When European Commission president Ursula von der Leyen took the stage at Davos in January, she held up EU-Inc as “a new truly European company structure” with “a single and simple set of rules that will apply seamlessly all over our Union”.
The new corporate entity promised to let founders register a company online, in 48 hours, for €100, with full access to the EU single market from day one.
The campaign was co-founded by investor Andreas Klinger and is backed by hundred's of prominent European tech leaders including Stripe’s Patrick Collison and Wise co-founder Taavet Hinrikus.
Nine months on, Klinger and the other founders of the movement say that it is at serious risk of being watered down.
“After two years of campaigning, recent negotiations are taking EU Inc in the wrong direction,” the organisation wrote on LinkedIn, along with an open letter calling on heads of state to step-in.
The letter goes further. It says EU-Inc has been “reduced to just fast incorporation” and “will do nothing to improve Europe’s competitiveness” as it stands.
“You agreed to introduce a European standard, but then your teams negotiated away everything that makes it one,” reads the letter, which lands as EU leaders meet in Brussels this week, within competitiveness high on the agenda. “We urge you to step in and give your negotiating teams a clear mandate to change course.”
Five red lines
The letter sets out five things the final law must keep. The first is free choice of registration, so founders can incorporate in any member state regardless of where they operate.
“Without that free choice and mutual recognition, no standard will emerge – making the proposal pointless,” the letter reads.
The second is a broad employee stock option framework. Without one, “Delaware will remain the preferred choice for most fast-growth companies”, according to the letter.
The campaign also wants a central digital registry with standardised KYC, anti-money laundering and beneficial ownership checks. It also wants EU-Inc open to every industry.
The letter also addresses a common criticism. It says employees would stay covered by the labour law of the country where they work, and that registering elsewhere would not change where companies pay tax.
From Davos to deadlock?
The Commission tabled its formal proposal for EU-Inc in March, as an optional “28th regime” alongside the 27 national company laws. Some investors were wary of that from the start.
“If this ends up as an optional structure that coexists with national regimes, the real impact will be limited,” Daniel Uusitalo, associate at Dutch impact investment firm 4Impact Capital, told Impact Loop in an interview at the time.
Opposition soon followed. Trade unions, including the European Trade Union Confederation, and Germany’s Federal Chamber of Notaries oppose free choice of registration, citing risks to worker co-determination and money laundering.
The member states have since narrowed the proposal as well. A compromise text from the Irish Council presidency limits the stock option scheme to companies with fewer than 1,000 employees and turnover below €450m, and drops the central register.
On 30 September, EU ambassadors failed to agree on how stock options should be taxed. The Commission has pushed back on the changes.
“I cannot see the 28th regime and the Commission’s proposal without stock option harmonisation,” Stéphane Séjourné, the Commission’s executive vice-president for prosperity and industrial strategy, told EU industry ministers in Brussels on 24 September.
Member states aim to agree their negotiating position by the end of October, with a political deal targeted by year-end. The campaign’s letter ends with a warning.
“Europe’s founders will have a future,” the letter reads. “Whether that future is European is in your hands.”