The 28th Regime: a new legal framework for innovative companies
The European Parliament examines the scope of a proposed 28th regime, a voluntary legal and administrative framework for businesses operating across the EU. The idea of a 28th regime emerged from the growing need to reduce administrative burdens and fragmentation within the EU’s single market, which often hinders startups and SMEs seeking to scale across borders. The 28th regime should be open to businesses of all kinds and designed to meet the needs of innovative businesses, including those with an exit strategy who wish to attract venture capital funding and those with a vision of long-term independence.
This regime must offer speed and certainty for entrepreneurs and investors and, at the same time, ensure a level playing field with existing companies in areas such as taxation, commercial and consumer law. To make the regime practically useful, it must clarify how it will interact with existing national regimes and not create additional complexity or uncertainty where mandatory national legislation remains applicable.
The 28th regime should provide:
- A simple EU corporate form, with no eligibility criteria or capital requirements;
- Incorporation within 48 hours, fully digital and paperless;
- Support through standardized model documents, e.g. shareholder agreements, to speed up company formation and reduce legal costs;
- Flexibility in ownership structures and business models;
- Dedicated funding and investment support;
- Specialized courts and conflict resolution mechanisms, including English-language options;
- Fair interaction with existing national regimes and a level playing field for all companies in terms of legal obligations; and
- Aligned insolvency procedures.
Support for the 28th Regime idea was mainstreamed in two influential 2024 reports on the future of the EU’s economy, authored by Enrico Letta and Mario Draghi. European Commission and most EU governments are giving absolute priority to corporate competitiveness via ‘simplification’; however, critics warn that while the 28th regime could foster innovation and investment, it might also lead to a regulatory ‘race to the bottom’, undermining social rights, labor protections, and environmental standards.
The EU Commission’s legislative proposal is set to be released in the first quarter of 2026. The proposal will test whether the EU can balance competitiveness with its commitment to social and environmental responsibility. We are eagerly awaiting it.