BETTER FINANCE welcomes the European Union consultation on an optional, digital-by-default “28th Regime” framework, reflecting on what an “EU company brand” could mean for entrepreneurs and investors. Properly designed (and as BETTER FINANCE has long advocated for listed issuers) such a regime should bridge corporate and securities law through genuine EU standards, reducing arbitrage, overcoming (retail) investors’ home bias, enhancing issuer visibility, and ultimately strengthening the Capital Markets Union (CMU) and its competitiveness.
However, for this initiative to succeed, it must not start from the wrong end. The consultation appears to conflate unlisted start-ups with public/IPO-ready firms; two contexts requiring different approaches. Beginning with private, unlisted scale-ups or “innovative” SMEs in fact targets the most complex and highest-risk segment for retail investors, largely catering to venture capital. We caution against blurring the lines between private and public markets, which risks a race to the bottom on safeguards. By contrast, the priority should be to first harmonise listed/public markets (starting with large caps and cross-border issuers), where millions of EU citizens already invest and where fragmented rules and supervision continue to block effective SME access to capital markets through IPOs. Fragmentation in both corporate and securities law remains a major obstacle: divergent company statutes and market frameworks drive up compliance costs while failing to ensure unified shareholder rights (e.g. AGM access, redress). Digitalisation can help: central registers and online incorporation could enhance comparability. DLT could also reduce frictions in shareholder identification, cross-border filings and voting (under harmonised EU standards, not divergent national pilots). Considering those elements, BETTER FINANCE therefore calls for a modular EU framework with two distinct tracks, enabling clear conversion pathways towards public listing from private firms:
- Start with a public track first under harmonised regime under ESMA supervision, overriding divergent national (corporate/securities) laws. IPOs must be enshrined as EU-level processes, ensuring consistency, comparability and investor protection. This would lower compliance costs, enhance cross-border visibility, and provide a predictable growth route, also via an EU public market segment.
- Anticipate a private track, with standards: Private / innovative EU firms could of course benefit from easy simplified incorporation (symbolic capital, SAFE-type instruments, streamlined wind-up procedures); with calibrated core safeguards such as solvency/distribution tests, director liability, and clarify proportionate funding stage-based disclosures. Retail investor access must be carefully calibrated or limited, focussing in delivering first a look-through approach via professional/institutional investors.
To build a genuine ‘EU company’ identity, the 28th Regime should also consider (especialy for EU public companies):
- EU-wide employee share ownership schemes to foster, portable and transparent across borders, where templates should be adapted to both private and public firms and national laws.
- Hybrid AGMs as a shareholder right: enshrined in EU law to guarantee cross-border participation in public issuers, not left as complex corporate actions.
- Clear rules on share classes and MVRS: while MVRS may support founders in the private phase, once public they undermine accountability, shareholder equality and comparability. They should be excluded in the EU public track, or strictly limited with harmonised EU-wide sunset clauses.
- EU-level collective redress mechanisms in public markets is also indispensable to ensure accountability and investor confidence.
In fine, a 28th Regime should not be merely a private “simplification tool” or a empty label of a public or a private ‘EU company’. It should provide an adaptable framework visible and credible for both issuers and investors at different stages. To strengthen the CMU, it should first (or at least in parallel) harmonise the listed/public space, offering clarity and comparability to European investors, while providing a standardised private track with safeguards anticipating clear IPO pathways. Linking private innovation to a predictable EU listing framework is essential for visibility, comparability, for retail participation to ensure liquidity. A trusted ‘EU company’ brand must therefore be recognisable be it in both its public and private forms where a 28th Regime delivering a truly modular approach.
**Read and Download the Consultation Response*