EBN Position Paper in the 28th Regime -A strategic necessity for scaling European innovation

In response to the European Commission’s call for evidence, EBN and its 180 EU|BIC community members have submitted a comprehensive contribution to the design of the proposed 28th Regime, a pan-European legal framework intended to simplify how businesses are created and operate across the Single Market. By introducing a truly digital, uniform, and cross-border structure, this initiative aims to unlock Europe’s innovation potential and enable start-ups and scale-ups to grow globally.

Creating a framework that makes it easier to establish, operate, and attract investment is vital. EBN’s commitment to this process is grounded in the EU|BIC community’s four core mission pillars: fostering regional economic development, ensuring quality business support, improving access to finance, and enabling the scaling of European innovation. Our network demonstrates the tangible impact of structured support; 84.5% of start-ups supported by EU|BICs survive beyond three years, significantly above the European average.

Legal fragmentation across Member States remains one of the most significant barriers to scaling innovation. To address today’s urgent challenges — from the green and digital transitions to talent and capital disparities — Europe needs a bold and unified legal approach.

The future 28th Regime must serve as the cornerstone for achieving Radical Regulatory Simplification, turning local potential into global leadership..

Recommended policy actions

To ensure the 28th Regime delivers tangible impact and enhances Europe’s competitiveness, EBN proposes four strategic priorities:

Adopt an EU Regulation, rather than a Directive, to guarantee full legal harmonisation and predictability for European start-ups.

Establish a digital-first lifecycle, enabling incorporation, management and closure entirely online via an EU Registry, with full cross-border eID recognition.

Introduce standardised EU-wide investment and talent instruments, including the EU-FAST convertible and the EU-ESOP scheme, eliminating “dry taxation” and strengthening Europe’s ability to attract and retain talent.

Empower Entrepreneurship Support Organisations (ESOs), including the EU|BIC network, to act as neutral orchestrators ensuring systemic, place-based innovation

Problem definition: Fragmentation as a systemic hurdle

The complexity and costs associated with incorporating and operating companies across the EU, caused by the fragmentation of national rules, actively discourage growth. This systemic impediment costs the EU an estimated €1.3 trillion every year and holds back over 35,000 European startups.

EBN’s consultation identifies several persistent barriers:

• Legal fragmentation and complexity: Divergent national company laws, tax rules, and labour frameworks result in complexity and costs associated with cross-border operations.
• Failure of EU Digital implementation: Existing EU rules meant to enable a fully online setup (e.g., eIDAS) are often ignored or incorrectly implemented at the national level, creating the need for physical presence, intermediaries, and unnecessary bureaucracy.
• Chilled cross-border investment: The lack of a recognised EU company brand and standardised legal templates (like EU-FAST) means “any interest evaporates” when investors encounter a trans-border element, constraining access to finance for startups.
• Burdensome employee share option plans (ESOPs): ESOPs are a “legal and tax minefield”, hindered by divergent national taxation rules that often lead to “dry taxation”, taxing employees on illiquid options before sale, which severely limits the ability to attract and retain global talent.
• High cost and stigma of failure: Fragmented insolvency frameworks lead to multi-year, complex, and high-cost closure procedures, often resulting in personal liability and professional stigma for honest founders.
• Inadequate existing EU legal forms: The Societas Europaea (SE) is unsuitable for startups and scale-ups due to its rigid structure, complex setup requirements, and excessively high minimum capital requirement of €120,000.
• Regulatory overreach concerns: Proposals that favour legacy businesses, overemphasise “killer acquisitions,” or attempt to “prevent relocations” send the wrong message to (could-be) founders, prioritising preservation over creating the most attractive environment for growth.

Detailed recommendations

EBN’s recommendations are structured according to the European Commission’s consultation pillars that are used in the online questionnaire, ensuring a comparable and implementable framework:

Barriers related to corporate law issues.

A recognisable EU company brand would boost investor trust and operational clarity. The 28th Regime must also implement the “once-only” principle for information sharing between authorities to eliminate unnecessary administrative burden

Structure and core elements of the 28th Regime companies

The new regime should establish a private limited liability company (LLC) open to individuals and legal entities, with no minimum capital, cross-border operability, and flexible employee participation options.

Simple, flexible and fast procedures and rules

All procedures — incorporation, operation, and closure must be entirely online. A modular, pre-approved template for articles of association should accelerate registration, while a harmonised fast-track closure procedure should reduce costs and complexity for honest founders.

Attracting investment to the 28^th Rregime companies

Access to finance is critical. The 28th Regime should:

• Introduce EU-FAST, a standardised SAFE-type instrument for rapid, cross-border early-stage funding.
• Enable digital capital increases and online shareholder participation.
• Allow multiple share classes to support tailored equity structures.
• Include clear pathways to access regulated markets as firms scale.

A Modular Approach for Ecosystem Success

The success of the 28th Regime depends on addressing the interconnected issues of tax, labour, and insolvency via a modular approach.

• Taxation: We call for alignment with initiatives like BEFIT and propose an optional pan-EU starup tax scheme with simplified reporting and R&D deductions.
• Employee Stock Option Plans (ESOPs): harmonisation under the EU-ESOP, deferring taxation until sale and recognising capital gains.
• Cost of failure: a “clean slate” closure mechanism to foster risk-taking.
• European business code: The development of a broader European Business Code would be beneficial to gradually reduce the “daily friction” of cross-border operations for smaller companies, offering a shared reference point and soft law harmonisation.

Strategic Implementation: Leveraging the EBN and the EU|BIC community of ESOs

The implementation of the 28th Regime requires a validated, place-based methodology to ensure its success. EBN and the EU|BIC community are ideally positioned to operationalise this regime as neutral orchestrators:

Systemic integration: EU|BICs are the recognised backbone that can integrate the legal simplicity of the 28th Regime with practical support structures. We must leverage existing ESO structures to ensure the legal framework supports missions like the European Green Deal and the European Innovation Agenda.

Operationalising key levers: Building on tested innovation ecosystem frameworks validated across Europe’s diverse innovation landscapes.

Place-based orchestration: Strengthening regional innovation capacity, especially in emerging and moderate innovator regions, by bridging local strengths with pan-European ambition.

Conclusion

The creation of a genuine 28th Regime governed by Regulation is not merely a policy choice but a critical necessity for Europe’s competitiveness. The existing legislative framework is failing, as highlighted by continuous regulatory burdens, digital implementation failures, and the resultant investment chill that fragments the Single Market.

To produce the next generation of world-leading companies, Europe must deliver a single, pan-European, digital-first legal entity that eliminates costly legal complexity and makes the entire Single Market its home market.

EBN, with its proven framework and quality-certified EU|BIC entrepreneurship support organisation community of neutral orchestrators, is ready to partner with the Commission to operationalise this strategic ambition, ensuring the 28th Regime drives resilient, sustainable, and inclusive growth from local roots to global reach.

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