EU Inc: Why the Commission’s perfect startup plan might be falling apart

EU Inc faces a political test over startup growth and workers’ safeguards

Poinews.com – EU Inc – The European Commission’s plan for a new cross-border company structure is running into growing resistance in Parliament, putting its ambitious year-end timetable under pressure. The proposal, widely known as EU Inc or the “28th regime”, is intended to offer founders one harmonised legal framework alongside the 27 national systems that currently shape company formation across the bloc.

Supporters see the initiative as a way to make Europe easier to build in. Critics, led by trade union representatives, fear it could create openings for companies to seek out weaker labour standards while operating across borders. Those competing priorities have become central to negotiations over a project designed to help startups form, raise capital and expand more quickly.

A single optional company form

EU Inc would not replace national company laws. Instead, it would create an optional EU-wide company type governed by one common set of rules. Founders would retain national legal forms as alternatives, while gaining access to a digital structure intended for businesses that want to operate across several member states.

Under the Commission’s model, registration through a central EU interface could take 48 hours in a single member state. The proposed minimum capital requirement is €1, with no compulsory opening deposit. Formation, statutory filings, corporate governance, issuing shares and liquidation would all be handled digitally, without notary or chamber fees.

The proposal also includes streamlined digital access to insolvency procedures. Companies already operating under national forms could switch to EU Inc without first dissolving and then creating a new entity. For founders, that could reduce the legal disruption of changing corporate structures as a business grows beyond its home market.

One of the most closely watched elements concerns employee equity. A harmonised European Employee Stock Option would apply common rules and tax principles to options regardless of where an employee lives. Advocates argue that a predictable framework could help European startups recruit and keep skilled workers when competing with larger international companies.

National rules would still govern much of working life

The initiative does not create an EU tax regime, alter tax residency or rewrite labour law across the bloc. A company would still be taxed where its effective management is located. Social security would continue to depend on the country in which an employee physically works.

Employment contracts, working-time protections, dismissal rules, collective bargaining arrangements and works councils would likewise remain subject to the law of the employee’s workplace. That division between a shared corporate framework and national employment systems is at the heart of the present dispute.

The Commission presented EU Inc on 18 March 2026 and set an objective of reaching agreement before the end of the year. The Council reviewed the text in June, and its working party is considering the Irish Presidency’s second compromise proposal. Progress in Parliament has been more difficult.

On 19 October, the Committee on Legal Affairs, known as JURI, did not vote through rapporteur René Repasi’s draft report. The committee had failed twice to secure a majority for the Socialists and Democrats lawmaker’s text. Repasi did not identify the precise issues preventing agreement, but the debate has increasingly focused on protections for workers.

“We have made progress, but we still need to find the right balance for a final agreement,” Repasi said.

He has argued that EU Inc needs both legal certainty and protections against abuse if it is to serve as a meaningful “seal of quality”. He also said such safeguards had been “entirely absent from the Commission proposal”.

“Should EU Inc become a vehicle for circumventing labour law rather than a driver of high-quality innovation, it will have failed to deliver on its promise,” the rapporteur added.

Unions warn of regime shopping

The European Trade Union Confederation has pressed for stronger safeguards, staging protests in Brussels on 24 September and in Strasbourg on 20 October. Its concern is that firms could choose to register where employee participation, collective bargaining or labour protections are weaker, then carry out operations elsewhere in the EU.

ETUC Deputy General Secretary Isabelle Schömann has described this risk as “regime shopping”. The confederation argues that such a route could encourage social and fiscal dumping, including by allowing businesses to avoid stronger rules that would otherwise apply in countries where their activities or workforce are concentrated.

Worker participation is especially sensitive because representation on company boards differs between member states and can depend on where a company is registered. ETUC says a business could establish itself in a jurisdiction without board-level worker representation, leaving employees without a role in important corporate decisions.

The union body also warns that the current proposal does not clearly prohibit businesses from using shares or options in place of wages or employment contracts, or from relying on them to supplement low pay. Repasi supports stock options as a tool for attracting and retaining talent, but has drawn a clear boundary around their use.

“Such schemes should never replace fair wages, pensions or social security contributions,” Repasi said.

Liquidation rules have become another point of contention. EU Inc would provide for fast procedures even when a company has unpaid obligations. ETUC’s legal analysis says this could expose workers to unpaid salaries, severance payments or social-security contributions after layoffs, while giving social-security authorities limited time to examine a case and raise objections.

“Faster procedures can reduce unnecessary administrative burdens, but speed must not come at the expense of creditors’ rights, employees’ claims or the effective enforcement of legal obligations,” Repasi warned.

The impasse illustrates the difficult balance facing EU lawmakers. A company form that is simpler to establish and manage could help reduce regulatory fragmentation for founders. Yet the same flexibility will remain politically controversial if lawmakers cannot establish confidence that it will not be used to weaken employee protections or avoid legitimate obligations.

Negotiators still want an agreement by the end of 2026. Reaching it will depend on whether the proposal can preserve its promise of a rapid, digital pan-European route for startups while adding safeguards strong enough to win support in Parliament and address the concerns raised by organised labour.