Mid March 2026, the European Commission presented the long-awaited proposal for a 28th EU regime by way of a new corporate form. The regime has been baptised with a name: EU Inc.
This new European legal form can be established within 48 hours, entirely digitally, and for a maximum of €100. Nobody can deny the Commission’s ambition in taking a big step towards harmonisation of corporate law and (in one fell swoop) removing national barriers within the internal market.
The EU Inc is intended to make it easier and more attractive for entrepreneurs and investors, particularly of start-ups and scale-ups, to do business and invest in Europe across borders. By now, many arguments have been exchanged over the EU Inc, most for, and a few against: limited liability, transferable shares without notarial intervention, the risk of abuse and fraud, and so on. I will not discuss those in this column. This column is designed to highlight the sombre side of things: how does the new EU Inc, which is scheduled to be available by the end of 2026, fit into the system of national and European insolvency and restructuring?
The text of the proposal includes a large Chapter X (Articles 88 to 102), which does not obscure the subject in its title: “Insolvency Proceedings, Winding-Up of Insolvent EU Inc. Companies that are innovative startups”. The proposal’s Explanatory Memorandum notes that, regarding the insolvency of an EU Inc – at least an EU Inc that is an “innovative startup” – the proposal complements the approximation of substantive insolvency laws achieved by the EU’s draft Directive 2026/799 harmonising certain aspects of insolvency law. It does so in particular by providing for a simplified winding up procedure and a framework for electronic auction of assets within such a procedure.
The EU Inc does not affect private international law matters, such as the rules on the determination of international jurisdiction, applicable law and recognition of judgments in insolvency matters, which are laid down in the recast Insolvency Regulation (EIR 2015).
Moreover, the proposal is also without prejudice to the application of the Preventive Restructuring Directive (2019/1023), as implemented into the laws of EU member states since 2020. Conclusion: The Preventive Restructuring Directive, as transposed in member states will fully apply to the EU Inc. Nevertheless, it was apparently deemed necessary to include a characteristic providing for uninterrupted negotiations for restructuring plans in the proposal, at Article 94: during the simplified winding up proceedings, the debtor should have access to a stay of individual enforcement actions (with uncertainty whether the conditions, exclusions and consequences of a stay apply, as regulated in Articles 6 and 7 of the Directive).
Chapter X contains rules on simplified winding-up proceedings (lawyers like abbreviations, so this will become “SWUPS”) for EU Inc companies that are innovative startups. The objective of the proposal is to ensure that EU Inc companies that are innovative startups are wound up in an orderly manner, using a swift and cost-effective proceeding. In reality, these startups often face scarcity of working capital, higher interest rates and larger collateral requirements, which make raising finance, especially in situations of financial distress, difficult, if not impossible. The proposal notes that, in the light of innovative startups’ unique characteristics and their specific needs in financial distress, in particular the need for faster, simpler and affordable procedures, when they become insolvent, they should have access to simplified winding-up procedures that are adapted to these specific needs.
Therefore, the main aim of Chapter X’s provisions is to simplify the procedure for insolvent EU Incs and lower the associated administrative costs. In principle, the debtor should be a debtor in possession (DIP), and remain in possession of the business’ assets and affairs throughout the SWUP. Member states should enable the use of electronic means of communication for all communications between the competent authority and, where relevant, the insolvency practitioner (IP), and the parties to the SWUP. These proceedings may be started at the request of the debtor or at the request of a creditor. To simplify the filing procedure, a standard form will be created under an implementing act of the Commission. It will contain the details as mentioned in Article 92(3)(a-f) of the proposal.
The “insolvency” test for access to simplified winding-up proceedings for an EU Inc works on the basis of easily ascertainable conditions: “An EU Inc. innovative startup shall be deemed insolvent for the purposes of simplified winding-up proceedings when it is generally unable to pay its debts as they mature” (Article 89(2)). It is up to the member states to provide a definition of “inability to pay debts as they mature”, and they must also define the specific conditions under which this criterion is met, as long as these conditions “are clear, simple and easily ascertainable by the startup concerned” (see recital 68). Recent experience shows that drafting definitions in this area – for instance “likelihood of insolvency” – is a cumbersome task. In the case of startups, this may also provoke competition in becoming the most attractive EU Inc member state of the EU.
The Commission attaches particular importance to the fact that proceedings concerning insolvent liquidation are conducted with the involvement of an IP. He or she can ensure compliance with all legal requirements and acts in the interests of creditors. The smooth administration of simplified winding-up proceedings for EU Incs, as a general rule, should begin with the appointment of an IP. His or her expertise is needed, in particular, when it comes to the protection of employee rights or ‘conformity with environmental law standards’ (see recital 69). This last phenomenon has been promoted to the European league for the first time.
Appointing an IP is a principle rule, as an exception has been included: it is possible that the winding-up proceeding is conducted without an IP being appointed “only when the prudent behaviour of the debtor in the period leading to insolvency justifies this” (recital 69; this “prudent behaviour” requirement does not appear in Article 90(2) of the proposal). Such a request can be made by the debtor itself, a creditor, or a group of creditors. It then is within the discretion of the competent court or authority to decide whether or not to grant such derogation, taking into account all relevant circumstances. It is a rather open norm, leaving much to the discretion of the court.
Speed, cost awareness, minimisation of formalities, and effectiveness are the keywords for SWUPS for EU Incs. The procedure should be conducted and concluded within six months of the submission of the request to open these proceedings. Minimalisation of formalities for the major procedural steps is the slogan, including for the opening of the proceedings, the lodgement and the admission of claims or the realisation of assets. It all should be so clear and inelaborate that innovative startups should be able to commence simplified winding-up proceedings themselves, without representation from a lawyer, using a standard form developed for that purpose. The desire to cut costs and the length of procedures should lead member states to enable debtors, creditors, insolvency practitioners and judicial and administrative authorities to use electronic means of communication for all procedural steps in insolvency proceedings.
As to the lodging and admission of claims by creditors in a simplified winding-up proceeding the assumption is that the majority of claims are lodged on the basis of a written statement submitted by the debtor. In addition to the claims included in that statement, creditors may lodge further claims. To simplify the admission procedure, claims listed in the statement of the debtor are considered as admitted, unless the creditor specifically objects to them. After the establishment of the insolvency estate, the competent authority decides if it will proceed with the realisation of assets, or if it will immediately close the simplified winding-up proceedings because the value of the assets make realisation unreasonable.
The proposal requires that the realisation of the winding-up occurs through online judicial auction, unless the competent authority considers this means of realisation of assets inappropriate. Member states should establish and maintain one or more electronic auction systems in their territory. This obligation, however, should be without prejudice to the multiple platforms that exist in some member states for online judicial auctions of specific types of assets.
These auction systems should also be interconnected via the European e-Justice Portal, which should serve as a central electronic access point to the online judicial auction processes run in the national system or systems. The Portal should provide a search functionality for users and guide them to the relevant national online platforms if they intend to participate in the bidding. The Commission is required to establish a system interconnecting the national electronic auction systems via the European e-Justice Portal, which should serve as a central electronic access point. The added value of such a system of interconnection is evident: the accessibility of all auctions through a single platform which is available in all official languages of the EU. The technical specifications of that interconnection system will be determined by way of implementing act(s).
The proposal is now with the Commission’s co-legislators, the European Parliament and Council, preceding trilogue negotiations, under the ordinary EU legislative procedure. The agenda says final adoption by end-2026. Will they be just as ambitious?
References
Proposal for a Regulation of the European Parliament and the Council on the 28th regime Corporate Legal Framework – ‘EU Inc’., 18.3.2026 COM(2026) 321 final 2026/0074 (COD)