Abstract

European debates on competitiveness increasingly treat corporate law as a lever to help innovative firms scale. The European Commission’s Proposal for a new “28th regime” seeks to introduce an optional, EU-wide corporate legal form (EU Inc.) designed to facilitate the cross-border scaling of innovative firms. A central instrument of the Proposal is the use of model articles of association to be adopted through future implementing acts. This article argues that, while standardised articles may ease incorporation and lower drafting costs for ordinary unlisted firms, they fall short for venture capital (VC) backed companies. The authors identify four shortcomings: the architecture is incomplete; the drafting process is overly generalist; the logic risks clashing with asymmetric deal structures; and the legal protection is limited.

Introduction

Europe’s concern that legal fragmentation constrains the scaling of innovation-driving firms moved from diagnosis to institutional design on 18 March 2026. The EU Commission unveiled a Proposal for a Regulation establishing a 28th corporate law regime, informally known as “EU Inc.” This regime is targeted on reducing fragmentation and facilitating firm creation. An essential device for achieving these objectives is a statutory template for articles of association. However, this article argues that the Proposal does not offer a well-designed solution for VC-backed firms. Prior work suggests that the contractual technology for VC deals deployed in the United States creates a coordinated set of arrangements distributed across articles of association and shareholder agreements. In jurisdictions like Germany and Italy, the legal environment is averse to such technologies because legal gatekeepers and adjudicators take an interventionist approach that distorts the economic logic of the contracts.

The proposal and its model documents

The proposition of an optional EU-wide corporate law framework emerged through reports by Enrico Letta and Mario Draghi. The European Commission’s Start-up and Scale-up Strategy of May 2025 placed the project on the policy agenda. Initially, model documents were not prominent until a Draft Report on 30 June 2025 called for both model articles of association and a model shareholder agreement. The EU Parliament’s Resolution of 20 January 2026 endorsed this two-template structure. However, the Commission’s Proposal narrowed the scope to model articles only. Because matters not governed by the Regulation fall within Member States’ corporate laws, shareholder agreements will remain subject to national mandatory laws. The drafting of these articles is now entrusted to the Commission and implemented through delegated rulemaking, without explicitly retaining the previously proposed two-expert-group architecture.

What VC-backed firms need, What they cannot get, and how to solve the problem

VC-backed firms operate amid severe uncertainty and information asymmetries. Economists expect contracts to play a central role in allocating cash-flow and control rights to mitigate these frictions. Ideally, corporate law should take a restrained view of mandatory law and exercise restraint in ex post gap-filling. Delaware corporate law approximates this benchmark, allowing a highly specific contractual technology to evolve. In contrast, rigid corporate law in Europe generates a functional gap. Prohibitions and uncertainty penetrate practice through gatekeepers like counsel and notaries who may block clauses inconsistent with prevailing interpretations. Empirical evidence shows that VC supply is sensitive to this legal environment. One proposed response is an explicit statutory provision insulating VC arrangements from restrictive interpretations and a template consisting of model articles and coordinated shareholder agreements.

Four concerns about the proposal

The authors raise four primary concerns. First, the Proposal’s scope is limited to model articles, preventing the deliberate coordination with shareholder agreements required for sophisticated VC contracting. Second, the process for drafting model articles involves a consultation directed at a broad population. A 28th regime consultation in 2025 received 1,470 responses, with 534 (36%) from companies, of which 96% were small and medium-sized enterprises. This risks a compromise solution serving standardised governance defaults rather than specialised VC needs. Third, the Proposal inscribes a fairness-oriented posture into the design, which clashes with the asymmetric logic of VC deals. Finally, the safe-harbour effects are limited to the formation stage, meaning national adjudicators could still find clauses unlawful after incorporation.

Four suggestions

Four adjustments are proposed to improve the initiative. The Commission should restore the model shareholder agreement to deliver a functionally integrated package. A dedicated drafting track should be created, supported by a specialised body including VC practitioners and lawyers to insulate templates from generalist compromises. The design mandate should abandon fairness as an organising principle for VC templates, accepting that sophisticated parties can agree to asymmetric structures. Finally, a comprehensive safe harbour should be established to preclude substantive content review at formation and provide a presumption of validity ex post, constrained by explicit interpretive rules.

Conclusion

The EU Inc. Proposal is a potentially important moment for European company law development. It reflects recognition that corporate law facilitates the scaling of innovation-driving firms. However, as currently designed, the Proposal outlines a response that is poorly calibrated for VC-backed firms. The authors advocate for four correctives: a model shareholder agreement, a dedicated drafting track, a design mandate free of fairness orientation, and a real safe harbour operating both ex ante and ex post.