The phrase “Europe needs to take drastic action to remain competitive” has become a common refrain in political debates. Among a long list of potential reforms, one that has received particular attention is a new EU-wide legal personality for innovative companies.
The innovation, known (somewhat vaguely) as the “28th Regime”, is being touted as Europe's answer to Delaware's C-Corp and would further strengthen the regime already in place in the 27 EU member states. Probably. Now supported by a grassroots movement backed by entrepreneurs and venture capitalists, it also brings with it the more familiar name of “EU Inc” and unexpected momentum. The EU Inc petition, launched on October 14, has already gathered around 11,000 signatures.
The connotations of the term Inc in the United States are not coincidental. While startups and venture capital firms around the world are now well aware of Delaware C corps, there is still a gap in Europe. An existing prescription, named “Societas Europaea” (Europe loves Latin), was aimed at large companies, but failed to gain traction and was never widely used. As a result, expansion across the continent remains a difficult process and must be carried out country by country, further contributing to why pan-European technology champions remain rare.
Seeing that the new company vehicle is likely to encourage cross-border investment in European startups, EU Inc's petition is aimed at venture capital as a whole and startups such as Niklas Zennström and Patrick Collison. Supported by the persona of the founders and investors.
One of the petition's four leaders, entrepreneur-turned-investor Andreas Klinger, said his initial I remember how all of the companies in the UK ended up becoming joint stock companies in the UK. He says the main problem for European startups is “a very fundamental structural problem”. He and his EU Inc supporters are effectively marching on the EU Commission. “A, the startup community needs this and wants this. B, there's an urgency. And C, make sure it's implemented the right way,” he told TechCrunch said in an interview.
In its recently added roadmap, the EU Ink movement has set a goal of submitting a final petition on 1 December, after which the new EU Commission taking office will make it part of its agenda for the next five years. I'm looking forward to it.
A recently commissioned report in which both Enrico Letta and Mario Draghi, not to mention President Ursula von der Leyen herself, pledged to form the 28th government, echoed this call within the House, and even beyond. If anything, having the tacit support of the European Commission will certainly help. But with so many issues and areas gaining attention, campaigns will need to be careful not to lose momentum. The campaign therefore calls on Europe's startup ecosystem to unite around this initiative.
The gathering appears to be going well, with some activity from France Digitale, the French startup and venture capital lobby group. Its working document calling for a 28th government was already in place before EU Inc's campaign was in full swing and is now supported by several other startup associations across Europe.
This kind of national support could be the key to success. But perhaps even more so given the level of detail included in the proposal that France Digitale created and revised after dialogue with its peers. For example, co-author Antoine Latran told TechCrunch that “regulations” rather than directives are needed to avoid unwanted differences in substitutions between countries. This is a lesson learned from Societas Europaea, a cross-border legal form that, according to France Digitale, “has proven virtually unviable for start-ups, small and medium-sized enterprises, and high-growth companies.” This is one of the.
EU Inc and its supporters are certainly drawing on past experience, such as its “Not Optional” campaign, which helped improve stock option policies in 11 European countries. Martin Mignot, a partner at Index Ventures, told TechCrunch that he and his team are big supporters of EU Inc and have led the campaign so far, which shows it's a long road ahead. , he said. ”
And some observers worry that aspirations for a European corporate structure comparable to Delaware's will be dragged down by red tape and the nation state.
“When it comes to EU Inc., I have serious doubts that countries will be able to agree on common standards that are easier to understand and, most importantly, less bureaucratic,” lawyer Steve Zeitler told TechCrunch. “I'm embracing it,” he said. The partner at Austria-based law firm E+H Rechtsanwälte gave the example of capital maintenance regimes that vary widely across EU member states.
“Applying the (strict) Austrian or German capital maintenance regime to all EU joint-stock companies would make it rather unattractive in countries with 'less stringent' regimes,” said Jeitler. said. France Digitale addressed this point in a non-paper, calling for a “1 euro company”.
Still, there will likely be many other similar hurdles along the way. “The devil is in the details, and we're going to be very careful about that,” Mignot said.
Brexit is also a bit of a bug, but Mignot is hopeful that the UK could continue to follow suit, saying: “They'll say, 'Look, if you're EU Inc, it'll work well for us. ” EU Inc shares a similar outlook. Its FAQ points out that while “initiating an EU-centric solution will have the greatest impact”, the focus is “Europe, not the EU”.
There is a growing consensus that the region, whether in Europe or the EU, needs to take action to keep up. Deep tech investor Michael Jackson said: China is the big panda in the room. Other parts of the world are really starting to grow their economies and focus on technology and innovation. Europe cannot stand idly by. ”
That said, it's hard to contain the enthusiasm of EU Inc activists like Klinger. […] This means that as an industry, we're being very specific, very focused on one topic, not like a list of 20 demands, but like one thing: “This is important.” That's what it means. Additionally, it could also be a platform for other important things that are very complex in Europe, such as stock options and exits. ”