‘Europe Is Killing the EU Inc’: Founders Sound the Alarm

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Europe’s start-up scene is pulling the emergency brake: The EU-INC initiative led by the Austrian investor Andreas Klinger (Prototype Capital) warned on Thursday in an open letter to Europe’s heads of state and government that the planned European company form is being gutted in negotiations. The EU Inc that the governments themselves had championed “no longer exists,” the letter says. All that remains is fast incorporation, and that is not enough.

A Standard Modeled on Delaware

Mr. Klinger laid out what is at stake on LinkedIn: The EU Inc was supposed to work like the Delaware Inc in the United States. A start-up could, for example, register in the Netherlands but operate, hire and pay taxes in Bulgaria. The market would then align around a few standard jurisdictions with standard documents and matching software. The EU Inc was also meant to fix the taxation of stock options, so that employees are not taxed before they ever see any money from their shares.

Both are now being negotiated away, Mr. Klinger said. Without a standard, the EU Inc is useless, he argued: Europe already has more than 30 legal entity types, which is why experienced founders have long been turning to the Delaware Inc. Without a fix for stock options, Delaware remains the better choice. And if the E.U. cannot even deliver this basic infrastructure, Mr. Klinger asked, how will it ever build a pan-European stock exchange?

Five Demands to Governments

In the open letter, EU-INC calls on Europe’s leaders to give their negotiating teams a clear mandate to return to the European Commission’s original proposal. Specifically, the initiative demands:

• Free choice of registration: Founders should be able to register wherever they want, regardless of where they operate. Otherwise, no standard will emerge.
• Stock options: A broad framework for employee ownership, so that start-ups can compete with large corporations and U.S. tech companies for talent.
• A central digital registry: A single gateway with standardized KYC, AML and UBO data, for example to open bank accounts across borders.
• Local worker protections: Employees remain covered by the labor law of the country where they work, and taxes are still paid there.
• EU Inc for everyone: No restrictions on which industries can use it.

In fact, a compromise text from the Irish presidency of the Council of the E.U. deleted the central registry and limited stock option plans to companies with fewer than 1,000 employees and less than €450 million in revenue, Science|Business reported. A second text adds stricter checks at incorporation. Stéphane Séjourné, the European commissioner for prosperity and industrial strategy, pushed back: He said he could not imagine the so-called 28th regime without harmonized stock options.

More Than 300 Lobbying Meetings

The letter is the latest escalation in a lobbying battle that Trending Topics measured last week in an analysis of official databases. Since late 2024, there have been 275 meetings with members of the European Parliament and at least 33 at the Commission level. In Parliament, the start-up side logged 59 meetings, trade unions 50 and notaries 28. Lukas Mandl, an Austrian lawmaker from the conservative ÖVP, alone met with the notaries’ chamber seven times. At the Commission, the start-up side leads with at least 20 meetings, ahead of notaries with nine and unions with two. For comparison, the Corporate Europe Observatory counted 613 meetings with lawmakers in just under two years for the Digital Services Act, one of the most heavily lobbied E.U. laws. After little more than six months, the EU Inc has already reached nearly half that number. The report by the rapporteur René Repasi, a German Social Democrat, has drawn 1,418 amendments.

Concerns Over Co-Determination

Trade unions and notaries see the free choice of registration as the core problem. The European Trade Union Confederation and Germany’s Hans Böckler Foundation warn that companies could deliberately register where workers’ rights are weak, sidestepping national rules on employee board representation. Germany’s Federal Chamber of Notaries supports the goal of a European company form but warns of straw-man incorporations and new openings for money laundering, as Trending Topics showed in its overview of the battle over the EU Inc.

Co-determination is also where talks are stuck in Parliament. A vote in the Legal Affairs Committee scheduled for last Thursday was postponed because the rapporteurs could not agree. A new attempt is planned for Monday, and member states aim to finalize their negotiating mandate by the end of October. A political agreement is still targeted by the end of the year.