The European Commission has thrown its weight behind the idea of a cross-EU company structure, dubbed “EU Inc”, aimed at making it easier to build and scale startups across the bloc. But while the political signal is clear, the execution so far falls short of what founders and investors had hoped for.
EU President Ursula von der Leyen has, so far, stopped short of fulfilling all the wishes of the actual EU Inc. movement, which is backed by numerous investors and founder organisations.
Von der Leyen is backing a single company registration system, but proposes first using an old, existing system called the Business Registers Interconnection System (BRIS). Although this knits together national company registries, it falls short of the EU Inc lobbyists’ demands for a modern, EU-wide database.
The question is whether this will be followed up by the Commission establishing a central register, as a second step.
In addition, the draft proposal is still lacking a European court to adjudicate legal conflicts involving the new companies. The fudge is that local and national courts will rule on these, again falling short of the EU Inc demands.
She also said the proposals would “respect existing social standards and labour law, including employees' rights to participate in company boards.” Admittedly, this might butt-up against the way the average startup operates.
Andreas Klinger, founder of Protoype Capital and a co-organiser behind the EU Inc initiative, commented on the Pathfounder Podcast that to avoid having to get all member states to agree to the proposals (not easy and slow) the EU has come up with a workaround by keeping everything on national, rather than supra-national, law.
“Either [startups] have the infrastructure here in Europe to be able to compete, or they will just leave.”
He claims this will make a mockery of EU Inc’s demands, putting it in software terms: “Imagine every country gets the same spec and customer request, but does their own software implementation, gets their own bugs and then does their own bug fixes, and also does their own UI.”
Klinger says the idea that local courts decide how an EU Inc company operates is not what they wanted: “What we originally pitched for was a 28th regime.. a European level entity… What we got instead, right now, is a national solution. The hot fix that we are thinking of… is saying, yes, the implementations are national, but let's not use national courts, because every country has different business practices… Let's use a centralised court and European level instead.”
He also says the BRIS system is a “fairly old, fairly horrible harmonisation thing. As an engineer, I think it's way more effort to make that thing work. We're talking legacy software here.”
He think EU Inc will have to keep the pressure up because the EU Commission and the Eu structures have a way of kicking things ‘into ‘the future’: “If future promises and future expectations would be a solution we would already have an actual 28th regime. So right now, what we advocate for is that every decision that's currently made needs to be active day one as the primary source. So EU courts, day one, registry, day one, because everything can happen ‘in the future’.”
As for Von der Leyen’s mention of employment rights etc, Klinger said: “We, by default, always advocated to keep taxes, employment, outside of it for now, not because we think it's perfect, just because we think that's a compromise needed to get anything done in Europe.”
“The prize is to get a Delaware-style company across the whole of Europe and get that capital in and allow companies to scale internationally, across Europe and internationally,” he says.
“Either [startups] have the infrastructure here in Europe to be able to compete, or they will just leave.”
Explainer:
EU-Inc is a proposed standardised company structure for a new digital holding company in the EU. It aims to streamline incorporation and management processes for startups and small businesses.
It has four main aims:
• A standardised company structure with Harmonised corporate governance
• A single unified online registry of companies
• An EU-FAST investment: which is a simple investment instrument inspired by convertible instruments like SAFEs, etc
• And an EU-ESOP: Or an EU-wide employee share option scheme with standardised rules to attract and retain talent.