EU Inc. in Comparative Perspective

The European Commission’s EU Inc. proposal is intended to make company formation, financing and cross-border growth easier. Under the proposal, company-law procedures would be largely digital. Where the EU model articles are used, a company could be incorporated within 48 hours at a cost of no more than EUR 100. On this basis, the Commission’s impact assessment estimates administrative savings.

A recent economic assessment by DIW Econ for the German Federal Chamber of Notaries assesses the claimed benefits of EU Inc. using a broader cost framework from the company-level, institutional and procedural perspectives. The assessment finds no robust evidence that EU Inc. would deliver the expected cost advantages in Germany.

A formation using the EU model articles of association may initially appear cheaper. However, the underlying need for substantive legal review and advice remains, and some of this work shifts to other actors and to later stages of the company life cycle. As a result, total costs for companies and legal transactions can be higher than under the current framework. In addition, weakening existing notarial safeguards against money laundering carries substantial opportunity costs. These follow-on costs were not adequately reflected by the European Commission. The proposed framework, moreover, leaves key bottlenecks in the formation process untouched. What matters to companies is when they can actually start doing business. This is not automatically shortened by faster registration. An economically efficient EU Inc. should simplify procedures where administrative burdens can genuinely be avoided, while retaining review and safeguarding functions that prevent costs from arising later.

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