How is Europe trying to prevent the relocation of startups and retain business value?

In recent years, a shared diagnosis has emerged within the European economic and regulatory landscape: the European Union excels at generating knowledge, yet faces structural difficulties in capturing the economic value derived from that knowledge. Reports led by figures such as Mario Draghi and Enrico Letta have pointed to a gradual loss of control over strategic assets, insofar as certain companies and technologies ultimately develop or are exploited outside the European framework.

In this context, it may be observed in certain cases that European technology companies—particularly during phases of accelerated growth—adopt international corporate structures or relocate their parent company to other jurisdictions. This phenomenon is often driven, among other factors, by considerations of legal certainty, operational flexibility, and alignment with international venture capital standards, rather than exclusively by tax considerations.

From a practical standpoint, many institutional investors—particularly in the venture capital and private equity sectors—tend to operate in environments that offer a high degree of predictability in terms of governance, investor protection, and exit mechanisms. Jurisdictions such as Delaware have developed corporate structures that facilitate such operations, naturally incorporating instruments such as drag-along rights, liquidation preferences, and anti-dilution mechanisms.

By contrast, the European framework—characterised by the coexistence of multiple national legal systems—may generate certain operational frictions in cross-border contexts or during business scaling processes. Without prejudice to the progress achieved through instruments such as the European Company (SE), part of the doctrine has pointed out that certain formal rigidities—particularly regarding share capital, capital maintenance rules, or the configuration of management bodies—may not fully align with the dynamics of today’s global investment market.

Against this background, the European Commission’s Proposal for a Regulation of 18 March 2026 (COM(2026) 321 final), commonly referred to as “EU Inc.” or the “28th Regime”, should be understood, the final content and practical scope of which remain subject to its legislative process and eventual implementation.

The initiative appears to aim at establishing an optional, harmonised, and directly applicable framework to facilitate the incorporation and operation of companies with a cross-border vocation within the internal market. Unlike previous initiatives—such as the European Private Company (SPE) or the Single-Member Company (SUP)—this proposal relies on a legal basis linked to the functioning of the internal market, which could enable its adoption through mechanisms other than unanimity.

This approach, together with ongoing developments in corporate digitalisation and cross-border mobility, suggests a gradual shift towards more agile models aligned with contemporary business practice.

From a technical perspective, the proposal appears to point towards greater flexibility in corporate structuring. Among other aspects, it may favour a shift from the traditional focus on share capital towards criteria based on effective solvency, through mechanisms such as balance sheet and liquidity tests.

It may also lead to greater statutory autonomy in the configuration of shareholders’ economic and political rights, bringing European practice closer to more contractual models commonly found in other legal environments. This approach could prove particularly relevant in financing rounds, where clarity and enforceability of shareholder agreements are key considerations for investors.

In any event, the practical implementation of these trends will depend on the final regulatory development and its interpretation by legal and economic operators.

In the field of corporate governance, the proposal appears to promote greater adaptability in the structure of management bodies, as well as in the allocation of control rights to investors. This could include a clearer recognition of provisions commonly found in investment agreements, such as veto rights over strategic decisions or board appointment rights.

Likewise, the potential standardisation of mechanisms such as drag-along and tag-along rights could help reduce legal uncertainty in disinvestment processes, facilitating the execution of mergers, acquisitions, or public market exits.

These developments seem to align with a broader trend towards models in which corporate law incorporates a stronger contractual dimension, without prejudice to the necessary safeguards for third parties and the fundamental principles of the legal system.

Beyond its technical dimension, EU Inc. may be interpreted as an attempt to adapt the European legal framework to the demands of a global economic environment, where corporate structure increasingly influences the location of economic value and control.

The creation of a harmonised instrument could help reduce certain barriers perceived by international investors and facilitate the retention of corporate structures within Europe. However, its effectiveness will largely depend on its adoption by the market, the level of legal certainty it provides, and its coordination with other elements of the ecosystem, such as capital markets and the broader regulatory environment.

In this context of transformation of the European corporate framework, the proper legal structuring of companies—particularly during growth phases, investment rounds, or restructuring processes—acquires increasing strategic relevance. The choice of corporate vehicle, the configuration of shareholders’ rights, and the anticipation of exit scenarios are no longer merely technical matters, but key decisions in the generation and retention of value.

At ILIA ETL GLOBAL, we support companies and management teams in navigating these processes, combining legal analysis with a practical, business-oriented approach. From company incorporation and corporate structuring, to capital increases, due diligence processes, or mergers and acquisitions, as well as more complex scenarios such as restructurings or insolvency proceedings, our objective is to align legal architecture with each project’s strategic goals.

In an environment where the regulatory framework continues to evolve rapidly, having a solid and flexible legal structure can make the difference between scaling successfully or falling behind.