Businesses given chance to shape EU’s ‘28th regime’

The European Commission is intent on establishing a new legal framework that eligible companies would be able to opt to adhere to, instead of having to navigate different sets of national legislation in place across each of the 27 EU member states in the event they want to operate in those countries. This has been dubbed the ‘28^th regime’.

The proposal for the new regime was outlined in the European Commission’s ‘competitiveness compass’ in January (27-page / 389KB PDF), in which it said it would seek to “simplify applicable rules and reduce the cost of failure, including any relevant aspects of corporate law, insolvency, labour and tax law”. At the time, it said that if innovative companies could benefit from a “single, harmonised set of EU-wide rules” then this would “represent a real game changer”.

Further details of what the 28^th regime might look like emerged in July when the Commission opened a call for evidence, inviting stakeholders – including start-ups, scale-ups, entrepreneurs and investors – to complete an online questionnaire. The consultation, which remains open until 30 September, has already attracted several hundred responses.

In its questionnaire, the Commission is seeking input on fundamental questions around the scope of the prospective new 28^th regime.

For example, respondents are asked for their view on what type of company the 28^th regime should be open to and who should be eligible to set up such a company. The Commission is also seeking views on whether minimum capital requirements, or other conditions, should be imposed on 28^th regime companies, to guard against the “creation of non-viable companies”.

Further questions go to the heart of how the 28^th regime might operate in practice – whether, for example, it should provide for fully digital procedures for everything ranging from registering companies in the first place to the signing of documents, amending articles of association, holding shareholder meetings, and closing companies.

Another focus of the questionnaire is on helping 28^th regime companies to attract investment. In that regard, among other things, the Commission is considering the extent to which 28^th regime companies should be allowed to issue multiple classes of shares and whether there should be limits put on the transfer of shares in those companies.

Stakeholders have also been invited to share their thoughts on whether there are other measures that could be taken in the areas of insolvency, tax and employment law to help make a new 28^th regime a success.

The Commission said it plans to set out its formal proposals for the 28^th regime in the first quarter of 2026.

Dublin-based Paul White of Pinsent Masons, an expert in corporate law, said the details with regard to proposals for a 28th regime would need to be understood further to understand the wider benefits being offered to businesses and investors. He noted the existing Irish legal framework that supports companies to establish themselves in and operate out of Ireland, which already incorporates some of the features being considered and will continue to be available in parallel with proposals.

White said: “From a process perspective, it is relatively easy to set up as a business in Ireland and to incorporate a legal entity. We have a well-established and pro-business environment in Ireland with several options for companies in terms of what type of entity they incorporate – both private and public – and with a proven track record that readily supports ongoing investment and EU expansion.”

“If the aim is to reduce barriers to doing business, the Commission would need to carefully look at reasons for imposing any additional restrictions which are not already in place for current company-types. In particular, minimum capital requirements would need to be examined further so as to not discourage businesses being set up.”

White said the Commission must guard against unintentional consequences when drafting proposals around share issuance and transfer under the 28^th regime.

“Any restriction on the type of shares that 28^th regime companies could issue or transfer would need to be balanced with the requirement to protect existing shareholders – both majority and minority owners,” White said. “Any mechanism that facilitates circumventing shareholder protections under the guise of stimulating investment will not enhance the ability of a company to seek investment in the long term. Helpfully, Irish companies already have the ability to issue different share classes with different rights – any restriction on the type of shares and form of investment into companies is likely to inhibit growth in these types of companies, especially where there are other options available without any such barriers.”

White highlighted that companies need to adhere to local law requirements when operating across the EU, which he acknowledged includes “country-specific differences with regard to employment law rights and taxation”. However, while the Commission appears to be considering potential employment and tax law-related measures under the 28th regime, White said such matters will need to be balanced with the requirements of individual countries.

The Commission was advised last year to develop plans for a 28^th regime in two separate reports it commissioned.

In the first report, on the future of the EU single market, former Italian prime minister Enrico Letta said (147-page / 1.24MB PDF) a 28^th regime would serve as a form of “European code of business law” and has the potential to be “a transformative step towards a more unified single market”.

Letta said: “An initial step involves the systematic codification of the existing legal framework. However, merely codifying existing laws will not suffice to realise a truly integrated European market. It is essential to complement the codification process with innovative elements and new European tools designed to meet the needs of European enterprises. Such innovations must include the establishment of a Simplified European Company to provide a more adaptable legal structure for businesses. Its scope may be expanded to include the following areas of law, where applicable: general commercial law, market law, e-commerce law, company law, securities law, enforcement law, insolvency law, banking law, financial market law, intellectual property law, employment law, and tax law.”

“Where the EU has exclusive competence, it is crucial for the Code to replace national laws to address the current overlap. In other areas, the Code will supplement national laws with new instruments that businesses can choose to utilise: enterprises will have to comply with the Code, but they will be free to choose whether or not to use a new European instrument and compare it with existing national laws. Therefore, a European business code would provide economic players with a 28th regime to aid their Europeanisation, making the single market the natural horizon for business development,” he said.

The idea of a “voluntary 28th company rulebook” was also supported by former European Central Bank president Mario Draghi in his report into EU competitiveness.