European founders and VCs push for strong EU Inc legislation

Background on the EU Inc proposal

The European Union is drafting a continent wide corporate status known as EU Inc. The idea is to give companies a single set of rules that apply across all member states, replacing the patchwork of national company codes that currently complicate cross border growth.

The European Commission has described the initiative as a way to lower administrative costs, increase legal certainty and make Europe more attractive for high growth firms. For many policymakers the move is seen as a strategic response to the United States and United Kingdom, where a single corporate regime already exists.

Why a single corporate form matters

Startups that raise capital in multiple EU countries often have to incorporate separate legal entities, each subject to its own filing requirements, shareholder rights and tax rules. This creates a hidden cost that can deter founders from expanding beyond their home market.

A uniform corporate framework would allow a company to incorporate once and operate everywhere, similar to the model used by large multinational corporations. Proponents argue that the simplification could accelerate fundraising, improve talent mobility and boost the overall competitiveness of the European tech sector.

Who signed the open letter

In early June, a group of more than thirty founders and investors released an open letter addressed to the European Parliament and the Council of Ministers. The signatories include founders of unicorns such as Delivery Hero, Northvolt and UiPath, as well as senior partners from venture firms like Atomico, Accel and Balderton Capital.

Profile of the signatories

Many of the founders have built companies that now operate in twenty or more EU countries. Their investors manage billions of euros in capital and regularly back cross border rounds. The collective experience gives them a clear view of the practical obstacles that a fragmented legal landscape creates.

Among the investors, the head of Invest Europe highlighted that the EU Inc proposal could become a benchmark for future funding rounds if it is designed with the needs of high growth firms in mind.

Key concerns raised by founders and VCs

The open letter outlines several areas where the draft legislation could fall short if watered down. The main points are presented below.

Risk of watered down provisions

• Limited shareholder rights may reduce investor confidence, especially for foreign limited partners who rely on strong governance standards.
• Insufficient protection for minority shareholders could discourage participation from early stage angels and business angel networks such as the European Business Angel Network.
• Ambiguous rules on director liability may increase legal risk for founders who are already navigating complex market dynamics.

Impact on fundraising and scaling

Venture capitalists argue that a weak EU Inc framework could push ambitious founders to seek incorporation outside Europe, typically in the United Kingdom or the United States. This would undermine the EU’s goal of retaining talent and capital within the bloc.

Furthermore, the letter warns that a diluted corporate status could lead to divergent national interpretations, recreating the very fragmentation the proposal aims to eliminate.

Political response and next steps

European lawmakers have welcomed the dialogue but remain divided on the level of ambition required. Some members of the European Parliament view the proposal as an opportunity to raise corporate governance standards across the union.

European Parliament’s stance

During a recent committee hearing, a parliamentarian cited the OECD corporate governance report as a benchmark for best practice. The speaker emphasized that any EU wide law must align with international norms to avoid creating a “regulatory island”.

Timeline for negotiation

The legislative process is expected to move through three readings in the European Parliament, followed by a conciliation phase with the Council of Ministers. If all parties reach agreement, the law could be adopted by the end of 2025.

Stakeholders have requested that the Commission publish a detailed impact assessment that quantifies the expected cost savings for companies that adopt the new regime.

Potential implications for the European tech ecosystem

Should the EU Inc framework retain strong shareholder protections, clear director duties and a single set of filing requirements, the benefits could be substantial.

• Lower administrative overhead would free up resources for product development and market expansion.
• Enhanced legal certainty could attract more foreign venture capital, increasing the pool of available funding.
• A unified corporate identity may improve the perception of Europe as a single market for high growth tech companies.

Conversely, a compromised version could reinforce the narrative that Europe is a difficult place to scale, prompting talent and capital to flow to jurisdictions with more predictable corporate law.

Industry observers note that the outcome of the EU Inc debate will likely influence other policy areas, such as the upcoming revision of the EU capital markets union and the digital services act.

In the words of one founder who signed the letter, “We need a corporate framework that matches the ambition of European innovators, not one that forces us to look elsewhere.” The message is clear: the future of Europe’s tech ambition may hinge on how lawmakers shape the final text of the EU Inc legislation.