EU Countries Proposed Startup Definition Changes
A coalition of eleven nations seeks to reclassify startups to avoid restrictive 'Undertaking in Difficulty' labels.
Updated on Sept. 24, 2026 in Startups
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Eleven EU member states led by the Netherlands have submitted a formal proposal to the European Commission to revise the definition of an 'Undertaking in Difficulty' (UID). The coalition argues that current criteria unfairly categorize high-growth startups as non-viable, hindering their economic competitiveness.
Why it matters
Current EU definitions effectively treat startups as distressed businesses, which limits their access to necessary capital and support. This proposal aims to modernize these classifications to foster innovation capacity across the European Union.
The coalition is specifically requesting that the European Commission include quasi-equity instruments within the definition of a viable business. This would provide a clearer path for startups to operate outside the 'Undertaking in Difficulty' classification currently slated for 2027.
The players
The Netherlands
A European nation leading the coalition of eleven member states to reform startup business definitions.
European Commission
The executive branch of the European Union responsible for drafting and enforcing the bloc's legislative and regulatory standards.
Heleen Herbert
The Minister representing the Netherlands in discussions regarding the revision of EU business viability classifications.
Teresa Ribera
A European Commissioner involved in formal discussions with member state ministers regarding regulatory updates.
The details
Under current EU state-aid rules, companies that meet the UID definition face significant operational restrictions because they are considered financially unsound. The proposed revision asks to adjust these parameters to better reflect the unique financial structures of scale-ups. By incorporating quasi-equity—financial instruments that share characteristics of both debt and equity—the coalition aims to prevent these growing firms from being misidentified as failing enterprises.
Timeline
May 2026: Eight countries initiated the call for a UID definition revision.
September 24, 2026: The Competitiveness Council discussed the proposed definition changes in Brussels.
2027: The European Commission is scheduled to implement the new UID definition.
The Tech Race
This move represents a direct challenge to the European Commission's established timeline for updating the Undertaking in Difficulty definition. It follows a pattern of member states seeking to adjust regulatory constraints to better compete with non-EU startup ecosystems.
Startups and scale-ups operating within the EU will see a shift in their regulatory status if the proposal is successfully integrated into the 2027 implementation. This will likely ease access to financing and reduce the administrative burden currently faced by companies classified under the older, stricter definitions.
The takeaway
The coalition is betting that reclassifying scale-ups will unlock significant regional capital and improve startup survival rates. Stakeholders should monitor the Competitiveness Council updates for the final inclusion criteria of quasi-equity instruments.
What happens next
The Competitiveness Council and European Commission are expected to move toward the 2027 implementation of the revised UID framework following ongoing discussions.
Further reading
For broader context on current challenges in the sector, explore the Startups section.
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Should governments revise business viability rules to better support innovative startups and scale-ups?
