‘EU Inc’? Simplification must go hand-in-hand with legal certainty

This article is paid for by Council of the Notariats of the European Union (CNUE). An address rented in a European capital, an electronic signature obtained online, a 48-hour waiting period. Under the proposed regulation establishing a 28th company law regime, known as ‘EU Inc.’, this could be enough to establish a company with legal personality throughout the European Union. No share capital would be required. The founder could complete the entire process without appearing, even digitally, before a public authority or another person entrusted with preventive legal control. There would be no personal verification of their legal capacity, of whether they understand what they are signing, or of whether they are acting on behalf of someone who wishes to remain invisible. The company could then open bank accounts, enter into contracts, own assets and employ people across the European Union. If the company later fails to meet its obligations, creditors and employees may find that there are no assets to recover and that the person formally responsible for it was acting merely as a front man. This scenario illustrates the serious concerns raised by the proposal for a Regulation on ‘EU Inc.’ put forward by the European Commission and currently being examined by the European Parliament and the Council of the European Union. The preventive checks set out in Article 14 of the commission's proposal are largely limited to formal requirements. There is no independent and impartial scrutiny of the founders' legal capacity, of the lawfulness of the articles of association, or of whether the transaction complies with substantive legal requirements. Transfers of shares and capital transactions are also not subject to substantive control. Liquidation is treated primarily as an administrative formality, even though it can directly affect creditors and employees. The consequences may extend far beyond company law. Companies own real estate and are entered in land registers. If it is no longer possible to establish reliably who owns a company, it also becomes more difficult to establish who ultimately owns the real estate held by that company. Reliable company information therefore matters for the transparency of property ownership. 'Not reliably verified'? If the information in a register has not been reliably verified, others have to verify it themselves. Banks, business partners and investors may need additional legal opinions, audits and insurance. Costs that a preventive check avoids at the outset may therefore arise repeatedly at a later stage. This would represent a shift from the European tradition of public preventive legal control towards a model that relies more heavily on resolving disputes after they arise. Delaware is a prominent example of such an approach, supported by specialised courts and a correspondingly prominent role for litigation. Transplanting it to Europe would place additional demands on national judicial systems that lack the necessary resources. The proposal also raises questions with regard to the recent European efforts to combat money laundering and the financing of terrorism. The creation of the Anti-Money Laundering Authority (AMLA) is the latest milestone in this process. To create, at the very same time, a legal form with significantly reduced checks risks severely undermining these efforts. The same applies to sanctions: their enforcement depends on knowing who is really behind a company – especially when shares are transferred. Without reliable legality control of share transfers, corporate ownership can change unnoticed and become a vehicle for sanctions circumvention. The amendments required are straightforward. The acquis of European company law, as established by Directive (EU) 2017/1132 and recently reinforced by Directive (EU) 2025/25, should also apply to EU Inc. companies. This means reliable identification of founders and directors, public oversight of legal compliance at the time of formation and at subsequent stages, and reliable business registers. Public protection These safeguards exist for a reason. They protect not only the parties to a transaction, but the public at large. Because they serve a public purpose, they must remain a public responsibility. Private service providers cannot replace independent preventive control carried out under public responsibility. How these checks are organised differs between member states. In some member states, public authorities carry them out directly. In others, the state entrusts notaries with this public function. Notarial involvement therefore does not add another layer of control: the same public function is simply carried out by different public authorities. In many member states, a company can already be formed digitally within 48 hours, with full legal verification carried out by a public official. The European Parliament and the Council of the European Union will decide their positions in the coming weeks. There is still time to improve the legislative framework of EU Inc. significantly and to make it a success. This requires digital and efficient procedures without compromising legal certainty. The rule of law is one of the European Union’s strengths. EU Inc. should build on that strength, not weaken it. This stakeholder article is paid for by a third party. All opinions in this article reflect the views of the author and not of EUobserver.