The debate surrounding a supranational legal framework for startups is gaining traction as policymakers seek to bolster Europe’s economic competitiveness. While many founders succeed in establishing their companies, challenges often arise in the growth phase, hindering their potential.
Strengthening the European single market is widely recognized as a crucial response to current economic and geopolitical challenges. The European Commission’s focus on “One Europe – One Market” signals a commitment to greater integration.
Against this backdrop, discussions about a unified legal structure for startups – aimed at minimizing legal hurdles and reducing administrative burdens – appear logical. However, a key question remains: is focusing solely on the rules for company formation sufficient?
Many startups don’t fail during the initial establishment phase, but rather when attempting to grow, access capital, and expand across borders. Strengthening the competitiveness of the European single market, requires a broader perspective than simply company law.
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Guest comments and contributions from external authors do not necessarily reflect the opinion of the editorial team.
What, then, are the primary obstacles to growth for European startups?
First, the fragmentation of capital markets. European venture capital markets remain divided, with investments heavily influenced by national preferences. Access to international investors is critical for larger scale-ups. A functioning capital markets union would be more beneficial to growing companies than an additional legal structure, and could also address the significant outflow of startups to overseas locations.
Second, insolvency law. Investors are concerned not only with how quickly companies can be founded in Europe, but also with the predictability of procedures in the event of failure. Differing national insolvency regimes increase uncertainty and raise capital costs. A more harmonized and transparent framework would lower financing costs, reduce risks, and facilitate investment.
Third, labor and participation models. Startups primarily compete for talent, not for ease of incorporation. Differing labor laws, divergent taxation of employee stock options, and administrative hurdles to cross-border mobility act as real brakes on growth.
A new supranational legal order limited to formal aspects of incorporation would only address part of the problem. Reforms should focus on areas where the economic leverage is greatest.
One aspect should not be overlooked: legal certainty is not a bureaucratic obstacle, but Europe’s strategic competitive advantage. Especially in times of geopolitical upheaval, a reliable legal framework gains significant importance.
International investors do not invest solely in ideas; they invest in markets with reliable institutions. Researchers Daron Acemoglu and James A. Robinson have demonstrated the crucial role of rule-of-law structures in sustainable prosperity – the two economists were awarded the 2024 Alfred Nobel Memorial Prize in Economic Sciences for their work.
Hon.-Prof. Dr. Claus Spruzina is a lawyer and has been President of the Austrian Notarial Chamber since 2025, as well as a long-standing President of the Salzburg Notarial Chamber.
