Corporate Templates in the EU Inc. Proposal: Their Limitations and Why They Matter for European VC-backed Startups

The European Commission’s proposal for a new optional company form—often referred to as “EU Inc.”—marks an important step in European company law. By aiming to reduce legal fragmentation and facilitate cross-border scaling, it seeks to address persistent obstacles to the growth of (innovative) European firms. A central instrument in this design is the introduction of standardised templates for the articles of association.

These templates could, in principle, become the regime’s main operational lever. But, as we argue in our recent paper, the proposal turns that promise into a missed opportunity. The choices it makes on the scope, design, and legal effects of templates are unlikely to support the firms that motivated the initiative—those relying on external investors to scale quickly.

Shortly after the publication of the proposal, we argued that the proposal underestimates how corporate law, in practice, constrains the contractual arrangements used by venture capitalists and startup founders. Templates bring this problem into focus. For these firms, financing depends on a coordinated set of arrangements that allocate economic and control rights in a flexible and often asymmetric way. Templates can add value only if they accommodate and protect that contractual architecture. As currently conceived, they do not.

To see why, consider that firms that rely on external investors operate under conditions of deep uncertainty and information asymmetry. Investors face the risk that founders may take actions that are not aligned with their interests. Founders, in turn, risk losing control of their company if things go wrong. Contracts are used to manage these tensions.

In more developed markets, these contracts follow a well-established pattern. They allocate economic returns and control rights in a flexible and often uneven way. Investors may gain strong control rights if the company underperforms, and a large share of the value if it is sold under unfavourable conditions. These arrangements are not accidental. They are designed to make investment possible in situations where risk is high and information is limited.

Crucially, these arrangements are not contained in a single document. They are spread across the company’s articles of association and separate agreements among shareholders. The two sets of documents are tightly coordinated and work together as a single structure.

This is precisely where European corporate law creates difficulties. In several jurisdictions, including Italy and Germany, many of these arrangements are either not allowed or are subject to significant uncertainty. Legal professionals may refuse to include them in company documents, and courts may later reinterpret or invalidate them. The result is a weaker contractual framework and, ultimately, more expensive or less available funding.

The 28th regime aims to overcome these problems by offering a new, EU-wide corporate form. But when it comes to templates, it only goes halfway.

The first limitation is its narrow scope. The proposal provides for model articles of association, but not for model agreements among shareholders. This is a serious gap. If the relevant contractual structure depends on the interaction between the two, standardising only one of them cannot reproduce the intended effect. The missing piece is left to national law, with all its constraints and uncertainties.

The second limitation concerns how the templates will be drafted. The proposal assigns this task to the European Commission, relying on a broad consultation process. This is likely to produce templates that reflect broad and heterogeneous preferences, but the deeper concern lies elsewhere. The process does not create strong incentives to produce instruments that track market practice or to update them as that practice evolves. Nor does it appear to mobilise the specialised expertise required for the task. The contractual arrangements used in investor-backed firms are not a loose collection of clauses, but a tightly coordinated and continuously refined architecture. In the United States, comparable templates have emerged from sustained investment by practitioner communities, drawing on repeated use in real transactions and constant feedback from investors and founders. Replicating that outcome through a generalist, Commission-led process raises both an incentive problem—whether the European Commission will invest the resources needed to ensure that templates respond to, and remain aligned with, evolving market practice—and a competence problem—whether it can effectively mobilise the technical expertise required to design and maintain such an integrated contractual system.

The third limitation lies in the underlying approach to fairness. The proposal places strong emphasis on balancing the interests of different shareholders and protecting minorities. While these are important goals, they sit uneasily with the logic of venture-capital-backed firms. In those settings, contracts often rely on asymmetric allocations of rights and returns. Trying to impose a notion of balance risks undermining the very mechanisms that make investment viable.

The fourth limitation concerns legal certainty. The proposal offers some procedural advantages to firms that adopt the standard articles, such as faster incorporation. But it is unclear whether the content of those articles will be protected from later challenges. If courts or other authorities remain free to reinterpret or invalidate key provisions, the benefits of standardisation are limited. 

Taken together, these shortcomings suggest that the proposal does not yet provide a reliable framework for the firms it is meant to support. What would a more effective approach look like?

First, the regime should include not only model articles of association but also model agreements among shareholders. The goal is not formal symmetry, but functional completeness. The two sets of documents must be designed together.

Second, the drafting process should involve those with direct experience in structuring venture capital deals: investors, founders, and specialised lawyers. Without that input, the templates risk being too generic. (One of us suggested a more radical solution: delegating the task of issuing templates to private bodies authorised by the European Commission, in line with the New Legislative Framework.)

Third, policymakers should avoid building the templates around an abstract notion of fairness. The focus should instead be on enabling informed parties to adopt arrangements that reflect their economic objectives, even if those arrangements are uneven in their outcomes.

Finally, the regime should provide stronger legal protection for firms that adopt the templates. This means not only simplifying incorporation but also limiting the scope for later challenges and reinterpretations. Without such protection, the benefits of standardisation will remain uncertain.

The broader point is that corporate law is not just about reducing administrative burdens. It shapes the terms on which investment takes place. If Europe wants to foster innovative firms, it needs to ensure that its legal framework supports, rather than constrains, the contractual tools on which those firms depend.

To conclude, the 28th regime is a step in that direction. But in its current form, as the provision on templates illustrates, it risks being a missed opportunity.

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Luca Enriques is a Professor of Business Law at the Bocconi University Department of Legal Studies, and an ECGI Fellow, Board and Research Member.

Casimiro A. Nigro is a Lecturer in Business Law at the University of Leeds.

Tobias Tröger is a Professor of Private Law, Commercial and Business Law and Jurisprudence at Goethe-University Frankfurt am Main, and an ECGI Research Member.

This blog is based on a discussion held at the 7th LawFin Workshop The 28th Regime: An Effective Legal Architecture for Innovation in Europe?. Visit the event page to explore more conference-related blogs.

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