Changes from report parliamentary committee draft to plenary report

AddedIn the absence of a decision by the Commission within this period the national provisions referred to in paragraphs 4 and 5 shall be deemed to have been approved.

AddedWhen justified by the complexity of the matter and in the absence of danger for human health, the Commission may notify the Member State concerned that the period referred to in this paragraph may be extended for a further period of up to six months.

Added7. When, pursuant to paragraph 6, a Member State is authorised to maintain or introduce national provisions derogating from a harmonisation measure, the Commission shall immediately examine whether to propose an adaptation to that measure.

Added8. When a Member State raises a specific problem on public health in a field which has been the subject of prior harmonisation measures, it shall bring it to the attention of the Commission which shall immediately examine whether to propose appropriate measures to the Council.

Added9. By way of derogation from the procedure laid down in Articles 258 and 259, the Commission and any Member State may bring the matter directly before the Court of Justice of the European Union if it considers that another Member State is making improper use of the powers provided for in this Article.

Added10. The harmonisation measures referred to above shall, in appropriate cases, include a safeguard clause authorising the Member States to take, for one or more of the non-economic reasons referred to in Article 36, provisional measures subject to a Union control procedure.

AddedVI – Analysis

Added(a) Article 50 TFEU

AddedThe essence of the INL is company law and is therefore covered by Article 50 TFEU, which empowers the Union legislators to adopt measures in order to attain the freedom of establishment. According to paragraph 8 of the draft INL, “[...] the 28th regime should mainly concern company law rules and [...] only limited liability companies not listed on the stock market should be able to participate in it; [...] the 28th regime should be a set of rules that must be incorporated into existing or new national corporate forms”.

AddedThe draft INL provides for a new type of corporate form, the ‘European Start-Up and Scale-Up’ (ESSU) (paragraph 9), which is to be incorporated in each of the 27 Member States’ legal orders into existing or new national corporate forms. Indeed, such measures would contribute to facilitating the exercise, by innovative companies, of their freedom of establishment.

AddedOther elements of the draft INL, such as the simplification and digitalisation of company formation and registration (paragraph 11), the rules on minimum paid-in capital (Section 2 of the annex) and the protection against killer acquisitions (paragraph 18 and Section 5 of the annex) also constitute company law rules, covered by Article 50 TFEU.

AddedThe draft INL proposes the establishment of “a uniform Union-level digital company register to serve as a direct entry point for registering ESSUs, complementing and extending the existing Business Register Interconnection System” (paragraph 12). The annex complements this by explaining that “[s]uch a register would complement and extend the existing Business Register Interconnection System. The uniform Union-level digital company register should not replace the existing national incorporation rules but, rather, serve as a common portal.” The register aims to facilitate the simplification and digitalisation of the creation of an ESSU. As long as it would serve as a direct entry point for the registration and it will not replace the relevant national rules, this provision would also fall under Article 50 TFEU.

Added(b) Article 114 TFEU

AddedArticle 114(1) TFEU is the appropriate legal basis for the approximation of the provisions laid down by law, regulation or administrative action in Member States which has as its objective the establishment and functioning of the internal market.

AddedAccording to the case-law, Article 114 TFEU empowers the Union legislature to adopt measures to improve the conditions for the establishment and functioning of the internal market and they must genuinely have that object, contributing to the elimination of obstacles to the economic freedoms guaranteed by the Treaty, which include the freedom of establishment. Furthermore, recourse to Article 114 TFEU as a legal basis is also possible if the aim is to prevent the emergence of obstacles to trade resulting from heterogeneous development of national laws; the emergence of such obstacles must, however, be likely and the measure in question must be designed to prevent them.

AddedAs mentioned in the draft INL (recitals A and D), the progressive introduction by Member States of specific corporate forms for start-ups may negatively affect the proper functioning of the internal market by distorting fair competition. Such divergencies may also have an impact on access to capital, an issue which the draft INL addresses in paragraphs 21 and 22 as well as in Sections 2 and 7 of the annex.

AddedIt results clearly from the draft INL that the aim is to help SMEs, start-ups and scale-ups and their founders to operate and expand across the internal market by setting a clear legal framework of the new corporate form.

AddedIt is worth mentioning, in this regard, that the new corporate form would be a national corporate form which would have to be made available in all Member States with a number of its elements being harmonised by Union law. Therefore, the present situation differs from the situation at issue in case C-436/03 concerning the European Cooperative Society (SCE). The SCE constitutes a European legal form which has specific Union character and is governed by a regulation which leaves unchanged the different national laws already in existence. In its judgment of 2 May 2006 in the above-mentioned case, the Court ruled that the creation of such a supranational corporate form could not be regarded as aiming to approximate (‘harmonise’) the laws of the Member States and that the Regulation was therefore correctly based on Article 352 TFEU (ex Article 308 TEC).

Added(c) Other aspects

AddedAs part of the safeguards to be introduced to prevent the abuse of the 28th regime, the draft INL evokes employee participation in paragraphs 10 and 20 as well as in Sections 1 and 4 of the annex. It is proposed to resolve matters pertaining to employee participation by means of a ‘conflict of law rule’: the applicable law should be determined by the law of the real seat of the company, that is to say, the place of the company’s central management.

AddedFor existing forms of limited liability companies, rules on employee participation aiming to prevent circumvention have been adopted in a legislative act based on Article 50 TFEU. Analogous anti-circumvention rules may be based on Article 50 TFEU.

AddedWith regard to the employee stock ownership plans (paragraph 17 and Section 6 of the annex) and specialised dispute resolution (paragraph 23 and Section 8 of the annex) it is worth drawing attention to two potential issues:

AddedHarmonised rules across the Union on the structuring of employee stock ownership plans, even if construed as optional rules, might not be covered by Article 50 TFEU and are, since they are ‘relating to the rights and interests of employed persons’, explicitly excluded from the scope of Article 114 TFEU, pursuant to paragraph 2 of the latter.

AddedDispute resolution mechanisms understood as ‘out-of-court’ or ‘alternative’ mechanisms, as long as they are ancillary to reach the aims of the measure, could be covered by Article 114 TFEU (see, to that effect, Article 21 of the Digital Services Act, and Directive on alternative dispute resolution for consumer disputes). Requiring Member States to change the organisation of their courts, by contrast, might go beyond the scope of Articles 50 and 114 TFEU.

AddedVII – Conclusion

AddedAt its meeting of 3 December 2025 the Committee on Legal Affairs accordingly decided, by 22 votes to 2, with 1 abstention, to recommend that the draft own-initiative legislative report pursues aims in the area of company law as well as approximation of laws that are indissociably linked and that, therefore, Articles 50 and 114 TFEU seem to be the appropriate legal basis.

AddedYours sincerely,

AddedIlhan Kyuchyuk