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The European Commission (EC) has launched a public consultation on a so-called “28th regime”, which would be an optional EU-wide corporate legal framework designed to help companies, particularly start-ups and scale-ups, overcome barriers to operating across the Single Market. For SMEs, this initiative could mean simpler, faster and more digital procedures for setting up, operating, and expanding businesses in the EU.
The regime aims to reduce the complexity and costs caused by divergent national rules on company formation, capital requirements, and cross-border operations. It proposes a streamlined legal form for innovative SMEs, with optional standard templates, minimal capital thresholds, full digital setup, and easier access to EU-wide investment.
Stakeholders are invited to share their views on challenges such as legal fragmentation, administrative burdens, digital tools, investor access, employee stock options, and insolvency rules. Feedback will help shape the design of a flexible, SME-friendly regime that supports growth and competitiveness across the EU.
The consultation is open until 30 September 2025.
The European Parliament’s (EP) Internal Market Committee (IMCO) organised a public hearing on 25 June to discuss the EC’s recently published Single Market Strategy. The hearing highlighted the need for a simplified, fair and fully integrated single market, particularly for SMEs and consumers.
Panellists and MEPs emphasised addressing the most harmful regulatory barriers, strengthening enforcement, tackling unfair trading practices, and ensuring coherent implementation across member states. Digitalisation, cross-border service provision, and stronger product surveillance especially in e-commerce emerged as priorities, with many calling for bolder action and more consistent application of EU rules.
The draft report was prepared by MEP Rene Repasi (S&D, Germany), and attempts to develop the EP’s position on the 28th regime initiative in parallel with the ongoing public consultation (see article above) and ahead of a proposal currently expected for March 2026.
The draft report proposes a new corporate form, the European Start‑Up and Scale‑Up (ESSU) company, designed as an optional, harmonised legal status for limited liability SMEs, start‑ups and scale‑ups that voluntarily opt into the 28th regime across the EU.
SMEs opting for the ESSU would benefit from fully digital incorporation and registration within 48 hours, following the “once‑only” principle. A central EU‑level digital register would support business registration, issue a unified company identifier, and ensure recognition across all EU member states.
Eligible ESSUs would be limited liability companies (not publicly listed), with minimum initial capital possibly set at EUR 1, and mandatory profit‑reserve mechanisms until national thresholds are met. The report urges harmonised models for shareholder agreements, equity‑like debt instruments, profit‑participation rights and silent partnerships, thus helping SMEs raise finance without ceding control.
Mr. Repasi also proposes faster, cost‑efficient dispute handling via optional specialised alternative dispute resolution (ADR) or dedicated court panels focusing on ESSU‑related corporate disputes. ESSUs would remain fully subject to national mandatory labour and co‑determination rules. A conflict‑of‑laws rule would apply governance and codetermination law would follow the location of a company’s real seat.
This is only a non-binding EP report, but it will show which direction the MEPs are likely to go when legislating on the future EC proposal. As a next step, JURI Committee will vote on the draft report in the autumn.
To support MEPs with the 28th regime draft report (see article above), the EP’s research services commissioned and published a study on its potential benefits.
The study looks at the reasons for introducing a possible 28th regime by examining the challenges companies, especially SMEs, face when operating across borders in the EU Single Market. These include tax related barriers, as well as duplicating reporting requirements, among many others.
IMCO Committee adopted its draft report on Streamlining and strengthening the EU single market on 15 July, with 42 votes in favour, 3 against and 5 abstentions. The draft report was prepared by MEP Anna-Maja Henriksson (RE, Finland).
The adopted draft report notably stresses the need to avoid inconsistent implementation of EU laws and fragmented enforcement, calls for measuring and monitoring progress towards established targets such as reducing administrative costs by 25% and by 35% for SMEs, and underlines the need for efficient legislative and non-legislative instruments to address persistent single market barriers (e.g. on cross-border services).
As a next step, the EP plenary is scheduled to adopt the final report on 8 September.
