Europe must take radical action to remain competitive. Among the long list of potential reforms, one of particular interest is the new EU-wide enterprise status for innovative companies.
Known (somewhat vaguely) as the “28th Regime”, this innovation is being billed as Europe’s response to the Delaware C-Corp and will add to those already existing in the EU’s 27 member states. Now, with the backing of a grassroots movement backed by entrepreneurs and VCs, it has taken on a much more palatable name and unexpected momentum: “EU Inc.” The EU Inc petition, launched on October 14, has already garnered around 11,000 signatures.
The American connotation of the term Inc is no coincidence. While startups and VCs around the world are now familiar with Delaware C Corp, Europe still has a gap in that respect. The existing formula, ‘Societas Europaea’ (Europe Loves Latin), was aimed at large corporations but failed to gain traction or widespread use. As a result, expanding across the continent is still a challenging process that must be undertaken on a country-by-country basis, adding to the reason why pan-European technology champions are still rare.
The EU Inc petition, which expects the new corporate vehicle to boost cross-border investment in European startups, has received support from an entire VC firm and startup founders and investors such as Niklas Zennström and Patrick Collison.
Andreas Klinger, an entrepreneur turned investor and one of the four leaders of the petition, recalled how his first company was all British because options distribution capabilities in places like France and Germany were so poor at the time. I order it. He said the main problem for European startups is “a very fundamental structural problem.” He and his EU Inc backers effectively marched towards the EU Commission. “A, the startup community needs this and wants this. B, it’s urgent. And make sure C is implemented in the right way,” he told TechCrunch in an interview.
In a recently added roadmap, the EU Inc movement set a target of submitting a final petition by December 1, with the hope that the new EU panel that takes office will make this part of its agenda for the next five years.
It would certainly be helpful to have tacit support within the House of Commons, or rather the European Commission, as both Enrico Letta and Mario Draghi, as well as President Ursula von der Leyen, have recently commissioned reports pledging a 28th government. no see. But with so many issues and sectors competing for attention, campaigns will have to be careful not to lose momentum. The campaign therefore calls on the European startup ecosystem to unite around the initiative.
The rally appears to be going well through France Digitale, the French startup and VC lobbying organization. A working paper calling for a 28th regime was already in the works before the EU Inc campaign began and has now been endorsed by several other startup associations across Europe.
This kind of national support could be key to success. But even more so considering the level of detail included in the proposal, which France Digitale wrote and revised after speaking with its colleagues. For example, co-author Antoine Latran pointed out in TechCrunch that the study calls for “regulations” rather than guidelines to avoid unwanted differences in national transpositions. This is one of the lessons France Digitale has learned from Societas Europaea, a cross-border legal format that “has proven not to work in practice for startups, SMEs and high-growth companies.”
EU Inc and its backers will certainly want to draw on past experience, including the Not Optional campaign, which helped improve stock options policies in 11 European countries. Martin Mignot, Partner at Index Ventures, told TechCrunch that while he and his team are EU Inc enthusiasts, leading previous campaigns has shown that there is a long road ahead. ”
And some observers worry that Europe’s aspirations for a Delaware corporate structure will be thwarted by bureaucracy and nation-states.
“For the EU Inc, there are serious doubts whether the countries will be able to agree on common standards that are easy to understand and, most importantly, not too bureaucratic,” Steve Jeitler, a lawyer by profession, told TechCrunch. . The Austria-based partner at law firm E+H Rechtsanwälte gave examples of very different capital maintenance regimes across EU countries.
“Applying the (strict) Austrian or German capital maintenance regime to all EU Inc would be somewhat unattractive in countries with ‘not so stringent’ regimes,” Jeitler wrote. France Digitale addressed this specific point in a non-paper, calling for “1€ companies”.
But there will be many other similar obstacles along the way. “The devil is in the details. We have to be very careful about this,” Mignot said.
Brexit is another worm, but Mignot hopes the UK can still follow suit. “They can say, ‘Look, if you’re EU Inc, it works for us too.’” EU Inc shares a similar outlook. The FAQ notes that while “launching EU-centric solutions will have the greatest impact,” the focus is “on Europe, not the EU”.
There is a growing consensus that action must be taken to ensure that the region is not left behind, whether in Europe or the EU. Deep tech investor Michael Jackson says: “Europe is in a much more competitive environment than it was 30 or 40 years ago. Right? China is the big panda in the room. There are other parts of the world that are actually starting to grow their economies and focus on technology and innovation. “Europe cannot sit on the sidelines,” he said.
Still, it is difficult to curb the enthusiasm of EU Inc activists like Klinger. “The amazing thing about all of this is that it’s actually going to happen. (…) This is about us as an industry being very clear, very focused, on one topic and saying, ‘This is important,’ not a list of 20 requests. Plus, it can be a platform for all kinds of important things that are very complicated in Europe, like stock options and liquidations.”
