EU Inc.: the insolvency provisions of the Commission's draft 28th regime proposal

On 18 March 2026, the European Commission presented its proposal for EU Inc., an optional, digital-by-default European corporate framework designed to sit alongside existing national company frameworks as the cornerstone of the EU's 28th regime (the Proposal). It provides for simple and efficient corporate rules and procedures covering the full lifecycle of a company, from registration through governance and operation to investment. Of particular interest for restructuring practitioners are the insolvency and liquidation provisions in the Proposal: they represent a meaningful attempt to harmonise winding-up procedures across the Single Market.  

Innovative startups will have access to simplified insolvency procedures to facilitate the winding-up of operations. This enables founders to try and test innovative ideas and start again if needed. More efficient insolvency procedures should have a positive impact on competitiveness as they should reduce the costs of closure, currently considered higher in the EU compared to other jurisdictions. 

The Proposal also introduces a fast-track liquidation for solvent companies and a 'once-only' data submission principle during liquidation, addressing the fragmentation of corporate and insolvency laws across the EU and making it easier and more efficient for eligible companies to manage their end-of-life processes. 

The Proposal complements the recently adopted directive harmonising certain aspects of insolvency law (see our blog here) and preserves the application of the Recast Insolvency Regulation on private international law matters. The 2019 Restructuring Directive's measures, which have been transposed into national laws, will also fully apply to the EU Inc. These measures concern preventive restructuring frameworks, discharge of debt and disqualifications, and the efficiency of procedures related to restructuring, insolvency, and debt discharge. 

We consider the key features of the insolvency and liquidation chapter below.

The problem the Proposal seeks to address

The Commission's diagnosis is a familiar one. The EU's 27 national legal systems and more than 60 company forms create a fragmented corporate landscape that delays company setup, raises costs and discourages cross-border scale. The insolvency dimension of this fragmentation is equally acute: national insolvency frameworks are, in the Commission's view, "not always fit to treat insolvent EU Inc. companies that are innovative startups properly and in a proportionate manner". Innovative startups face scarcity of working capital, higher interest rates and larger collateral requirements, making raising finance in situations of financial distress difficult if not impossible.

Key insolvency features of the Proposal

Chapter 10 of the Proposal outlines a new, simplified, and digital-first framework for the winding-up of insolvent EU Inc. companies that are classified as "innovative startups". The primary objective is to ensure that these specific types of companies can be wound up in an orderly, swift, and cost-effective manner, moving away from potentially cumbersome national insolvency frameworks that may not be suited to their unique characteristics.

1. Scope: which companies qualify for simplified winding-up?

The simplified insolvency procedures in Chapter X of the Proposal are not available to all EU Inc. companies. They apply only to EU Inc. companies that are "innovative startups" as defined by the accompanying Commission Recommendation. That Recommendation defines an innovative startup as an enterprise which:

• qualifies as an "innovative enterprise" (broadly, one whose research and development costs represented in at least one of the three preceding financial years either at least 10% of its total operating costs or at least 5% of its total net sales, or which has developed or is developing a major innovation carrying a risk of technological or industrial failure);
   
• is autonomous;
   
• employs fewer than 100 persons and has annual turnover or balance sheet total not exceeding EUR 10 million; and
   
• has been operating for less than 10 years following registration.

The 10-year age limit is notably generous, designed to capture deep-tech startups that may require longer research and development cycles, capital-intensive development phases, regulatory validation processes and delayed revenue generation. This is a pragmatic choice, but it means the simplified winding-up procedures will remain unavailable to the broader population of EU Inc. companies, including scaleups that have outgrown these thresholds.

2. Insolvency trigger: a single, simplified test

For EU Inc. innovative startups, the Proposal adopts a single insolvency trigger: the company is deemed insolvent when it is "generally unable to pay its debts as they mature". This is a deliberate simplification. The cessation of payments test and the balance sheet test are the two usual triggers among Member States for the opening of standard insolvency proceedings; the Proposal opts for only the former, on the basis that it is more easily ascertainable. Member States retain discretion to define the specific conditions under which this criterion is met. 

3. Application process

Either the insolvent company or any creditor can initiate the proceedings using a standard digital form, which will be established by the European Commission. Representation by a lawyer or other legal professional is not compulsory for this request.

4. Streamlined admission of claims

The insolvency practitioner (or, in its absence, the debtor) prepares a list of creditors and claims; claims on that list are deemed lodged and admitted without further action unless a creditor specifically objects within a period not exceeding 30 days.

5. Stay of enforcement

Debtors benefit from a stay of individual enforcement actions, either by operation of law or upon decision of the competent authority.

6. Insolvency practitioner

In principle, the debtor should remain in possession of the business throughout simplified winding-up proceedings; however, the smooth administration of such proceedings generally requires the appointment of an insolvency practitioner. The debtor, a creditor or a group of creditors may request that no insolvency practitioner be appointed, provided the startup demonstrates it has an up-to-date balance sheet and has submitted its most recent annual statement.

7. Digital communication 

All communications within these simplified winding-up proceedings, including those between the court/competent authority, the insolvency practitioner, and parties, must be carried out using digital means.

8. Six-month target for closure

The court or competent authority must take a decision on closure within six months of the request for opening, extendable once by a further six months where additional time is needed for asset sales or distribution of proceeds. In the absence of such extension or upon expiry, the procedure automatically converts into an ordinary winding-up procedure.

9. Electronic auction systems and their interconnection

A notable feature of the Proposal is the requirement for Member States to establish and maintain one or more electronic auction platforms for realising the assets of the insolvency estate in simplified winding-up proceedings. The insolvency practitioner must use the electronic auction system for asset sales unless this is inappropriate given the nature of the asset or the circumstances of the proceedings.

The Commission will establish a system for the interconnection of these national electronic auction systems via the European e-Justice Portal, which will serve as a central electronic access point providing information on all auction processes in all official EU languages and enabling users to search among them and navigate to the relevant national platforms to submit bids. The costs of establishing and adjusting national systems are borne by each Member State, while the interconnection system is financed from the general EU budget. 

Member States may extend the use of these electronic auction systems beyond EU Inc. innovative startups to other types of insolvency proceedings.

Fast-track liquidation for solvent EU Inc. companies

Chapter IX of the Proposal addresses the closure of solvent EU Inc. companies and introduces a fast-track liquidation procedure designed for simple cases. The procedure is available where, at the date of dissolution, the EU Inc. has ceased its economic activity, has no assets (or all assets have been distributed), has no liabilities (or has obtained consent from all known creditors) and is not subject to any pending administrative or judicial proceedings.

The filing process is fully digital. The company files a notification of dissolution simultaneously with an application for removal from the business register, accompanied by a declaration from all directors that the conditions are met, a financial statement of liquidation, evidence of creditor consent where applicable and a declaration from a person who undertakes to keep the books and records for six years.

Creditor protection is maintained through several mechanisms. Creditors may object within 30 days of public disclosure, stating the reasons for their claims. The national tax authority has 30 days to issue clearance or submit its opposition, extendable by a further 30 days; if it does not respond, clearance is deemed granted. Following expiry of these deadlines and in the absence of objections, the business register removes the company.

Importantly, directors remain jointly and severally liable for any unsatisfied claims of creditors after removal. The company's books and records must be kept for six years. The overall target is completion within approximately three months.

The once-only principle in liquidation

The Proposal extends the once-only data submission principle to the liquidation phase. Following the filing of liquidation-related documents to the business register, that register must digitally inform the relevant national authorities (such as tax and social security bodies) of the change in the company's status without delay; the EU Inc. company is not required to provide the same information separately to those authorities. Creditors are entitled to submit their claims fully online, free from requirements for physical form or notarial authentication.

Key takeaways and practical implications on the EU Inc. insolvency provisions

The insolvency provisions of the Proposal represent a targeted intervention rather than a comprehensive harmonisation of insolvency law. We want to highlight a few key takeaways:

• The definition of "innovative startup" as the gateway to simplified proceedings is both a strength and a limitation. The objective criteria are designed to be easily applicable, but the 10-year age limit and EUR 10 million turnover ceiling will exclude many companies that might otherwise benefit from streamlined winding-up. The single insolvency trigger (inability to pay debts as they mature) simplifies the opening of proceedings, but Member States retain discretion over the specific conditions, creating scope for divergence in application across jurisdictions.
   
• The streamlined claims process, under which debtor-listed claims are deemed admitted unless specifically objected to, should reduce costs and accelerate proceedings; creditors will need to be vigilant in reviewing the debtor's list within the 30-day objection window.
   
• The mandatory use of electronic auction platforms for asset realisations, interconnected via the European e-Justice Portal, introduces a new cross-border infrastructure for insolvency asset sales whose practical effectiveness will depend on technical implementation and market uptake.
   
• The fast-track solvent liquidation procedure offers a route to removal from the register within approximately three months for companies with no assets or liabilities (or with creditor consent), subject to 30-day creditor objection and tax clearance windows; directors' continuing joint and several liability for unsatisfied claims after removal provides an important safeguard.
   
• The Proposal expressly preserves the application of the Recast Insolvency Regulation and the Restructuring and Insolvency Directive, positioning itself as a complement to, rather than a replacement for, the existing EU insolvency framework.

Next steps

The EU Inc. proposal now enters the ordinary legislative procedure, requiring adoption by both the European Parliament and the Council. During this process amendments to the text may be made. It is the Commission’s intention to reach an agreement by end of 2026. Businesses, particularly innovative startups and those operating cross-border, should closely monitor these developments, as the final regulation will significantly impact corporate structuring and insolvency processes within the Single Market.