EU Inc.: what the insolvency and liquidation provisions mean for practitioners

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. 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: 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, enabling founders to try and test innovative ideas and start again if needed. More efficient insolvency procedures should also 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.

The Proposal complements the recently adopted directive harmonising certain aspects of insolvency law and preserves the application of the Recast Insolvency Regulation on private international law matters. The 2019 Restructuring Directive's measures — concerning preventive restructuring frameworks, discharge of debt and disqualifications, and the efficiency of related procedures — will also fully apply to EU Inc. companies.

The problem the Proposal seeks to address

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 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 financial distress difficult if not impossible.

Key insolvency features of the Proposal

Chapter 10 of the Proposal outlines a new, simplified, digital-first framework for winding-up insolvent EU Inc. companies classified as "innovative startups". The primary objective is to ensure these companies can be wound up in an orderly, swift and cost-effective manner.

1. Scope: which companies qualify?

The simplified procedures apply only to EU Inc. companies qualifying as "innovative startups" under the accompanying Commission Recommendation — broadly, enterprises which: qualify as an "innovative enterprise" (one whose R&D costs represented in at least one of the three preceding financial years either at least 10% of total operating costs or at least 5% of total net sales, or which has developed or is developing a major innovation carrying a risk of technological or industrial failure); are autonomous; employ fewer than 100 persons with annual turnover or balance sheet total not exceeding EUR 10 million; and have been operating for less than 10 years following registration.

The 10-year age limit is deliberately generous, designed to capture deep-tech startups requiring longer R&D cycles and delayed revenue generation. It does, however, mean the procedures remain unavailable to the broader EU Inc. population, including scaleups that have outgrown these thresholds.

2. Insolvency trigger: a single, simplified test

For eligible companies, 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 deliberately omits the balance sheet test used by many Member States, on the basis that the cessation of payments test is more easily ascertainable. Member States retain discretion to define the specific conditions under which this criterion is met.

3. Application process and digital communications

Either the insolvent company or any creditor can initiate proceedings using a standard digital form established by the European Commission, without mandatory legal representation. All subsequent communications — between court, insolvency practitioner and parties — must be conducted digitally throughout.

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 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 throughout; however, the smooth administration of proceedings generally requires practitioner appointment. 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. Six-month target for closure

The court or competent authority must take a decision on closure within six months of the opening request, 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.

8. Electronic auction systems

Member States must establish and maintain one or more electronic auction platforms for realising assets of the insolvency estate. The insolvency practitioner must use the electronic auction system for asset sales unless inappropriate given the nature of the asset or circumstances. The Commission will establish an interconnection system via the European e-Justice Portal, providing a central access point with information on all auction processes in all official EU languages. Member States may extend use of these platforms beyond EU Inc. innovative startups to other insolvency proceedings.

Fast-track liquidation for solvent EU Inc. companies

Chapter 9 introduces a fast-track liquidation procedure for simple solvent closures. It is available where, at the date of dissolution, the EU Inc. has ceased its economic activity, has no assets or 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 undertaking to keep books and records for six years.

Creditors may object within 30 days of public disclosure. The national tax authority has 30 days to issue clearance or submit opposition, extendable by a further 30 days; silence is treated as deemed clearance. Following expiry of these deadlines and in the absence of objections, the business register removes the company. Directors remain jointly and severally liable for any unsatisfied creditor claims after removal. 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 filing of liquidation documents with the business register, that register must digitally inform relevant national authorities — such as tax and social security bodies — of the change in status without delay. The EU Inc. company is not required to provide the same information separately. Creditors are entitled to submit claims fully online, free from requirements for physical form or notarial authentication.

Key takeaways

The insolvency provisions represent a targeted intervention rather than comprehensive harmonisation. The "innovative startup" gateway is both a strength and a limitation: the objective criteria are easily applicable, but the 10-year and EUR 10 million thresholds will exclude many companies that might otherwise benefit. The single insolvency trigger simplifies the opening of proceedings, but Member State discretion over its specific conditions creates scope for divergence across jurisdictions. The streamlined claims process should reduce costs and accelerate proceedings, though creditors must be vigilant within the 30-day objection window. The mandatory electronic auction infrastructure is genuinely novel, but its practical effectiveness will depend on technical implementation and market uptake. Throughout, the Proposal expressly preserves the Recast Insolvency Regulation and the Restructuring and Insolvency Directive, positioning itself as a complement to the existing EU framework rather than a replacement.

Next steps

The proposal now enters the ordinary legislative procedure, requiring adoption by both the European Parliament and the Council, with the Commission targeting agreement by end of 2026. Businesses — particularly innovative startups and those operating cross-border — should monitor developments closely, as the final regulation will significantly impact corporate structuring and insolvency processes within the Single Market.