Company Formation: European Union 2026

Chapter 1: Freedom of Establishment and the EU Legal Framework

1-1. Treaty Foundation: Articles 49-55 TFEU

The right to form and operate a company across European Union member states rests on the freedom of establishment guaranteed by Articles 49 to 55 of the Treaty on the Functioning of the European Union (TFEU). Article 49 prohibits restrictions on the freedom of establishment of nationals of a member state in the territory of another member state. Article 54 extends this right to companies and firms formed in accordance with the law of a member state and having their registered office, central administration, or principal place of business within the Union.

These treaty provisions have direct effect, meaning they can be invoked by individuals and companies before national courts without the need for implementing legislation. The Court of Justice of the European Union (CJEU) has developed extensive case law interpreting the scope of freedom of establishment, with landmark decisions including:

• Centros (C-212/97, 1999): A member state cannot refuse to register a branch of a company validly incorporated in another member state, even if the company was incorporated there solely to avoid the formation requirements of the branch state.
• Uberseering (C-208/00, 2002): A member state must recognize the legal capacity and capacity to be a party to legal proceedings of a company formed under the law of another member state.
• Inspire Art (C-167/01, 2003): A member state may not impose minimum capital or other substantive requirements on branches of foreign EU companies that go beyond the disclosure requirements permitted by the Eleventh Company Law Directive.
• VALE (C-378/10, 2012): The freedom of establishment encompasses the right of a company formed under the law of one member state to convert into a company governed by the law of another member state, provided the conditions laid down by the legislation of the destination state are met.
• Polbud (C-106/16, 2017): A company may transfer its registered office to another member state by way of cross-border conversion without transferring its real seat, and the member state of origin may not impose liquidation as a precondition.

1-2. The Company Law Directive (Directive (EU) 2017/1132)

The Company Law Directive is the principal EU directive consolidating existing company law directives into a single instrument. It covers:

• Formation and capital requirements for public limited liability companies (Title I, Chapter III)
• Disclosure requirements including mandatory publication of company documents and particulars in a national gazette and/or business register (Title I, Chapter III)
• Cross-border mergers of limited liability companies (Title II, Chapter I)
• Cross-border divisions (Title II, Chapter III, added by Directive (EU) 2019/2121)
• Cross-border conversions (Title II, Chapter II, added by Directive (EU) 2019/2121)
• Branch disclosure requirements for branches of companies from other member states (Title I, Chapter III)

The directive was substantially amended by Directive (EU) 2019/2121, which introduced harmonized procedures for cross-border conversions and divisions for the first time. These provisions, which member states were required to transpose by January 31, 2023, provide a structured legal framework for companies wishing to move their registered office to another member state or to divide across borders.

1-3. Member State Discretion and Divergence

Despite the harmonization achieved through EU directives, significant differences remain among member states in the practical requirements for company formation. The EU has not created a uniform European private limited company (the proposed SUP -- Societas Unius Personae -- was never adopted). Key areas of divergence include:

• Minimum capital requirements: These range from EUR 1 (Germany UG, France SAS) to EUR 25,000 (Germany GmbH) for private limited companies. Some member states have no minimum capital requirement at all (such as the UK prior to Brexit, and Ireland for LTD companies).
• Notarization requirements: Some member states require notarial authentication of formation documents (Germany, Austria, Czech Republic), while others permit purely online formation without notarial involvement (Estonia, Denmark, Ireland).
• Director residency requirements: Most member states do not require directors to be resident within the state, but some impose practical requirements such as the need for at least one EEA-resident director (Ireland, prior to 2024 reform) or requirements related to management presence.
• Registration timelines: Formation timelines range from less than one business day (Estonia e-Residency, Denmark online) to several weeks (Germany, Austria, Luxembourg).
• Beneficial ownership reporting: While all member states are required to maintain beneficial ownership registers under the AMLD, the implementation, access rules, and enforcement vary significantly.

1-4. The European Economic Interest Grouping (EEIG)

The European Economic Interest Grouping (EEIG), governed by Council Regulation (EEC) No 2137/85, is a supranational legal form designed to facilitate cross-border cooperation between businesses from different member states. Key characteristics:

• The EEIG must have at least two members from different member states
• Its purpose is to facilitate or develop the economic activities of its members, not to make profits for itself
• Members have unlimited joint and several liability for the EEIG's debts
• The EEIG has legal capacity but is tax-transparent: profits are taxed at the member level, not at the EEIG level
• Registration is required in the member state where the EEIG has its official address

The EEIG is used primarily for joint ventures, research collaborations, and consortia for public procurement. It is not suitable for operating businesses or for liability limitation purposes.

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Quick Decision Matrix

Choose the right business structure in 5 seconds.

5-second answer: Most small businesses should start with an LLC (or local equivalent). Read Chapter 2 for requirements, Chapter 3 for step-by-step setup.