Reinier advises national and international companies
reinier.russell@russell.nl +31 20 301 55 55Jesper specialises in corporate litigation and governance
jesper.nooij@russell.nl +31 20 301 55 55The European Commission aims to introduce a new European legal entity in 2027: EU Inc. How does EU Inc. work? For which companies is this legal form suitable?
A significant development has recently taken place in Europe. The European Commission has submitted a proposal for a new type of legal entity: the EU Inc. With this move, the European Union aims to make it easier to set up a European legal entity that is the same across all EU Member States and can operate throughout the EU. The EU Inc. also offers significant advantages where certain activities require a legal entity to be established in another EU Member State. The existing legal form can be used, and a European register makes it straightforward to submit the company details relevant to the incorporation of an EU Inc. subsidiary.
The proposal stipulates that the EU Inc. must be incorporated with the commercial register of an EU Member State. In the Netherlands this will be the Chamber of Commerce. This can be done entirely online. A notary is not required for this. Furthermore, the EU Inc. may also be established through the conversion of an existing legal entity, a merger or a demerger, in which case a cross-border element is not required. To facilitate incorporation, the EU will make a template for the articles of association available.
Fewer requirements apply to the formation of the EU Inc. than to the current European legal forms: the European Company (SE) and the European Cooperative Society (SCE). The SE and the SCE can only be established with the approval of a notary, court or other competent authority, and by existing legal entities. Furthermore, the establishment of the SE and the SCE requires a cross-border element, whereas this will not be necessary for the EU Inc.
The EU Inc. has a board of directors which may consist of both natural persons and legal entities. It is required that at least one director be resident in the EU. The directors are appointed and, where applicable, dismissed by the General Meeting of Shareholders of the EU Inc. These directors jointly represent the company. This differs from the Dutch standard, under which each statutory director has individual power of representation. However, an EU Inc. may include such a provision in its articles of association.
In addition to the board, the EU Inc. also has shareholders. These shareholders not only have the right to appoint directors but may also amend the articles of association. The proposal requires a two-thirds (66.66 per cent) majority for this. This percentage may be reduced in the articles of association to 50 per cent plus one vote. Furthermore, the proposal allows for electronic meetings. In doing so, the EU Inc. addresses a practical need. It will also be possible to transfer shares online without the involvement of a notary.
Finally, it is also possible for the EU Inc. to establish a supervisory body. The proposal does not go into further detail regarding the procedures, powers and composition of such a body. This could mean that these matters can be regulated entirely in the articles of association, drawing inspiration from the provisions of national company law (NV/BV).
The EU Inc. is primarily intended to make it easier for start-ups and scale-ups to supply goods and services across the EU. However, the EU Inc. also offers other businesses – particularly small and medium-sized enterprises – greater opportunities for internationalisation. It may also make it more attractive for companies from outside the EU to set up and expand their businesses within the EU.
The introduction of the EU Inc. is still in its early stages. The European Parliament and the European Council have yet to negotiate the proposal. Furthermore, criticism has been voiced from various quarters regarding the proposal in its current form. The EU Inc. could potentially lead to forum shopping, resulting in a deterioration of employee participation (works councils) or the emergence of letterbox companies. Furthermore, there would be insufficient oversight of the EU Inc., as it can be incorporated without the involvement of a court, notary or other competent authority.
The EU Inc. is intended to make it easier to do business across the EU as a whole. It will therefore be interesting to see how this proposal develops further, including for companies from outside the EU.
Would you like to know more about the EU Inc.? Or do you have any questions about setting up or converting a legal entity? The corporate law specialists of Russell Advocaten will be happy to assist you. Please contact us:
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