It was supposed to be a breakthrough for European business — EU Inc., a single company framework that would finally let startups and investors operate across the EU under one set of rules. Instead, the European Commission has delivered a watered-down proposal, one that is unlikely to keep businesses from heading elsewhere.
“A profound betrayal of the idea’s original ambition,” write professors Luca Enriques (Bocconi), Casimiro Nigro (Leeds), and Tobias Tröger (Goethe/SAFE) on the Oxford Law Blog. According to them, the instrument ultimately privileges entrenched corporate interests over the innovative companies it was designed to help.
Many of Europe’s most ambitious founders still incorporate in the US state of Delaware rather than Germany, France, or Sweden. For years, Brussels promised a single European company framework, so called 28th regime, that could finally give startups the legal certainty their American competitors enjoy.
“We will soon put forward our 28th regime. The ultimate aim is to create a new truly European company structure. We call it EU Inc. We need a single and simple set of rules that will apply seamlessly all over our Union,” said Commission President Ursula von der Leyen at Davos in January.
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When the proposal arrived in March 2026, it became clear that Europe’s “Delaware moment” might not happen anytime soon.
Invisible tariffs
The structural problem von der Leyen was addressing, has led to a Europe that lags behind the United States and China. Reports by former Italian prime minister Enrico Letta and by former European Central Bank president Mario Draghi on competitiveness diagnosed legal fragmentation across 27 national corporate systems as an “invisible tariff” on cross-border growth.
The International Monetary Fund (IMF) estimates that persistent barriers to the EU single market still represent the equivalent of a 110 percent tariff on services.
The consequences are visible in the data. The US is home to 853 active unicorns — 53.6 percent of the global total — while China comes second with 330. Europe has only 217, according to startup tracker Failory. According to Global Finance Magazine, 44% of US unicorn founders were born outside the United States, many of which coming from Europe.
Take Lovable, a Swedish AI startup that recently crossed $300 million in annual recurring revenue. It chose Delaware, not Stockholm. It is one of many: European founders routinely incorporate in the US because no credible pan-European alternative exists.
Harmonisation, not unification
The Commission anchored EU Inc. in Article 114 of the Treaty on the Functioning of the European Union (TFEU) — the legal basis for the approximation of national laws affecting the internal market. Article 114 is an instrument of harmonisation, not unification. It works by aligning existing national frameworks around a common standard, not by creating something new in their place — the very idea behind a 28th regime.
The core problem lies in Article 4 of COM(2026) 321, which states that “matters that are not covered by this Regulation or by the articles of association shall be governed by national law”. In practice, experts argue, this means each member state plugs the gaps with its own national law — delivering not a single European company form but twenty-seven different versions of one.
The fundamental value of a Delaware-style system is not the specific rules it contains. It is the certainty and consistency those rules provide. A French founder raising a seed round from a Dutch fund, a German institutional investor, and a US venture firm needs all three to see the same legal entity, governed by the same law, interpreted by the same courts, according to entrepreneur Alessandro Palombo’s EU Inc. Zone policy contribution.
The federal floor
A more ambitious path would have used Article 352, which allows the Council to act unanimously in areas not otherwise covered. This would have established a genuinely European-level legal entity and, critically, a dedicated European business court. While politically demanding, this route would have been constitutionally cleaner.
As a fallback, enhanced cooperation under Articles 326–334 TFEU could have been used. It’s the same mechanism that helped establish the European Public Prosecutor’s Office and the Unitary Patent system.
Delaware works, in part, because it operates within a federal system that provides a consistent baseline on tax, securities regulation, and labour law. EU Inc. has no such floor. A regulation establishing a corporate form without accompanying fiscal measures is structurally incomplete. The corporate vehicle exists, but the tax environment in which it operates remains as fragmented as before, as Dennis Weber of the Amsterdam Centre for Tax Law writes for the Kluwer International Tax Law Blog.
The compliance burden facing cross-border scaleups spans corporate tax, R&D credits, VAT, transfer pricing, and withholding procedures. These costs fall hardest on smaller firms, which often lack the legal and administrative capacity to navigate twenty-seven overlapping national frameworks. An EP JURI study calls this a structural barrier to operating at Single Market scale.
A missed opportunity
The European Commission has put forward something, but with more issues ahead than problems solved. EU Inc. was meant to be Europe’s answer to Delaware — a chance to finally provide European startups with a stable and uniform legal framework across the continent. Instead, it risks becoming another Brussels compromise, diluted by political realities and legal fragmentation.
The question now is whether the Parliament and Council can salvage the ambition — or if this will remain yet another example of a rare opportunity lost. Europe does not lack ideas, entrepreneurs, or capital. What it often lacks is the political ability to choose integration over compromise.
