Jeroen ten Broecke, lawyer at the Belgian law firm Philippe & Partners, is also convinced that this fragmentation will be significantly reduced with EU Inc. and that administrative costs will also fall: “Particularly for startups in the early stages, the friction losses in cross-border activities could be reduced. In addition, the standardized, standard digital approach should also make it much easier to set up and operate in all EU member states.”
At the moment, the founding process for many startups is characterized by an excess of bureaucracy. In Italy, Exein needed a notary and lawyers, which required additional costs and administrative effort. “This complicates things excessively, especially for startups, because money is usually tight due to various other costs. Not to mention the considerable amount of time involved,” says Gagliardo.
Augustin Prot, co-founder of the French tool provider Weglot, also saw these problems coming his way – and chose a different approach: His company initially launched in 2015 without a formal legal structure in order to avoid unnecessary administrative costs. It was only when the founders were convinced after six months that they could justify the investment in the administrative founding process that this was initiated. “The possibility of founding a startup within 48 hours for less than 100 euros would have made it much easier for us to start – as would the choice of legal form. If you make the wrong decision here, time and energy will have to be spent to correct it,” states the entrepreneur.
As you grow, you have even more work
As a European company grows, the administrative challenges multiply. Exein founder Gagliardo can also sing a song about this: “Every new market treats us like a new company, which represents an additional burden and can affect routine business operations,” says the manager. For example, a recently completed revolving loan from JP Morgan required hiring lawyers in Germany, Great Britain and Italy – as well as setting up three separate governance and approval processes: “This process took three months. If the laws had been harmonized, it would have been a matter of a few hours,” says Gagliardo.
Another challenge for companies across Europe is stock options for employees. How this is treated for tax purposes varies considerably within the individual EU member states. This makes it more difficult to offer this option to the workforce, which also affects its attractiveness as an employer. Gagliardo expects great things from the EU Inc. framework in particular on this point: “The complexity surrounding stock option plans is currently simply chaotic. In this respect, the proposals within the framework of EU Inc. could be a game changer for Europe.”
Weglot founder Prot also sees the uniform regulation on stock options provided for by EU Inc. as an effective instrument for attracting and retaining talent in a growing startup: “So far, the different regulations in Europe have primarily created unequal competitive conditions compared to the USA. The framework there is much simpler and more attractive.”
