Recently, the European Commission published a draft regulation for a new legal form of a European capital company, the EU Inc.1.
Despite a population of over 450 million people, public support for innovation, and robust infrastructure by international comparison, the European Union, by its own assessment, currently lags behind its major competitors.2 This prompted the draft regulation on the EU Inc.
The core objective is to create a legal form that is able to "raise equity in a flexible manner, and founders and shareholders should be able to freely choose the appropriate financing options without facing unnecessary legal constraints due to differing national regulations."3 While the new legal form envisioned by the Commission indeed offers simplification for capital measures and a radical reform of formal requirements for share transfers, the draft simultaneously exhibits significant shortcomings, for instance, regarding shareholder transparency, the integrity of capital contributions, and creditor protection. Some assumptions in the draft regulation are illusory or – if I may offer a harsh critique – ill-conceived and facilitate dishonest schemes.
The draft regulation (VO) employs the following regulatory technique: The VO regulates only some, but not all, aspects of the EU Inc. The areas not regulated in the VO are primarily4 by the national law concerning the GmbH to be supplemented.
To the extent that the VO contains regulations for the EU Inc, it can be criticized for not having evaluated the meaningfulness and practical applicability of the proposed regulations.5
Below, we will highlight the most important topics regulated by the draft:
EU Inc is intended to have its own legal personality and be able to operate a business. This implies that the shareholders are not personally liable for the debts of EU Inc. EU Inc is established upon registration in the register. However, while Austria has a uniform company register, for the Union, only the option of registering at a "single point" is currently envisaged.6 EU Inc will then, however, be registered in the respective national company/commercial register.
The draft provides neither for a minimum share capital nor for the obligation to draw up at least a business plan to seriously assess the likelihood of success of the business project. Instead, at a later stage, only for the question of whether profits may be distributed, with legallyuncertain tests (balance sheet test; solvency test) will suffice. Overall, EU Inc would encourage speculation at the expense of creditors.
If shareholders make contributions in kind, which is not mandatory, the draft regulates in the event of overvaluation of contributions in kind – similar to § 10a of the Austrian GmbH Act – a difference liability of the contributor in kind. However, the problem of inconsistency arises here: Does the statute of limitations provision of § 10a GmbHG now apply7 subsidiarily or does the draft contain an exhaustive regulation? What is meant when it is stated that contributions in kind "should not be brought into the capital"? This could be interpreted, on the one hand, as a focus on the nominal value, and on the other hand, that parts of the contribution in kind represent debt capital. In Austria, the difference liability also includes the agreed premium (agio)8, as well as the value of the entire contribution in kind must be examined. It also remains unclear whether national law regarding hidden contributions in kind must be applied9 and whether "acquisitions in kind" in the sense of stock corporation law terminology are permissible.
The articles of association of EU Inc must be submitted to the register in two languages – both in the language of the country and in English ("a language customary in the sphere of international business and finance") – whereas in Austria, for a GmbH, the articles of association in German are sufficient. While English is generally the most widely spoken language in the Union, as a native language, German, French, and Italian are more widely spoken.
The requirement for bilingualism is, in most cases, superfluous, at least at the beginning of business operations, and incurs costs. This will lead shareholders to forgo detailed contract drafting that serves their interests, opting instead for brief, less adequate provisions due to cost considerations.
Based on the argument that the formation of an EU Inc should not require legal advice, the intention is to provide founders with 'EU templates' – i.e., templates for incorporation – instead. These will be available in multiple languages and are presumed to be 'drawn up and certified in due legal form in accordance with national laws'. These 'EU templates' will be created through regulations.
Member States (MS) must ensure that all procedures within the scope of the law can be conducted digitally are ('Principle of digital-only procedures'). However, if 'duly justified by overriding reason', national legislators can still deviate from this principle, although the extent of this possibility does not seem clear. Communication between shareholders and the company should also take place online, unless otherwise stipulated in the articles of association or agreed between the company and its shareholders. Member States must also implement the 'Principle of digital-only procedures' for payments. Due to the word 'procedure', this is unlikely to affect internal company relations.
Both the registered office ('registered office') and the actual administrative headquarters ('central administration or principal place of business') must be located within the Union, but can be in different Member States. This certainly does not contribute to simplification and is prone to causing legal complications. The law applicable to the EU Inc is additionally determined by the registered office.
Employee co-determination in the company's bodies is intended to be determined, in deviation from the acquis by the registered office. As a result, by arbitrarily choosing the registered office, employee co-determination in those states that have it could be avoided without major difficulties.
The draft stipulates that the practically important information of who a shareholder of the EU Inc is, is neither entered in the register nor published. Business transactions cannot, therefore, easily ascertain this information, nor the majority and control relationships. A justification for this is missing. This can be disadvantageous for tax authorities, as well as for creditors, insolvency administrators, and the shareholders themselves. Anti-money laundering issues remain completely unaddressed. Only the sole shareholder, if one exists, is to be disclosed, similar to a stock corporation (AG).
The EU Inc requires one or more managing directors. At least one of the managing directors must have their habitual residence within the European Union. Managing directors are appointed by the General Meeting of Shareholders and are subject to its instructions. The liability of the managing directors is explicitly determined by national law, including the Business Judgment Rule10. The managing directors must safeguard the interests of the company. If a managing director is subject to a conflict of interest11, they must inform the other managing directors, or if there are no "other managing directors", the General Meeting. A managing director cannot participate in a decision if they are subject to a conflict of interest, unless the General Meeting or the articles of association authorize them to do so.
Managing directors must not be "disqualified", specifically, they must not be disqualified in any Member State. Due to a European framework, "disqualification" has been an exclusion criterion EU-wide since 1 January 2024 for all managing directors of GmbHs and FlexCos, as well as for all board members of corporations12, although regulated differently in detail from state to state. Should the EU Inc come into force as regulated by the draft, the 27 different regulations of the individual Member States would now have to be observed.
A supervisory board is not foreseen for the EU Inc according to European legal requirements; however, the supervisory board obligation under Austrian GmbH law would likely apply subsidiarily, provided the EU Inc chooses a location in Austria for its registered office. Anyone wishing to avoid this legal consequence merely needs to choose a registered office in another state that does not have a supervisory board obligation or at least no employee co-determination like Austria.
The highest body of the EU Inc is the General Meeting of Shareholders. General Meetings should be possible to hold online or in a hybrid format.13 The managing directors are responsible for convening the meeting, but it is not clear whether the minority right of shareholders to demand the convening of the General Meeting and to convene it themselves also applies subsidiarily, as is the case for the Austrian GmbH.
Written resolutions are also possible, provided all shareholders agree to this form of decision-making or the articles of association14 as stipulated.
Shareholder resolutions are generally passed by a simple majority vote. For amendments to the articles of association – including capital increases – a 2/3 majority (!) is stipulated. This lower majority quorum compared to a GmbH would necessitate a change in negotiation strategy when negotiating equity stakes, if one wishes to reserve a 'blocking minority': While in a GmbH, a 75% majority is required to protect the minority shareholders, which in a GmbH – unlike in an AG15 – cannot be reduced in the articles of association16, a blocking minority in an EU Inc requires not – as in a GmbH more than 25% – but more than 1/3 of the votes!
If there are different classes of shares, the separate consent of each class of shares is required for contract amendments in some cases.17 For resolutions introducing additional contribution obligations or liability assumptions, the consent of every affected shareholder is required.18
In Austria, § 50 para. 3 of the GmbH Act requires unanimity for changes to the company's business purpose, as the Austrian legislator considered this to be the 'most fundamental restructuring'.19 Draft Article 49, which stipulates a 2/3 majority, does not clarify whether unanimity (§ 50 para. 3 GmbHG) is additionally applicable in this case.
Whether shareholders who are subject to a conflict of interest when voting at the general meeting are excluded from voting rights20, is not regulated in the draft.
Under Austrian GmbH law, certain capital investments21, if they exceed 20% of the share capital22, require approval by shareholder resolution – and this even generally with a 3/4 majority. Certain other types of transactions require – if a supervisory board is appointed – the approval of the supervisory board23. The disposal of the company's entire assets even requires, for its effectiveness, the approval of the general meeting with a 3/4 majority. The draft itself does not contain any transactions requiring approval, which again means there is no legal certainty as to whether the approval requirements under Austrian GmbH law also apply to an Austrian EU Inc.
In the draft, however, it is only stated that managing directors can exercise "all the powers of the company that are not required, by the applicable rules". Furthermore, for resolutions requiring a qualified majority, a 2/3 majority of votes applies, although the articles of association may provide otherwise.
The shareholders of the EU Inc are not to be entered in the commercial register. Rather, the managing directors of the EU Inc – as was previously the case24 with the Austrian GmbH – are to maintain a shareholder list , namely digitally. The list of shareholders, however, does not have to be submitted to the company register.
For the transfer of a business share, a secure electronic signature (eIDAS25-signature) should be sufficient. „The transfer of shares shall only become effective once it has been recorded in the digital register of shares.“ „The registration of shares into the digital register of shares shall have constitutive effect and evidence the ownership of the shares.“ The formal requirement of a notarial deed or – in the case of a FlexCo – a private deed drawn up by a lawyer or notary, including the associated duty of disclosure of the notary/lawyer, is thus implicitly abolished.
This could particularly cause problems if a share sale is disputed, for example in the case of a double sale, if ultimately the managing director – not the court – decides who becomes a shareholder by entering one or the other acquirer into the list of shareholders.
Unlike with the Austrian GmbH and FlexCo, it should also be possible for the EU Inc to26 on a multilateral trading facility27 to trade. However, bearer shares are not possible.
Whether capital maintenance concerns the entire company assets28 or merely the assets required to maintain the share capital are tied up29, cannot be inferred from the draft regulation. This may be decided by national law, depending on whether there is any tied-up equity at all. Recital 46 states: „The amount of capital of the EU Inc should therefore not be legally prescribed and can be 0 EUR throughout the company's lifetime. If no capital is present, modern and highly effective safeguards for creditors should be provided in other ways, in particular through balance sheet and solvency tests as a prerequisite for distributions to shareholders. Only if the founders and shareholders choose to build up capital should this capital be subject to the usual maintenance rules.“
In the event of a capital increase, the existing shareholders have a Pre-emptive Rights. According to the draft regulation, however, these can be excluded in the articles of association or by the general meeting, as well as by the management. It is not stated whether an objective justification in the overriding interest of the company and the setting of a premium corresponding to the intrinsic value of the company are necessary for this.30
Pre-emptive rights are excluded if they concern claims arising from instruments that enable the subscription of new shares.31 While the subscription period according to the acquis32 must be "at least" 14 days, only 14 days are stipulated in the draft. In comparison: For the Austrian GmbH, the subscription period is generally 4 weeks and cannot be shortened to less than 14 days.
The capital increase itself requires a shareholder resolution with a 2/3 majority, as does the exclusion of pre-emptive rights. This follows from Article 83 of the GesellschaftsRG. However, it is unclear whether states can reduce this majority. It also remains unclear what requirements the resolution must meet, particularly whether the purpose of the capital increase must be stated in certain cases.33 Furthermore, it should be noted that the registration of the capital increase in the commercial register in Austria has a constitutive effect.34
One of the achievements that the Austrian legislator brought with the introduction of the Flexible Company (FlexCo)35 A key provision effective January 1, 2024, was the enablement of flexible financing through conditional, authorized, and authorized conditional capital. For the EU Inc, it is also foreseen that the management board can be authorized to issue new shares. The management board can also be granted the power to exclude pre-emption rights. In the EU Inc, these powers can also be transferred to a corporate body other than the shareholders; however, in Austria, a shareholder resolution is mandatory for the FlexCo. Under Austrian law, the exclusion of pre-emption rights requires objective justification, provided that the articles of association of the GmbH or FlexCo stipulate it from the outset.36
For the permissibility of a capital reduction, it is explicitly neither a creditor call nor the notification of existing creditors is provided for, but for assessing its permissibility, both a "balance sheet test", a "solvency test", and a capital reduction audit ("a report of an independent expert appointed or approved by an administrative or judicial authority") must be carried out. It is conceivable, however, that a creditor call may be required for the Austrian EU Inc due to national law.
New for the Austrian observer is the right of every shareholder to exit for good cause with the right to compensation, as provided for in the draft: Accordingly, minority shareholders can exit the company by court decision if the court finds that the company's business is being or has been conducted in disregard of the shareholder's rights.37
Scenarios that would allow an exit include the withdrawal of significant company assets, the general meeting instructing the managing director to miss a significant business opportunity, or a substantial change in the company's activities.38
The minority shareholder will then be compensated at "fair value". However, the draft does not specify whether damages for the actions of the majority shareholders leading to the exit and the resulting sustained business losses should also be included in and considered for the fair value.
For the compensation, the remaining shareholders and the company are jointly and severally liable.39
Redeemable Shares
The concept also includes "Redeemable shares" (repurchasable shares), meaning shares that can be redeemed if the company, the shareholder, or both so desire. A redemption price will likely need to be set, which must be paid from distributable profits.
Under Austrian GmbH law, every shareholder has the right to (at any time) inspect company records; this can only be excluded by the articles of association if a supervisory board has been appointed. In contrast, such a right to inspect company records is not intended to exist in the EU Inc unless it is stipulated in the articles of association.40
However, it is again unclear whether a shareholder's right to inspect company records fundamentally does not exist in the Austrian EU Inc, or whether the Austrian GmbH Act intervenes complementarily and protectively. This is because it remains unresolved which protective rights the national legislator may provide beyond the draft or which will apply.
A minority right to a special audit also exists for a 10% shareholder minority in the EU Inc41. The articles of association can also tie this minority right to a lower shareholding.
Under Austrian GmbH law, claims for damages that the company has against its corporate bodies or shareholders can be asserted based on a shareholder resolution. Shareholders affected by the claim are excluded from voting on the resolution. Additionally, there is the instrument of the minority action for damages, which allows a minority to pursue claims for compensation.42.
The draft for the EU Inc contains no provisions on this matter, which is why national regulations will likely apply.
The draft regulation contains no provisions on the topics of action for the removal of managing directors for good cause43; judicial removal of supervisory board members for good cause44, as they apply in Austria for GmbHs and FlexCos. Other minority rights, such as the right to demand the convening of a general meeting45 or to supplement the agenda46 or the right to remove liquidators for good cause47 are not provided for in the draft regulation. These instruments of minority protection would apply to an EU Inc with its registered office in Austria by virtue of the subsidiarily applicable GmbH law.
Whether shareholders can bring an action against the managing directors of the EU Inc for refraining from ultra vires conduct – for example, if they intend to conduct business outside the scope of the company's objects or without the necessary approval by shareholder resolution or the supervisory board – is neither regulated in the present draft regulation nor under Austrian law48.
The EU Inc can issue "warrants" (options to acquire shares) to employees. This also facilitates the regulation of "approved conditional capital" – a term used in Austrian legal parlance.49. Within the framework of the "EU-ESO", a Union-wide regulation regarding taxation will also be established.
The draft regulation does not specify the conditions under which the directors of the EU Inc must file for insolvency. Therefore, national law is likely to be decisive.
For profit distribution, for the purchase of own shares, as well as for the cancellation or return of such shares, a balance sheet test is to be conducted, which, however, does not focus on actual over-indebtedness, and furthermore, a legallyuncertain solvency test should be decisive. However, these tests are unlikely to be decisive for determining insolvency.50
Also with regard to the dissolution and liquidation of the EU Inc, a “fast-track” procedure is provided for. The consent of known creditors must be obtained if the company has liabilities. All creditors can object to the accelerated liquidation procedure within the “relatively short deadline” of 30 days for the company's deletion. Objections can also be raised by creditors who initially consented, provided they can provide valid reasons. The directors are liable to creditors for any remaining claims in the event of a fraudulent or false declaration regarding the existence of consent.
For “innovative startups”51 is a "fast-track" insolvency procedure provided for, with the option of not appointing an insolvency administrator. All communication is to take place digitally.
Commentary: Why such haste is being shown here is incomprehensible. Especially since the final balance sheet must first be prepared, tax returns submitted, and a tax clearance certificate obtained before the company can be dissolved. It would also need to be ensured that taxes are correctly assessed and paid. The evidently foreseeable impairment of creditors' interests is either not addressed at all or insufficiently addressed in the draft. Such a proposal undermines the state's financial viability if companies can avoid paying taxes and social security contributions without consequences – essentially an invitation to make the legal entity (= EU Inc) as a taxpayer disappear legally as quickly as possible. Has the Commission lost its mind? The laws against social fraud have just been tightened, and not without reason.52
The draft contains a list for member states with prohibited requirements, which, however, relate to public law.
I see neither a real need for the introduction of the EU Inc in this hybrid form in Austria, nor would the introduction of the EU Inc as a new legal form meet the public's understandable desire to simplify regulations within the EU. Quite the opposite would be true, as the demarcation of when national regulations apply subsidiarily is unclear. Furthermore, the draft would undermine the goal of transparency – including determining who the shareholders are, who transfers which shares or commits to future transfers, etc.
A comparison of the EU Inc draft with the Flexible Company Act , which came into force in Austria on January 1, 2024, shows that the Commission aims to replicate much of what the Austrian legislator has already introduced and implemented. It is unclear which legal system the draft draws upon. Most likely, it draws upon Anglo-Saxon regulatory practices, although it is certainly questionable why these should continue to have such a strong influence on the new EU legal form after BREXIT, thereby breaking with previous European traditions.
The additional complexity of a new EU-wide legal form concerns, for example, the application of the Equity Substitution Act, which is based on participation in share capital, and the obligation to file for insolvency in cases of over-indebtedness or illiquidity.
And the actual purpose for which the EU Inc is to be introduced – namely to promote innovative and successful companies – is not adequately addressed by providing yet another untested legal form. Instead, it requires, among other things, a more efficient funding landscape where the legislator provides promising companies with venture capital, relevant expert advice, and networking platforms – for instance, concerning sales opportunities and the search for investors. The difficulty – especially with funding measures – admittedly lies in accurately predicting the future development, feasibility, and market success of a startup and the capabilities of its founders, selecting truly deserving companies, and avoiding the misallocation of funds. On the other hand, the distribution of public (!) funds should not be arbitrary. However, this goal is not supported by the introduction of a new legal form.
For Austria and the Union, the EU Inc legal form in this configuration offers no real advantage that outweighs its disadvantages, especially if the right to freely choose the seat of the EU Inc allows one to
The draft EU Inc regulation promotes a "race to the bottom," a development that, in my opinion, is undesirable.
1 Proposal for a Regulation of the European Parliament and of the Council on the corporate law framework of the 28th regime – “EU INC.”, COM (2026) 321 final – SEC (2026) 321 final – SWD (2026) 321 final.
2 „In this context, the Letta report on the future of the Single Market highlighted the urgent need to remove the structural barriers preventing startups and scaleups from expanding across borders and called for a ‘Simplified European Company’. Similarly, the Draghi Report underlined the differences in laws and regulations across Member States, which limit companies’ ability to seamlessly operate across the EU single market and called for the adoption of a new EU-wide legal statute for innovative startups (‘Innovative European Company’). The business, and in particular startup community, have also strongly stressed the need to urgently address this fragmentation to encourage founders to set up companies in the EU, help EU companies thrive and grow, and create conditions that can attract investment to EU companies."
3 Recital 46.
4 Article 4(2) Draft.
5 The draft regulation itself admits this! „Therefore, no evaluation of the existing rules was necessary.“: Draft, Explanatory Memorandum 9.
6 See also Zib in Zib/Dellinger, Großkomm UGB² § 7 marginal no. 7 et seq.
7 A. Winkler/M. Winkler in FAH, GmbHG² § 10a marginal no. 10; Koppensteiner/Rüffler, GmbHG³ § 10a marginal no. 12.
8 J. Reich-Rohrwig, GmbH Law I² marginal no. 1/729.
9 Nagele/Lux in Artmann/Karollus, Austrian Stock Corporation Act III⁶ § 150 marginal no. 29 et seq.
10 Cf. § 25 para. 1a Austrian GmbH Act; § 84 para. 1a Austrian Stock Corporation Act.
11 Aschl/J. Reich-Rohrwig/F. Buchta, Conflicts of Interest in Corporate Law, ecolex 2025, 575.
12 § 15 para. 1a Austrian GmbH Act; § 75 para. 2a Austrian Stock Corporation Act.
13 This would also be possible for the Austrian GmbH and FlexCo if their articles of association provide for it.
14 This is also the provision for the Austrian FlexCo.
15 J. Reich-Rohrwig, GmbH Law 434 fn 18.
16 J. Reich-Rohrwig, GmbH Law 434.
17 Cf. § 121 para. 2 Austrian Stock Corporation Act.
18 Similarly, § 50 para. 4 Austrian GmbH Act.
19 Milchrahm/Rauter in Straube/Ratka/Rauter, GmbHG145 § 50 Rz 42.
20 See § 39 para 4 öGmbHG; further extending to cases of equally serious conflict of interest: OGH 6 Ob 191/18h; 6 Ob 105/19p; 6 Ob 90/19g.
21 § 35 para 1 item 7 öGmbHG.
22 This regulation can be waived for the period after two years from the company's registration in the commercial register: § 35 para 2 GmbHG.
23 § 30j para 5 öGmbHG.
24 §§ 26 and 78 GmbHG old version.
25 Regulation (EU) 910/2014 as amended by 1183/2024.
26 See § 75 para 3 GmbHG; Umfahrer, GmbHG Rz 15.3; Zollner in U. Torggler, GmbHG § 75 Rz 12 et seq.
27 Art 4 para 1 no 22 Directive (EU) 65/2014 as amended by 2811/2024; Lehmann, Banking and Capital Markets Law² 95.
28 See also J. Reich-Rohrwig, Fundamental Questions of Capital Maintenance (2004) 98; OGH 6 Ob 233/24v; 17 Ob 11/24b.
29 Thus, § 30 of the German GmbH Act for limited liability companies in Germany.
30 Cf. OGH SZ 53/172 (Terranova); GesRZ 1986, 36.
31 For Austria, note: § 174 para. 4 Stock Corporation Act.
32 Art. 72 para. 3 Company Law Reform Act.
33 Winner in Doralt/Nowotny/Kalss, AktG³ § 149 marginal no. 55.
34 Zib in Zib/Dellinger, Großkomm UGB² § 7 marginal no. 36.
35 See also J. Reich-Rohrwig/Ph. Kinsky/S.-F. Kraus, Austrian Limited (2021); J. Reich-Rohrwig/A. Reich-Rohrwig/Kinsky, Flexible Kapitalgesellschaft (2024).
36 Winner in Doralt/Nowotny/Kalss, AktG 3 § 153 marginal no. 114 et seq.; in the servicing, for example, of convertible and option bonds, this arises from § 174 para. 4 Stock Corporation Act: Nagele/Lux in Artmann/Karollus, AktG III 6 § 153 marginal no. 31.
37 Art. 52 Draft.
38 Recital 37 Draft.
39 Similarly, regarding the personal liability of shareholders of a German GmbH if they decide on the compulsory redemption of a shareholder's share, even though the company does not possess the necessary balance sheet reserves for compensating the excluded shareholder: BGH II ZR 342/14, ZIP 2016, 1160.
40 Article 56(5) Draft.
41 Article 56(6) Draft.
42 Section 48 öGmbHG.
43 Section 16(2) öGmbHG.
44 Section 30b(5) öGmbHG (Right of a 10% minority).
45 Section 37(1) öGmbHG.
46 Section 38(3) öGmbHG.
47 Section 89(2) öGmbHG.
48 See also Koppensteiner/Rüffler, GmbHG³ § 30j Rz 9.
49 See Kinsky/Kurz in Reich-Rohrwig/Reich-Rohrwig/Kinsky, Flexible Kapitalgesellschaft, para. 14.26.
50 Article 89 para. 2 Draft.
51 C(2026)1800.
52 Federal Law Gazette I 98 and 107/2025 (BBKG 2025).
