided contract drafting to the detriment of structurally weaker parties is facilitated, for example with regard to share transfers in the context of employee share schemes. This contradicts the fundamental principles of EU law, which traditionally attaches particular importance to the protection of structurally weaker parties, in particular consumers, employees and small investors.

Overestimation of Anglo-American models (Delaware)

The draft is based in key aspects on Anglo-American legal models, in particular through reduced shareholder rights, the omission of preventive control, and the emphasis on ex post judicial enforcement. This model is being transferred to continental European law without sufficiently taking into account the different institutional frameworks. While Anglo-American systems rely on costly ex post enforcement and favour financially strong actors, the continental European model is characterised by preventive control, reliable registers and a reduced need for internal due diligence. The draft jeopardises this locational advantage without providing an equivalent alternative.

Threat to Public Interests 

The outsourcing of key control functions to private actors and the introduction of standardised structures significantly interfere with the organisational autonomy of Member States. This particularly affects registers, the organisation of the justice system, and core state functions such as tax collection, anti-money laundering and the enforcement of sanctions.

While in Germany, procedures accompanied by a notary – with notification and verification obligations – ensure, for example, that the tax office is reliably informed of taxable transactions, the recording of such transactions would now depend on the parties involved themselves without appropriate oversight. Furthermore, there would also no longer be effective preventive safeguard against takeovers by sanctioned individuals or of critical infrastructure entities.

Conclusion

The departure from fundamental principles of European company law as set out in the draft regulation is not merely a procedural adjustment, but will have structural implications for the reliability of the company law framework. Register entries will lose their key function of conferring legitimacy and fostering trust. They risk merely reproducing unverified information provided by the declarants and the technical execution of digital processes, without reliably reflecting the substantive legal situation. Prior control is being replaced by subsequent dispute resolution, placing a considerable burden on the justice system. Ex ante legal protection is being replaced by an uncertain and cost-intensive ex post control.

A 28^th regime can only serve its purpose if it combines digitalisation with proven preventive control mechanisms and builds on the fundamental principles of the European acquis, rather than discarding them. The EU Inc. draft proposal pursues a legitimate aim, but falls short of its potential. Europe can do better.

About the author

Markus Brückner is a notary candidate in the district of the Baden-Württemberg Chamber of Notaries and works as a legal advisor in the Brussels office of the German Federal Chamber of Notaries.