The European Union (EU) is pressing ahead with plans for a supranational legal regime for companies operating across the bloc. The move defies critics who fear creating businesses with a special rulebook outside national law will dilute worker rights and disempower regulators.
Michael McGrath, the EU’s justice commissioner, said he was drawing up a proposal for a new voluntary regulatory regime, not tied to a member state, that would be a viable option for as many European companies as possible.
His decision to push ahead with the plan comes in the wake of almost four decades of on-off attempts in Brussels to create an attractive structure – alongside national company laws – that allows businesses and entrepreneurs to operate more easily across the continent.
“If we are serious about deepening the integration of the single market and removing the barriers to companies being founded and having the potential to grow to a global scale with Europe as their base, this is a crucial instrument and a step that we must take,” said Mr McGrath.
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Landmark reports by Mario Draghi, the former European Central Bank president, and former Italian prime minister Enrico Letta both called for an innovative “28th” regime offering an alternative on basic tax, insolvency and labour rules. The number referenced – 28 – is a nod to the challenge of harmonising all 27 national systems.
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Mr McGrath is planning to unveil the proposal in late March, addressing specific barriers for companies in those areas.
The aim, he said, was for businesses to be able to opt into a legal entity with low or no minimum capital requirements, as well as online incorporation within 48 hours.
The regime would offer clear rules on governance, creditor safeguards, share issuance and transfer, as well as liquidation. It would also outline rules on digital procedures for capital increase and unified tax treatment of employee stock options.
It is likely that the measures, which the start-up community has long called for, would be proposed as a regulation rather than a directive. This means the regime would have full force without needing to be transposed into national law in every member state.
“My instinct is to prefer a regulation rather than a directive,” Mr McGrath said, adding that there was otherwise “a real risk of ending up with 27 versions of the 28th regime”.
Attempts to create an EU-wide company statute have long faced resistance from trade unions. Ambitious plans have also fallen foul of European capitals that are wary of creating an attractive alternative legal home for companies in their country.
The existing “Societas Europaea” (SE) statute, a legal form of public company designed to work across the EU, was first proposed in 1988 and took effect in 2004 following years of negotiations.
“The SE is a bit like a Frankenstein monster, where you have tied a lot of different body parts. You have a core that is European but then there are 27 different regimes attached to it,” said Anne Sanders, chair of the law faculty at Bielefeld University in Germany.
It has since been adopted by more than 3,000 companies, including Airbus, Allianz, Dior, Porsche and TotalEnergies, but it has been criticised for undermining workers’ rights in jurisdictions such as Germany, which have strong employee representation rules.
Objections from member states killed past reform initiatives, including a 2008 push for simpler cross-border rules for small and medium-sized companies, and a 2014 proposal for one-person businesses.
Mr McGrath has pledged that the 28th regime “will not in any way be a vehicle for the diminution of labour rights across the EU”. However, trade unions remain fearful it would undermine workers’ rights.
“The need for companies to be able to operate around the EU would be very welcome . . . only if it isn’t to the detriment of working people, their pay rights and entitlements,” said Esther Lynch, general secretary of the European Trade Union Confederation, which represents European trade unions.
“I hope that those lessons have been learned and the problems aren’t amplified by the 28th company regime,” she added.
Another issue is whether the regime will be limited to a narrow range of companies, such as start-ups, or be available to existing corporates, regardless of size.
Mr McGrath said his aim was to make eligibility as wide as possible. “I want as many companies as possible in the EU to have the opportunity to avail of this 28th regime,” he said.
Proposing a broad scope risked member states balking at the reforms, fearing companies could pick their legal seat to lower workers’ rights or pay less taxes, said Claudia-Dominique Geiser, senior expert on EU economic policy at Bertelsmann Foundation.
Mr McGrath prefers the reforms to be introduced as a regulation, which would be directly applicable across the EU. But such an approach may require member states to agree to the reforms by unanimity, rather than a qualified majority.
René Repasi, an MEP responsible for shepherding the 28th regime through the European Parliament, said seeking unanimity could result in never-ending negotiations and unworkable compromises.
“The risk of creating Frankenstein’s monster is higher than creating something that will fly on the market,” he said.
Mr Repasi would prefer a directive that could be more quickly implemented. He has also floated the idea of a harmonised debt instrument for the 28th regime that would give investors more clarity on risks and repayment terms.
Ms Sanders of Bielefeld University recommended that policymakers go for what is safe, quick and pragmatic so it would “get us somewhere”. “We need something that really makes life easier for companies,” she said.
“If we don’t achieve that goal and if we end up somewhere in confusion, then better not do it at all.” – Copyright The Financial Times Limited 2026
