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20 Oct 2026, 2:05 pm
Advantages investors might obtain by setting up operations as an ‘EU Inc.’ in Luxembourg could be eroded if the country’s policymakers decide to use powers to be given to national governments to impose controls – like online notarisation – that could slow down, and add cost to, the process.
The EU Inc. regime, proposed by the European Commission earlier this year, is still subject to agreement by EU law makers. If it is enacted as proposed, it would introduce a new corporate legal framework that companies will be able to opt into – allowing them to set up in an EU country and operate across the entire trading bloc in accordance with that single ‘28th corporate regime’, rather than navigate 27 different national frameworks as they need to do so currently.
While start-ups seeking speedy EU expansion could turn to the proposed EU Inc. company form, we explain why many prospective investors in Luxembourg would be likely to stick with existing domestic alternatives instead.
On a conceptual level, the S.à r.l.-S (simplified private limited liability company – société à responsabilité limitée simplifiée) could be considered as the closest equivalent domestic company form to that envisaged with EU Inc. This is because a S.à r.l.-S can be incorporated with just €1 of capital sitting behind it as well as by private deed absent intervention by a notary. These features closely resemble those of the EU Inc. regime, where there would be no minimum capital requirement and no notary requirements are envisaged either.
However, the S.à r.l.-S is subject to hard structural constraints that significantly limit its scope by contrast to the EU Inc. For example, only natural persons may be shareholders and holding vehicles are excluded from the scope. For these reasons, the ordinary S.à r.l. company form remains the closest equivalent domestic company form to the proposed EU Inc. and is the preferred vehicle for investment structures and for companies with a business activity.
As the S.à r.l. is flexible and well-understood by international investors, and because of the sophistication of the framework Luxembourg-based investment fund holding structures operate within, we expect uptake of the EU Inc. company form to be moderate in Luxembourg. Businesses most likely to use the EU Inc. in Luxembourg are cross-border tech start-ups and scaleups seeking a single EU-recognised form with portability across member states. It could also be attractive to founders who value the "EU brand" and wish to avoid jurisdiction-specific formalities.
The Luxembourg law dated 10 August 1915 on commercial companies, as amended (the 1915 law) imposes three structural requirements that stand in contrast to the EU Inc. proposal:
The timeline for setting up a S.à r.l. in Luxembourg differs for what is envisaged for an EU Inc. too.
A S.à r.l. can be incorporated in a short time frame depending on the availability of the Luxembourg notary and the diligence of the persons involved. In practice, however, the overall process regularly takes longer in case the share capital is paid through a contribution in cash, mainly due to the bank account opening process, which can take several weeks.
A reform, entered into force in May 2026, has eased some requirements, however. Now, the minimum share capital of €12,000 for a S.à r.l. can be paid up within 12 months of incorporation rather than immediately, if provided for in the company’s articles of association.
If the share capital is paid through a contribution in kind, the overall process for incorporating a S.à r.l. is shorter as there is no need to open a bank account for the purposes of incorporating the company, and the valuation of the contribution can be freely assessed by the shareholders themselves – i.e. no auditor valuation report required.
The 1915 law requires that a S.à r.l. be incorporated in front of a Luxembourg notary. The EU Inc. proposal requires fully digital incorporation procedures and prohibits mandatory physical presence. However, member states retain discretion to implement preventive controls, including relating to notarisation, so long as the control process is entirely digital. This means that the practical impact on Luxembourg's notarial process would depend heavily on the implementation choices made by the Luxembourg authorities when transposing the finalised EU regime.
There are some differences between what Luxembourg law says about capital maintenance and the position proposed under the EU Inc. regime.
The 1915 law’s capital maintenance rules differ depending on the type of funds supporting distribution – for example, whether for distribution of interim dividend, distribution of share premium, or decrease of share capital. The rules prohibit distribution if the S.à r.l.’s net assets are, or would become following the distribution, lower than the company’s subscribed share capital increased by non-distributable reserves. By contrast, the EU Inc. proposal envisages distributions being governed by a balance sheet test and a solvency test. Even then, directors would have to sign a statement certifying – based on the most recent financial statements and a review of current and future affairs – that both tests are satisfied before a distribution could be made.
To protect minority shareholders from severe cases of unfair prejudice, the EU Inc. proposal envisages providing shareholders with the right to apply to the court for their withdrawal from the EU Inc. However, Luxembourg law does not recognise a general right of withdrawal for shareholders in such cases.
Similarly, while a general meeting of shareholders could give potentially binding instructions to the board of directors under the proposed EU Inc. regime, Luxembourg law establishes a division of competences whereby the board of managers has the power to independently carry out all acts necessary to achieve the company's corporate object, save for those explicitly reserved by law or the articles of association to the general meeting.
Protections for creditors that would apply under the proposed EU Inc. framework differ from those available under Luxembourg law at the moment.
While mandatory balance sheet and solvency tests would need to be satisfied by EU Inc. directors before any distribution or capital reduction, with personal joint and several liability for directors who certify incorrectly, the 1915 law instead gives creditors of a limited number of company types a reactive right to apply to court for security within 30 days of publication of the capital decrease deed, meaning that creditors must act themselves to be protected, rather than the burden falling on directors upfront.
In addition, while creditors of an EU Inc. would be able to submit claims entirely online, raise opposition to a simplified winding-up procedure under a fast-track process, and would retain enforceable rights against directors even after an EU Inc. company has been struck off, the 1915 law contains no equivalent digital claims process and creditor rights post-dissolution depend largely on national procedural rules.
The removal of minimum capital and notary requirements for EU Inc. companies would mean the related protections designed to deter bad actors from setting up a S.à r.l. would effectively be neutralised or circumvented in respect of an EU Inc., subject to any preventative controls policymakers in Luxembourg might impose as noted above.
Broadly, directors' duties proposed for EU Inc. companies align with Luxembourg's existing standard.
The EU proposal provides for the liability of directors to be “further governed by the applicable national law”, so Luxembourg liability provisions concerning directors will continue to apply. However, there are some areas of uncertainty.
For example, it is not clear which rules will be harmonised and which will be determined on a country-by-country basis, with the risk of significant fragmentation in respect of directors’ liability across the EU in relation to the latter.
It is also unclear how far directors of an EU Inc. would have to accept interference in their management of the company. Shareholder instructions could be binding, but there is the potential for their instructions to conflict with the company's best interests. Whilst there would be a safe harbour from liability if directors acted on a lawful general meeting resolution, it is not yet clear what qualifies as "lawful" and whether the safe harbour would apply where a resolution is formally lawful but arguably harmful to the company. This tension does not arise in the same way under the 1915 law, where the board retains autonomous powers and is not subject to binding shareholder instructions.
In addition, there is potential that inconsistent standards could apply across jurisdictions in relation to other protections directors would have under the EU Inc. regime. Under the proposal, directors would not be liable for any damage or loss incurred by the company resulting from a business decision provided that they acted in good faith, exercised the care that a reasonably prudent person would use, and had the reasonable belief that they were acting in the best interests of the company. However, much will depend on how member state courts apply this test.
Luxembourg voluntary liquidations of limited liability companies require the notary’s involvement. The ordinary liquidation process varies from several weeks to several months. The simplified liquidation process – which is available to the extent the company has a sole shareholder and all relevant taxes have been paid to the Luxembourg authorities – may take one business day, provided all prerequisite documentation is in place and an appointment with a notary is secured.
By contrast, the dissolution of an EU Inc. for the purposes of solvent liquidation would involve an online registry filing, which would immediately update the company’s status. Fast-track liquidation would be available where the company has ceased activity, has no assets or they have been distributed, no liabilities or creditor consent obtained, and no pending proceedings.
Luxembourg's insolvency rules would remain highly relevant, and for the vast majority of EU Inc. companies – i.e. those not qualifying as "innovative startups" – they would effectively be the primary insolvency framework.
According to the EU Inc. proposal, where the templates of an EU Inc.’s articles of association are used, any national requirement for articles "drawn up and certified in due legal form" would be deemed satisfied. This would fundamentally alter the role of the notarial profession for EU Inc. companies, subject to any online notarial preventive control at the incorporation stage that could be imposed in Luxembourg, as noted above.
There is also a fundamental disconnect between the significant minimum share capital requirements for a S.à r.l. and the absence of any share capital requirement for an EU Inc.
The introduction of a new shareholder remedy of forced buyout in cases of oppressive conduct and a simplified insolvency track for innovative startups are also noteworthy proposals. The right to apply for judicial withdrawal in cases of oppressive conduct does not currently exist under Luxembourg law. Simplified winding-up for innovative startups would create a parallel fast-track insolvency process that Luxembourg domestic law does not currently provide for that category of entity.
The EU Inc. proposal provides that matters not covered by EU Inc. regime or an EU Inc.’s articles of association are to be governed by the national law applicable to a "relevant national legal form". Each member state would need to designate such a company form, with Luxembourg likely to designate the S.à r.l. We expect the boundary between harmonised and non-harmonised matters to be a source of significant legal uncertainty for practitioners and clients.
Uncertainty and risk could also arise from the discretionary powers earmarked for member states in respect of the preventive controls they impose on EU Inc. companies. It is possible that Luxembourg could designate a form of notarial or administrative control that partially replicates existing requirements, potentially limiting the practical advantage of the EU Inc. for certain users.
For most entities setting up corporate structures in Luxembourg, the EU Inc. is unlikely to be a primary vehicle of choice in the short to medium term. The S.à r.l. is deeply embedded in Luxembourg practice, is well understood by international investors, and the Luxembourg ecosystem of notaries, service providers and registers is already efficient.
However, for founders of cross-border tech startups and scaleups seeking EU-wide recognition, speed, lower upfront cost, and the flexibility to avoid minimum capital are attractive features of the EU Inc. regime and offer a meaningful alternative. The "EU brand" may also have marketing value for companies seeking to raise funds from pan-European institutional investors. Much will depend on the regulatory implementation choices made by Luxembourg – in particular, the designation of the reference form, the nature of preventive controls, and the extent to which the EU Inc. lifecycle, particularly liquidation, genuinely bypasses the notarial process in practice.
Co-written by Luis Marques Guilherme of Pinsent Masons.
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