Founding a company in 48 hours for €1: Will the new "EU Inc." save Europe's start-up scene? Why it's not yet a Silicon Valley killer – Image: Xpert.Digital
Escape to the USA: Will the new “28th regime” stop the fatal brain drain of European founders?
EU Inc. and the 28th Regime: Europe's attempt to catch up on innovation
While the US and other global players are pulling ahead at an enormous pace in future technologies, Europe is struggling with a glaring innovation deficit and an unprecedented brain drain. Increasingly promising entrepreneurs are turning their backs on the continent, worn down by a fragmented single market, a chronic lack of venture capital, and paralyzing bureaucracy. To halt this fatal downward trend, EU Commission President Ursula von der Leyen announced a radical breakthrough at the World Economic Forum in Davos in early 2026: the “EU Inc.”.
Behind this so-called 28th regime lies the ambitious promise of a pan-European corporate structure that will allow startups to establish a cross-border recognized company within just 48 hours – entirely digitally, without notarization, and with a minimum capital of only one euro. It is an ambitious attempt to cut through the dense jungle of 27 national company law systems and finally transform Europe's single market into a true launchpad for tech giants.
However enticing the vision of a bureaucracy-free EU incorporation may sound, closer inspection reveals major flaws in the plan. A look at the drastic investment gap, the still fragmented tax systems, and the European Union's historical failures shows that a new corporate law alone is far from creating a Silicon Valley killer. Whether EU Inc. will actually become the urgently needed game changer or go down in history as a toothless paper tiger now depends on crucial political decisions. A data-driven analysis shows why this measure is vital for Europe's survival – and why it could still fail.
Why a new corporate law alone won't make a Silicon Valley killer
On January 20, 2026, at the World Economic Forum in Davos, European Commission President Ursula von der Leyen announced the creation of a new pan-European corporate structure, to be called EU Inc. This initiative, formally designated as the 28th Regime, is intended to exist as an optional, EU-wide legal framework alongside the 27 national company law systems. It will allow companies to be incorporated entirely online within 48 hours, with a minimum share capital of just one euro and without notarization. The Commission's legislative proposal is expected in the first quarter of 2026, with operational implementation planned for 2027 at the earliest. This announcement is part of the broader Choose Europe initiative and the planned European Innovation Law, which is also slated for adoption in 2026. What at first glance appears to be a revolutionary breakthrough, upon closer examination warrants a more nuanced, data-driven assessment.
Measuring the European innovation gap
To understand the implications of the EU Inc. initiative, the scale of the problem must first be quantified. Europe does not suffer from a lack of ideas, but rather from a systemic deficit in scaling and commercializing innovation. The figures speak for themselves: the cumulative investment gap in research and development between the EU and the US amounted to approximately €740 billion by 2024, with an annual gap of €114 billion in 2024 alone. Measured as a percentage of GDP, the EU invests only about half as much in research and development as the United States, and in terms of per capita income at purchasing power parity, Europe lags behind the US by around 34 percent.
The discrepancy is even more drastic when it comes to venture capital. Between 2013 and 2022, companies based in the EU received $1.4 trillion less venture capital than their American counterparts. Annual venture capital investments in Europe averaged just 0.2 percent of GDP, compared to 0.7 percent in the US. Even after a moderate recovery, European venture capital volume reached only about 22 percent of the US level in 2025, at around $58 billion, despite both economies being of comparable size. The gap has by no means narrowed in recent years: in 2013, the difference in annual venture capital investments was $43 billion; by 2022, it had quadrupled to $186 billion.
The Single Market as an Illusion: Europe's Hidden Internal Tariffs
The central argument for EU Inc. and the 28th Regime is that Europe's fragmentation is the real killer of innovation. And indeed, the data remarkably supports this thesis. The International Monetary Fund estimates that the hidden trade barriers within the EU single market are equivalent to a tariff of around 44 percent on goods and even 110 percent on services. By comparison, in the US, the equivalent is one-third of the European value for goods. The European single market, presented as an achievement of integration, is in practice considerably more fragmented than commonly assumed.
For startups and scaleups, this fragmentation translates into concrete terms: 27 different tax systems, over 100 different VAT rates, diverging labor laws, and varying product certifications for the same market. A survey by the European Investment Bank shows that 28 percent of EU startups have to allocate at least ten percent of their staff solely to regulatory tasks. Regulatory costs in Europe amount to around seven percent of revenue, compared to three percent in the US. In practice, if a German company wants to test the Polish market, it often has to establish a local legal entity, even though EU law theoretically permits cross-border business activity without a physical establishment.
The term "28th regime" (or 28th regulation) refers to a planned, Europe-wide uniform legal framework intended to be introduced in addition to and alongside the existing national legal systems of the EU member states. It is an optional set of rules that does not replace national laws but is available to companies as a voluntary alternative.
Origin of the name
The name derives from the number of EU member states. Currently, there are 27 member states in the European Union, each with its own individual national company law. The planned EU-wide regulatory framework will be introduced as an additional, 28th option alongside these 27 national systems. In effect, a 28th European legal form will be added to the existing legal toolbox of 27 national legal forms.
Functioning and objectives
The main objective of this regime is the radical reduction of bureaucracy in the European single market. Currently, companies wishing to expand across Europe often have to establish a separate legal entity in each member state and navigate a patchwork of 27 different legal systems. The 28th regime ensures that startups and scaleups can choose a single European corporate form, known as EU Inc., which is immediately legally recognized throughout the EU.
Planned legal scope
Ideally, the regulatory framework should cover the entire life cycle of a company, from its founding to its potential dissolution. The European Commission plans to consolidate various areas of law within this harmonized framework. This primarily includes company law, with uniform rules for incorporation, liability, and management. Furthermore, aspects of insolvency law, labor law, and tax regulations are also to be integrated in order to significantly simplify cross-border business activities.
The brain drain: Europe's most expensive export is its founders
The consequences of this fragmentation are measurable and painful. Between 2008 and 2021, nearly 30 percent of unicorns founded in Europe relocated their headquarters abroad, the vast majority to the United States. Only eight percent of global scaleups are based in Europe, while 60 percent are headquartered in North America. Around 15 percent of promising European founders choose to build their companies in the US from the outset. Sales cycles are estimated to be 20 to 30 percent shorter in the US, and access to growth capital is substantially easier.
Net immigration of technology professionals to Europe has plummeted by half in recent years. Deep-tech and AI founders are facing particularly small and cautious funding rounds in later stages, forcing some to relocate their headquarters, or at least their management team, to the US, where growth capital is more readily available, decision-making processes are faster, and the ecosystem is more forgiving of failure. This brain drain affects not only the companies themselves but also the entire ecosystem, as the founders also mean the loss of potential angel investors, mentors, and experienced mentors for the next generation of entrepreneurs.
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New EU law for startups is coming, but the biggest problems remain unresolved
What EU Inc. specifically promises and why it deserves support
Against this backdrop, the fundamental thrust of EU Inc. is not only understandable but economically imperative. At its core, the proposal envisions a single, standardized company form valid in all 27 member states, enabling digital incorporation within 48 hours. Key elements include a uniform capital regime across the EU, standardized investment documentation, harmonized employee share ownership schemes, and a central EU register. English is to serve as the standard language at the EU level, and neither physical presence nor notarization will be required.
The initiative has built a broad base of support in a remarkably short period. The petition, launched in October 2024 by a coalition of European entrepreneurs, including the founders of Stripe, DeepL, and Wise, has garnered over 22,000 signatures. In January 2025, the 28th regime was enshrined as a pillar of the Commission's Competition Compass, integrated into the Start-up and Scale-up Strategy in May 2025, and endorsed by the European Parliament's Committee on Legal Affairs with 18 votes in December 2025. The political momentum is unusually strong, with support ranging from the President of the Commission to leading venture capitalists and broad swathes of the European start-up community.
The Draghi report on European competitiveness from September 2024 emphatically underscored the urgency of such measures. It estimated the annual additional investment requirement at at least €750 to €800 billion and explicitly recommended the creation of an EU-wide legal framework for innovative companies. The Letta report on the future of the single market from April 2024 also advocated for a 28th regime as a key instrument for overcoming single market fragmentation.
Historical warning signs: The failure of the Societas Europaea
An honest analysis, however, must also identify the significant risks associated with this project. Europe has already attempted such a thing and failed. The Societas Europaea, the European public limited company, was conceived in the 1960s, took around 30 years to be adopted, and only came into force in 2004. The result fell far short of expectations: by 2025, there were only 4,000 to 5,000 registrations, the majority of which were in the Czech Republic, and many of these were mere shell companies. The Societas Europaea failed due to high minimum capital requirements of €120,000, complex incorporation requirements, incomplete harmonization, as many rules still referred to national law, and above all, the controversial co-determination regulations, which deterred companies from countries with strong employee protection laws.
The lesson from this failure is unequivocal: A European corporate form that ultimately has 27 national variations will not be accepted. This is precisely where the crucial risk for EU Inc. lies. Reports indicate that the Commission might propose a directive instead of a regulation. A regulation would be directly applicable in all member states and would guarantee genuine uniformity, but requires unanimity in the Council based on Article 352 of the EU Treaty. A directive, on the other hand, could be adopted by qualified majority, but would leave member states leeway in national implementation and thus risk precisely those 27 versions of a 28th regime that even the responsible commissioners have publicly warned against.
Structural limitations of the approach: What EU Inc. cannot solve
Even if perfectly implemented as a uniform regulation, EU Inc. would only address part of the European innovation gap. Company law is merely one of several barriers, and possibly not the most significant. The most serious bottlenecks lie in areas that EU Inc. deliberately excludes or only touches upon peripherally.
First, tax law remains national. The 28th regime is deliberately designed not to infringe upon the fiscal sovereignty of member states. A pan-European company will still have to contend with 27 different corporate tax systems, inconsistent VAT systems, and a lack of harmonized treatment of research expenditures and transfer pricing. For a scale-up operating across Europe, this tax complexity will not disappear.
Secondly, labor law remains fragmented. Regulations concerning co-determination, protection against dismissal, and employee representation on supervisory boards vary so significantly between member states that they have already brought down the Societas Europaea. Trade unions and social democratic groups in the European Parliament view the potential erosion of national occupational safety standards with considerable skepticism.
Third, EU Inc. does not solve the fundamental capital deficit. The problem for European startups is not only that setting up a company in multiple countries is complicated, but simply that there is too little venture capital available, especially in later funding rounds. Seventy percent of venture capital in Europe comes from the founder's home country, almost zero percent is pan-European, and the rest comes predominantly from the US. EU scale-ups raise only half the capital of their Silicon Valley counterparts. Since the GDPR came into effect, venture capital for European technology companies has declined by 26 percent relative to the US, with the cumulative gap widening to $1.21 trillion between 2015 and 2024.
Fourth, Europe lacks the computing infrastructure for the AI era. Around three-quarters of the world's GPU cluster power is located in the United States, China holds about 15 percent, and Europe lags far behind. Computing power has become the new capital for innovation, and without it, even the best ideas remain ineffective.
The European Innovation Law as a complementary piece of the puzzle
The Commission appears to have recognized these structural limitations, at least in part, and is complementing EU Inc. with the European Innovation Law, which is also scheduled to be presented in the first quarter of 2026. This law aims to create a cross-sectoral legal framework that reduces barriers to the commercialization of research results, strengthens collaboration between industry and academia, and improves access to markets, financing, talent, and infrastructure. A key element is regulatory sandboxes—controlled testing environments where innovators can test new technologies under real-world conditions without immediately being subject to the full regulatory framework. Furthermore, by August 2026, each Member State must establish at least one AI regulatory sandbox, as required by the EU AI Act.
The Commission's start-up and scale-up strategy of May 2025 brings these individual measures together in a coherent framework and identifies five areas of action: innovation-friendly regulation, better financing, accelerated time to market, attracting and retaining talent, and easier access to infrastructure and networks. Specific instruments include a planned Scaleup Europe Fund, which will be privately managed and co-financed, a European Business Wallet as a digital identity for economic operators, and innovation stress tests to assess the innovation-friendliness of new regulations.
The political reality: Between ambition and dilution
The greatest danger for EU Inc. lies less in its conception than in its political implementation. Europe has a long tradition of watering down ambitious proposals beyond recognition during the legislative process. Industry representatives have already criticized the European Parliament's report on the 28th Regime as unambitious, bureaucratic, and out of touch with the needs of businesses. The lines of tension run between those who demand an open form of business for all companies and those who want to restrict it to innovative firms; between proponents of a regulation and pragmatists who consider a directive more politically realistic; and between member states that would have to relinquish regulatory control and those that would benefit most from simplification.
Short-term national interests remain the biggest obstacle. As one observer aptly put it: many fail to grasp that abandoning some national rules would bring enormous benefits to the whole of Europe. Yet this very insight has never gained widespread acceptance in three decades of European company law policy. The labor law issue alone paralyzed the Societas Europaea for over 30 years, and there is no reason to assume that the co-determination issue will be any less controversial in EU Inc.
Assessment: A necessary but not sufficient step
The sober assessment is mixed, but not hopeless. The diagnosis underlying EU Inc. is correct. The fragmentation of the single market is a real and quantifiable competitive disadvantage that costs Europe growth, jobs, and technological sovereignty. The proposed solution is a step in the right direction, but it only addresses part of the problem.
EU Inc. can simplify the creation and cross-border operation of companies, and that alone would be progress. But without parallel measures to deepen the Capital Markets Union, mobilize European savings for venture capital, build AI computing infrastructure, and create a truly single market for services, EU Inc. will do little to address the fundamental structural problems. The Draghi report estimated the annual additional investment required at €750 to €800 billion, equivalent to 4.4 to 4.7 percent of EU GDP. Simplified company law alone will not mobilize this sum.
The crucial question will be whether the legislative process produces an instrument that is truly uniform, simple, and attractive enough to reach the critical mass of users necessary for success. If EU Inc. is adopted as a strong regulation that actually creates a single legal framework for all member states, it has the potential to be a game-changer. If it is watered down as a directive that allows for 27 national interpretations, it risks suffering the fate of the Societas Europaea: a legal curiosity with minimal practical relevance.
In recent years, Europe has diagnosed its competitiveness problem with admirable clarity, through the Letta Report, the Draghi Report, and now the Choose Europe initiative. The intellectual groundwork has been laid, the data is extensive, and the political momentum is stronger than in previous attempts. What must now follow is the most difficult part: its implementation into a functioning regulatory framework that doesn't founder on the resistance of national interests, bureaucratic overregulation, or institutional inertia. Whether EU Inc. will be the bold step it was announced to be, or whether it will become just another well-intentioned Brussels initiative that gets bogged down in legislative red tape, will be decided in the next twelve months. The founders of Europe can only hope that policymakers deliver this time, before the next generation of innovators crosses the Atlantic again.
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