EU Inc campaigners accuse lawmakers of ‘killing’ landmark reforms

Europe has a talent for building world-class technology and an even greater talent for making it nearly impossible for those companies to scale. If you have ever tried to expand a startup from Berlin to Paris, you know exactly what I am talking about. You are not just crossing a border; you are entering a completely different legal, tax, and regulatory universe. It is a friction tax that kills growth before it starts.

For a brief moment, there was hope that this would change. The 'EU Inc' initiative, a proposed 28th regime for corporate law, promised a unified legal framework for startups. It was supposed to be the European version of Delaware—a way to incorporate once and operate everywhere. But according to a group of more than 1,000 founders and investors, European lawmakers are currently in the process of stripping the proposal of its utility.

The Promise of a 28th Regime

The core issue is fragmentation. Right now, Europe is a collection of 27 different silos. If you want to issue stock options to an employee in another EU country, you need a local lawyer, a local tax advisor, and a lot of patience. This complexity is why European startups often move their headquarters to the United States the moment they raise a Series A. It is simply easier to manage a company under Delaware law than it is to navigate the patchwork of the European Union.

The EU Inc proposal was designed to fix this by creating a separate legal status that would coexist with national laws. It would provide standardized rules for equity, cross-border operations, and capital movement. For a founder, this represents the difference between focusing on product-market fit and focusing on bureaucratic compliance. It is the kind of boring, structural reform that actually moves the needle for builders.

Why the Reforms are Stalling

The recent open letter from EU Inc campaigners suggests that the European Commission is losing its nerve. The fear is that the proposal is being diluted to the point of irrelevance. Instead of a bold, unified legal structure, we might end up with a set of 'best practice' guidelines that national governments can choose to ignore. If the reform lacks teeth, it is not a reform; it is a suggestion.

Lawmakers often cite national sovereignty as a reason to resist these changes. They worry about losing control over tax revenue or labor laws. But this is a short-sighted perspective. By protecting their individual silos, they are ensuring that the total pie stays small. You cannot have a competitive AI or crypto sector if your companies are weighed down by 27 different sets of rules while their American and Chinese counterparts operate in massive, unified markets.

What This Means for Founders

If you are building in Europe right now, the current trajectory is frustrating but predictable. Founders are essentially being told to wait. But startups do not have the luxury of waiting for five-year legislative cycles. This is why we see a persistent 'brain drain' of technical talent moving to hubs where the legal infrastructure is predictable.

For builders, the message is clear: do not wait for the government to solve your scaling problems. If the EU Inc initiative fails or is significantly watered down, the default strategy will remain the same. You will likely find yourself incorporating in a jurisdiction that the VC community trusts—usually the US or perhaps the UK—simply to avoid the administrative nightmare of the continent.

The Risk of Stagnation

The skeptics will say that Europe has plenty of successful companies despite these hurdles. That is true, but they succeed in spite of the system, not because of it. We are seeing a massive wave of innovation in artificial intelligence and decentralized infrastructure. These are fields that require rapid scaling and global capital. If Europe cannot provide a frictionless environment for these companies, it will continue to be a consumer of tech rather than a producer.

The open letter is a last-ditch effort to remind the Commission that 'business as usual' is a death sentence for European competitiveness. The campaigners are right to be vocal. When lawmakers talk about 'balancing interests' or 'phasing in changes,' they are usually signaling that they have no intention of making the hard choices necessary for real growth.

The Bottom Line

We do not need more innovation hubs or government-backed venture funds. We need a legal system that works. The EU Inc proposal is the most logical path forward for the European ecosystem, but logic rarely wins against entrenched bureaucracy. If the Commission fails to deliver a meaningful 28th regime, they are essentially telling the next generation of founders to build somewhere else.

For those of us on the ground, the takeaway is simple: watch what they do, not what they say. Until there is a single, unified legal path for European startups, the continent will remain a collection of local players rather than a global powerhouse. Builders should plan their corporate structures based on the reality of today, not the promises of a reformed tomorrow.

Read the original at Sifted →