Europe’s proposed “EU Inc.” company law could make it considerably easier to start and operate a business across the EU. For Goedele Mangelaars, a Dutch-born founder of New York-based travel startup Pink Notebook, whose employees and investors are connected to both Europe and the US, the so-called 28th Regime is more than an abstract debate about company law.
Describing herself as a product of both the European welfare state and what she calls “sheer American ambition”, she believes Europe should use the current momentum not just to make incorporation easier, but to tackle the obstacles companies face as they grow. She has seen how much easier some aspects of running a company can be in the US, while also believing strongly in the social model she grew up with in Europe.
The European Commission put forward its EU Inc. proposal in March. The proposed framework would create an optional EU-wide company form, with fully digital procedures and a fast-track registration within 48 hours, no statutory minimum capital requirement, and common rules in areas including share issuance, financing and employee stock options. The European Parliament is now considering the proposal.
While Mangelaars supports EU Inc., she also calls on lawmakers to push the ambition further. EU Perspectives spoke to Mangelaars about her experience on both sides of the Atlantic and what she thinks EU Inc. can, and cannot, do to help European companies grow.
Having followed the debate around EU Inc. for a while, what did the Commission proposal get right?
I think the proposal gets several of the fundamentals right. In particular, it removes the requirement for minimum starting capital, speeds up incorporation, removes the need for in-person formalities, makes it easier to issue shares and allows for deferred taxation of employee stock options. These are all things that founders have been asking for, and together they make it considerably easier to get a company off the ground.
It also makes Europe a more attractive place to start a company because, at least on paper, it brings some of the conditions closer to what founders can expect in Delaware (Editor’s note: Delaware is a US state known for its business-friendly corporate law and widely used by companies incorporated in the US).
And where does the proposal fall short? What are the main issues you think EU Inc. still fails to address?
There are a few practical questions already emerging around how the proposal would work across different member states. France, for example, has discussed extending the incorporation period to 14 days to address fraud concerns, rather than the proposed 48 hours. Bulgaria has questioned whether zero euros of starting capital is realistic. You can already see national differences and concerns about sovereignty starting to play out.
But I think there is a bigger question about what EU Inc. is actually trying to achieve. If the goal is simply to make it easier for a small company to incorporate, get a VAT number and start operating, then EU Inc. does that. If the goal is to create an environment in which a large company can attract significant amounts of capital and the best talent, I’m not sure it gets us there yet.
The harder part comes when companies scale
An issue that’s often raised in this debate is that Europe does not necessarily lack the talent, ideas or even the startups — but that companies can leave, often for the US, once they reach the next stage of growth. Does EU Inc. address that problem?
I’m not sure it does, and I’m not sure it was written to.
The first few weeks and months of a company don’t feel easy when you’re in them — it can feel like the most complicated thing in the world. But setting up a corporation or a board of directors is relatively straightforward compared with what comes later: hiring and firing across borders, issuing shares across borders or scaling across borders when there are language requirements.
I also continue to work with people in Europe, including an employee in the Netherlands. One of the things we’re dealing with right now is how to issue him shares and when he should be taxed on them — whether they are treated as income or capital gains, for example, which obviously has a material effect on him.
In the US, issuing equity is much more straightforward. I can call my employment attorneys, they draft a few documents and it’s done. As soon as I want to do something similar overseas, it becomes materially more complicated.
Those are the kinds of issues that EU Inc. does not explicitly tackle. But I also don’t think that was necessarily the goal of the proposal. I think EU Inc. was ultimately designed to make incorporation easier. The question is whether we now use that as a starting point to address some of the more complicated issues that arise as companies grow.
So once a company moves beyond those early stages, is there still an EU-level framework that helps it grow, or does it essentially fall back on national rules?
Anything that isn’t covered by EU Inc. would generally fall back on national law, so companies operating in different member states can end up dealing with quite different rules. That’s where I think there is a risk of EU Inc. becoming a kind of “sticker on a national company”: you have a European legal form, but underneath it you’re still dealing with very different national rules depending on where you operate.
That’s an interesting contrast with Delaware, which has a specialised court that handles corporate issues. One reason US investors appreciate Delaware corporations is that they know the case law and what to expect if there is a disagreement. In Europe, companies operating out of the Netherlands, France or Germany could face quite different national rules on similar issues.
As a company scales, that is likely to cause friction. The reason it’s easier to get capital in the US, which is what you need to move from the small stage to the scale-up stage, is predictability. Investors already accept a lot of inherent risk in startups, so if you can simplify anything, they appreciate it.
But I don’t think that means Europe should simply adopt the US approach. Hiring and firing quickly, for example, is often cited as an advantage of the US system, but there are good reasons why Europe has stronger employee protections. Those protections are integral to the European model, and I don’t think they belong in EU Inc.
There is a broader conversation to be had about how European startups can grow across borders without having to navigate fundamentally different rules every time. I think that’s the part we haven’t gotten to yet.
From the European welfare state to the American dream
So, all in all, for you, EU Inc. is a great first step, but definitely should not be the end of the conversation?
Indeed, we should be more ambitious than that. We should get EU Inc. through, but then keep pushing on the other barriers that make it difficult for European companies to grow and compete.
One thing I would like to see is more clarity on which provisions defer to national law, because that certainty is so important. Another option would be something like a European Court of Commerce, similar to what Delaware has, so that companies and investors know what to expect if there is a disagreement.
But stopping there wouldn’t do justice to what Europe is capable of. There are so many bright minds in Europe who want to compete and create startups, and who are looking to their member states and the Commission to help create the conditions for them to do that.
You’ve experienced both the European and American systems. How has that shaped your view of what Europe needs to do to help entrepreneurs?
I’m very lucky that I feel like I’m both a product of the European welfare state and a product of the American dream. I was given free healthcare and schooling when I was little, and I very strongly believe in those models and in creating opportunities for people to participate in the economy in the way that they want to.
But I’m also a product of sheer American ambition. And I do think there is a difference in risk appetite between the US and Europe. The American “fake it till you make it” mentality can go too far, but I also see so many friends around me who have been to some of the best schools in the UK and Europe who don’t believe that they’re justified in dreaming that big and taking such big risks.
I find that a shame because I know them well and I know their American counterparts well, and pound for pound they can compete against each other. And they don’t.
We see some of our smartest minds in Europe follow a very corporate career trajectory, and there is nothing wrong with that. But I wish maybe two or three percent more would be incentivised to take a risk; to start a company or work for a startup.
The combination of those two experiences is why I believe in what EU Inc. has drafted, but also why I think we should take it further. There is so much more that we can do if we want European startups to compete with their predominantly American counterparts.
