*by Michael McGrath
Europe is unique. It has world-class talent, a market of 450 million consumers and a strong tradition of stability and the rule of law. But in a rapidly changing global economy, we need to ensure that Europe remains a place where entrepreneurs choose to build, innovate and grow.
Geopolitical tensions are rising, supply chains are changing and competition between major economies is intensifying. Companies today have serious decisions to make about where they choose to invest and expand. As the Draghi report also pointed out, Europe needs to do more to strengthen its competitiveness and support European entrepreneurs more effectively.
Competitiveness means that innovation can thrive alongside fairness, that growth can go hand in hand with stability, and that opportunity can rest on trust. In an unpredictable world, the above are not only economic advantages, but also underpin Europe’s political resilience, global influence and democratic stability.
To maintain and strengthen this competitive advantage, the EU needs to make full use of the potential of its single market. On paper, it is the largest market in the world. In practice, its potential remains partly untapped, especially for companies seeking to expand cross-border within the EU. Today, businesses wishing to expand within the EU are faced with 27 different company law systems. This fragmentation slows down the growth of businesses, especially start-ups and scale-ups, increases costs and discourages them from expanding in Europe.
That is why in the current week I will present the proposal for the 28th regimewhich we call, more simply, ‘EU Inc’. It is an optional, digital-by-definition European business framework designed to help businesses start up, operate and grow across the EU, giving them incentives to stay in Europe.
Last year, my colleagues at the European Commission and I asked entrepreneurs, investors and stakeholders across the EU. Their message was clear: Europe needs a simpler, more predictable corporate framework for companies that want to do business across borders.
Over 85% of respondents to our targeted consultation said differences in national company law were a major barrier, while nearly three quarters said the lack of a recognizable EU trademark for private companies made it difficult to attract investment.
The EU Inc framework provides a direct response to these concerns. It will provide a single, optional and harmonized set of corporate rules that companies can choose from, rather than being faced with multiple national regimes. Although it is designed with the needs of innovators, start-ups and scaling companies in mind, it will not be limited to them, but will appeal to all company founders and all businesses.
Companies choosing the EU Inc format will have faster and simpler procedures available to them. Entrepreneurs will be able to register their companies fully online within 48 hours through a single point of access, with no minimum capital requirements. Corporate processes will be digital by default throughout the company’s life cycle, with online shareholder and board meetings and streamlined digital insolvency procedures.
The EU Inc initiative will also help European companies compete for talent. One of Europe’s greatest assets is its talent pool. However, companies often struggle to provide competitive incentives at the necessary scale. The new framework will make it easier to grant stock options to employees, with common features across the EU. So companies can attract and retain the talent they need to grow.
Access to funds will also become easier. By providing a clearer and more predictable corporate structure, the EU Inc initiative will make it simpler for companies to raise equity across borders throughout their development cycle, from the start-up phase to the critical phase of expansion.
This is important because very often European companies encounter obstacles where they are ready to grow. Faced with regulatory complexity in the single market, many are choosing to expand elsewhere—notably in the US.
Europe should be the best place in the world to build your business. We have the talent needed. We also have the ideas. Our aim is to create a regulatory environment where companies can expand with equal ease across Europe or within a single country, and to keep European innovation in Europe.
The 28th Regime is therefore not just a technical reform of company law. It aims to fully exploit the potential of the single market.
At the same time, Europe’s competitiveness must remain grounded in our core values: reliability, predictability and respect for the rule of law. These values foster trust, which is one of the strongest drivers of sustainable development. This will create better jobs and more opportunities for our citizens and boost living standards and Europe’s ability to set global standards.
European entrepreneurs should not be forced to leave Europe to develop their ideas. By providing businesses with speed, simplicity and scale, with the level of certainty and trust that Europe is known for, the EU Inc framework can create the conditions for the next generation of EU companies to grow.
Our message is simple: Do you want to grow in the future? Europe is open for business.
*European Commissioner