EU Inc. and tokenised share transfers: What companies, start-ups and investors need to know

With the EU Inc., the European Commission is planning a single European corporate structure under the so-called 28th regime. Its most important innovation from a Web3 perspective is that this new legal form would, for the first time, allow tokenised share transfers – without the need for a notary appointment and, if desired, using blockchain technology. This would mark the first time that tokenised share transfers are recognised under EU law.

This creates new structuring opportunities, but also raises unresolved legal questions that need to be carefully considered.

Background to the EU Inc. and the 28th regime as a European corporate structure with tokenisation

The proposed EU Inc. is designed as a limited liability company. As part of the 28th regime, it would provide an optional alternative alongside the 27 national legal frameworks, be recognised in every EU Member State and operate under the same rules throughout the EU.

The EU Inc. is primarily intended to provide better conditions for start-ups, scale-ups and their investors, but would be open to all companies, regardless of their size or age. Existing companies would also be able to convert into an EU Inc.

Key facts about the EU Inc.:

Feature	Provisions in the draft Regulation
Legal form	Limited liability company recognised throughout the EU
Minimum share capital	Not required
Shares	No nominal value, fully dematerialised
Incorporation	Fully digital, with registration within 48 hours
Incorporation costs	Maximum of EUR 100 when using the EU model articles of association
Share register	Digital and constitutive, maintained by the company or a third party
Share transfers	Fully digital, without notarisation
Share classes	Multiple classes with different voting and economic rights permitted
Current status	Draft Regulation for the 28th regime, subject to the ordinary legislative procedure

The key innovation: the digital share register

Shares in an EU Inc. would no longer exist in the form of physical certificates, but solely as entries in a digital register. This means:

• Constitutive effect: A transfer would only become legally effective once it has been entered in the register.
• Effect against all parties: The entry would have legal effect not only in relation to the company, but also against third parties.
• Strict prohibition of additional formal requirements: Member States would not be permitted to impose any additional requirements for a transfer to be legally effective – including notarisation.
• DLT option: The articles of association could provide for shares to be issued, recorded and transferred using distributed ledger technology or other digital processes.

This would mark the first time that EU legislation explicitly recognises the blockchain-based representation of company shares – a significant departure from the existing European legal framework.

What “tokenised share transfers” mean in practice

Tokenisation means that a company share is represented as a digital entry (“token”) on a blockchain. Whoever holds the token in their wallet holds the share. A transfer would therefore no longer involve a contractual document followed by an update to the register, but instead take the form of a transaction – documented, time-stamped and traceable for all parties involved.

In practice, this means:

• The cap table and share register become one: The shareholder structure is always up to date, rather than being maintained separately in an Excel spreadsheet.
• Transfers can be completed in minutes rather than weeks: No notary appointment and no need to coordinate appointments across different time zones.
• Rules can be implemented technically: Vesting, lock-ups, pre-emption rights or drag-along clauses can be automated using smart contracts.
• Smaller investments become economically viable: As transaction costs fall, smaller investment amounts can also become worthwhile – for example, for employee share schemes.

Differences between the EU Inc. and the German GmbH

Under Section 15(3) and (4) of the German Limited Liability Companies Act (GmbHG), transfers of shares in a German GmbH require notarisation. This strict formal requirement is intended not only to prevent speculative trading, but above all to ensure:

• reliable evidence
• legal certainty
• protection against hasty decisions.

To date, there is no statutory basis for the tokenisation of GmbH shares with direct legal effect on ownership. Although the German Electronic Securities Act (eWpG) has allowed electronic securities since 2021, it expressly covers only certain debt securities and units in open-ended investment funds, but not shares in a German GmbH.

In practice, this means:

Tokenised shares in a German GmbH do not constitute a legal transfer of ownership. At most, they represent contractual rights, for example in the form of profit participation rights, trust arrangements or purely economic participation models in which the token is linked to an underlying legal relationship outside the blockchain. Legal ownership of the GmbH share itself remains unaffected and continues to be governed by Section 15 of the German Limited Liability Companies Act (GmbHG).

Direct comparison: German GmbH vs EU Inc.

Criterion	EU Inc. (draft)	German GmbH (current law)
Share transfer	Fully digital, no formal requirements	Notarisation required, Section 15(3) and (4) GmbHG
When the transfer becomes effective	Entry in the digital share register	Assignment; shareholder status evidenced by the list of shareholders
Tokenisation with legal effect on ownership	Permitted if provided for in the articles of association	Not permitted
Minimum capital	None	EUR 25,000
Time required for incorporation	48 hours	Several days to several weeks
Availability	At the earliest after the Regulation has been adopted	Available now

What are the tax implications?

From a tax advisory perspective, this also raises a number of further questions:

Without notarised documentation of the share transfer, providing evidence of the date of transfer and the percentage of ownership to the German tax authorities becomes more difficult – for example for:

• real estate transfer tax purposes in the event of a concentration of shares (Section 1(3) GrEStG)
• determining beneficial ownership within the meaning of Section 39 of the German Fiscal Code (AO)
• assessing transfer transactions that have not been documented by a notary

From an anti-money laundering (AML) compliance perspective, the reduced level of identity verification envisaged in the draft should also be viewed critically. The notarial reporting obligations to the tax authorities and the Transparency Register that accompany share transfers under German law have no equivalent in the proposed EU Inc. framework.

What action should be taken now regarding the EU Inc.?

The Regulation establishing the 28th regime is currently still going through the legislative process and may be subject to significant changes, both in terms of its content and timing. Until a statutory basis is established, any tokenisation of shares in a German GmbH remains limited to contractual arrangements.

For established companies, this currently means:

• Nothing will change in the short term. A German GmbH will remain a GmbH – with all the familiar formal requirements.
• The EU Inc. will become relevant for cross-border structures, for example as a holding company, joint venture vehicle or subsidiary for the EU market.
• In future acquisitions, you may encounter an EU Inc. as a target company. Different rules would then apply to the share transfer, with corresponding implications for due diligence and transaction completion.

Start-ups and scale-ups should consider:

• The greatest practical benefit lies in cap table management. Convertible loans, funding rounds and employee share schemes would become significantly easier to manage.
• Multiple share classes with different voting and economic rights are provided for in the draft – an area in which German start-ups have so far often had to rely on more complex structures.
• An important point for planning: the EU Inc. is not yet available. For current funding rounds, it is not an option, but rather a scenario to consider for the period after the Regulation enters into force.

For investors and VC funds:

• Digital transfers without formal requirements can significantly reduce transaction costs – particularly for secondary transactions and smaller investments.
• At the same time, notarial oversight would no longer apply. The responsibility for verification would shift to you. The integrity of the register, evidence of authorisation and the history of transfers would therefore need to form part of the due diligence process.
• For tokenised structures involving German companies, the same principle continues to apply: check what legal rights the token actually represents. A token without a legally robust underlying arrangement has no value.

Our recommendations on the EU Inc.

1. Monitor the legislative process, particularly with regard to identity verification, capital protection and minority shareholder protection – further amendments can be expected in these areas.

2. Do not base tokenisation projects on the EU Inc. until the Regulation has entered into force.

3. Clearly document the underlying legal arrangement if you are already using tokenisation. The token itself does not replace the share.

4. Clarify the tax implications in advance – including accounting, valuation and transferability.

5. Maintain complete documentation of all transfer transactions to meet tax documentation requirements and anti-money laundering due diligence obligations.

Tokenisation determines what legal rights a token actually represents, how the investment is accounted for and what evidence can be provided to the tax authorities.

This is precisely where our expertise lies: we advise companies, start-ups and investors at the intersection of crypto, corporate law and tax law. Find out more about our services: Crypto tax advice for companies.

If you would like us to review a specific project or transaction, please feel free to contact us.

Frequently asked questions about the EU Inc.

What is the EU Inc.?

The EU Inc. is a proposed European limited liability company structure put forward by the European Commission as part of the 28th regime. It would not require minimum share capital and would allow tokenised share transfers using distributed ledger technology.

When will the EU Inc. become available?

No specific date has been set yet. The European Commission is aiming to reach an agreement by the end of 2026. The Regulation is expected to become applicable around one year after it enters into force.

What is the “28th regime”?

The term refers to a uniform EU legal framework that would exist alongside the corporate laws of the 27 Member States. The EU Inc. is its core corporate law element.

Can shares in a German GmbH be tokenised?

Under German law, GmbH shares cannot currently be tokenised with direct legal effect on ownership. Tokenised models can only represent contractual rights, for example in the form of profit participation rights or trust arrangements.

What tax aspects need to be considered for the EU Inc.?

Without notarised documentation, it may be more difficult to provide evidence of the date of a share transfer and the percentage of ownership, for example for real estate transfer tax, beneficial ownership or valuation purposes. The EU Inc. framework does not provide for equivalent anti-money laundering reporting obligations.

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