EU governments were allowed to water down targets in their post-Covid pandemic recovery plans after they had already asked Brussels for the money, the European Court of Auditors (ECA) said on Thursday (8 October).

Of 20 milestones and targets the auditors examined, 13 were amended after the member state had already submitted its payment request. In nine of those cases, the change itself was requested after the payment application had already been made. 

The revised targets were “aligned with actual achieved outputs, which made the payment possible,” the auditors wrote in their annual report on the 2025 EU budget.

Rewriting measures

Ireland, for example, asked for a payment in December 2024. But in January 2025 it requested to cut the target for ICT graduates down from 12,450 to 10,900, citing a high administrative burden.

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An address rented in a European capital, an electronic signature obtained online, a 48-hour waiting period.

Under the proposed regulation establishing a 28th company law regime, known as ‘EU Inc.’, this could be enough to establish a company with legal personality throughout the European Union.

No share capital would be required. The founder could complete the entire process without appearing, even digitally, before a public authority or another person entrusted with preventive legal control.

There would be no personal verification of their legal capacity, of whether they understand what they are signing, or of whether they are acting on behalf of someone who wishes to remain invisible.

The company could then open bank accounts, enter into contracts, own assets and employ people across the European Union. If the company later fails to meet its obligations, creditors and employees may find that there are no assets to recover and that the person formally responsible for it was acting merely as a front man. 

This scenario illustrates the serious concerns raised by the proposal for a Regulation on ‘EU Inc.’ put forward by the European Commission and currently being examined by the European Parliament and the Council of the European Union.

The preventive checks set out in Article 14 of the commission’s proposal are largely limited to formal requirements.

There is no independent and impartial scrutiny of the founders’ legal capacity, of the lawfulness of the articles of association, or of whether the transaction complies with substantive legal requirements. Transfers of shares and capital transactions are also not subject to substantive control. Liquidation is treated primarily as an administrative formality, even though it can directly affect creditors and employees.

The consequences may extend far beyond company law.

Companies own real estate and are entered in land registers. If it is no longer possible to establish reliably who owns a company, it also becomes more difficult to establish who ultimately owns the real estate held by that company. Reliable company information therefore matters for the transparency of property ownership.

‘Not reliably verified’?

If the information in a register has not been reliably verified, others have to verify it themselves. Banks, business partners and investors may need additional legal opinions, audits and insurance. Costs that a preventive check avoids at the outset may therefore arise repeatedly at a later stage.

This would represent a shift from the European tradition of public preventive legal control towards a model that relies more heavily on resolving disputes after they arise.

Delaware is a prominent example of such an approach, supported by specialised courts and a correspondingly prominent role for litigation. Transplanting it to Europe would place additional demands on national judicial systems that lack the necessary resources.

The proposal also raises questions with regard to the recent European efforts to combat money laundering and the financing of terrorism.

The creation of the Anti-Money Laundering Authority (AMLA) is the latest milestone in this process. To create, at the very same time, a legal form with significantly reduced checks risks severely undermining these efforts.

The same applies to sanctions: their enforcement depends on knowing who is really behind a company – especially when shares are transferred. Without reliable legality control of share transfers, corporate ownership can change unnoticed and become a vehicle for sanctions circumvention.

The amendments required are straightforward. The acquis of European company law, as established by Directive (EU) 2017/1132 and recently reinforced by Directive (EU) 2025/25, should also apply to EU Inc. companies.

This means reliable identification of founders and directors, public oversight of legal compliance at the time of formation and at subsequent stages, and reliable business registers. 

Public protection

These safeguards exist for a reason.

They protect not only the parties to a transaction, but the public at large. Because they serve a public purpose, they must remain a public responsibility. Private service providers cannot replace independent preventive control carried out under public responsibility. 

How these checks are organised differs between member states. In some member states, public authorities carry them out directly. In others, the state entrusts notaries with this public function.

Notarial involvement therefore does not add another layer of control: the same public function is simply carried out by different public authorities. In many member states, a company can already be formed digitally within 48 hours, with full legal verification carried out by a public official.

The European Parliament and the Council of the European Union will decide their positions in the coming weeks.

There is still time to improve the legislative framework of EU Inc. significantly and to make it a success.

This requires digital and efficient procedures without compromising legal certainty. The rule of law is one of the European Union’s strengths. EU Inc. should build on that strength, not weaken it.

The Commission is “going a bit too fast” in unlocking €4.2bn and restarting the Erasmus+ student exchange programme in Hungary, according to budget committee MEPs.

The EU froze its financial assistance to Hungary in 2022 due to concerns about rule of law breaches and misappropriation of funds by Viktor Orbán’s government.

Green MEP from Germany, Daniel Freund, told EUobserver he “would have taken a more staged approach to not release everything in one go,” admitting that the reform agenda of Péter Magyar’s new government still has some way to go.

The commission’s proposal to unlock part of the €16.4bn in funds available to Hungary requires the green-light from the EU council, representing member states, one month after its announcement on 23 September.

Freund said that he was “happy about the changes we have seen” following his visit to Hungary on 1 October.

“Hungary needs this money, I also want Hungarians to have this money, since for years it was just going to Orbán and his cronies,” he said on Tuesday (6 October).

However, Freund and other MEPs on the fact-finding mission found that “the same risks of corruption exist,” and “there are new laws that are still fragile in their implementation,” French socialist and democrat Jean-Marc Germain told reporters in Strasbourg on Monday. 

The Parliament can serve as a pressure point, although the decision on funds is largely in the hands of the commission and the council.

“There is no real political pluralism in Hungary, which may in the long run be a reason for worrying,” he said, adding that most companies are still owned by the same few people as during Orbán’s rule.

The tone is different on the other side of the political spectrum.

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