EU founders warn lawmakers against 'watering down' proposed EU Inc. status
Venture capitalists and entrepreneurs are pushing for a unified corporate statute to stop the brain drain to Delaware.
European unicorn founders and venture capitalists have issued an open letter urging EU lawmakers to maintain the strength of the proposed 'EU Inc.' corporate status. The initiative aims to create a harmonized, EU-wide company statute to reduce the legal fragmentation that currently hinders startups scaling across the bloc.
The proposed status would be an optional framework usable anywhere in the EU from day one. Advocates are pushing for concrete efficiency measures, including a 48-hour company formation timeline and a cost cap of €100. A critical component of the proposal is full digitalization, which would remove the requirement for a physical presence during incorporation. Furthermore, a central demand from the campaign is a shift in tax policy, ensuring employees are taxed on stock options only upon the sale of underlying shares rather than at the time of the grant.
The Delaware Dilemma
Currently, European startups operate within a fragmented legal landscape, facing inconsistent national rules and the need for complex layered holding companies. This friction often drives founders to incorporate in the United States—specifically as Delaware C Corps—to attract global investment and scale more efficiently. The 'EU Inc.' movement seeks to replicate this legal certainty within Europe to prevent the 'brain drain' of high-growth companies moving their headquarters abroad.
Industry Support and Political Friction
The campaign has garnered support from some of the most influential figures in venture capital, including Niklas Zennström of Atomico, Sonali De Rycker of Accel, and Michael Moritz of Sequoia. In their open letter, the group stated that the initiative has the potential to "remove much of the friction and fragmentation that continue to throttle European companies, unlock investment and spur a new wave of entrepreneurship."
However, the proposal faces significant pushback from national interests. Germany’s association of notaries has criticized the move, as the push for digitalization threatens the role of traditional intermediaries. Simultaneously, labor unions and researchers from the ETUI have raised concerns regarding "regime shopping." They argue that a unified status could allow companies to register in low-wage countries with weaker labor protections to undermine workers' rights.
The Path Forward
As negotiations continue between the European Parliament and the Council, the outcome remains uncertain. Founders have warned that if the final legislation does not provide the same level of legal certainty as a Delaware incorporation, they will continue to look toward the U.S. for their corporate structures. The primary tension remains whether the EU can balance the demand for startup efficiency with the protection of national professional lobbies and labor standards.