Council Working Party on Company Law Session 7 examines worker representation in EU Inc

The Council Working Party on Company Law's seventh session on June 11, 2026 marked the most politically contentious phase of EU Inc negotiations to date, as member state delegates confronted the framework's treatment of worker board representation and employee participation rights across 27 different national systems.

According to The 28th Regime tracker, Session 7 examined Articles 35 to 58 of the proposal covering formation and governance, with Parliament's Employment Committee (EMPL) present for the first time. This signals the high political stakes surrounding codetermination rules that could determine whether the EU Inc becomes a widely adopted business vehicle or another failed attempt at corporate law harmonization.

Session 7 Overview: Worker Representation Takes Center Stage

The June 11 session represented a decisive turning point in the legislative process for COM(2026) 321, the Commission's proposal for a 28th regime corporate framework. Following six earlier sessions that examined registration procedures, capital requirements, and governance mechanics, Session 7 placed employee participation squarely in the spotlight.

The presence of EMPL Committee observers reflected growing concerns from labor representatives about potential regulatory arbitrage. Trade unions have consistently raised alarms that companies might exploit the EU Inc structure to circumvent stronger national codetermination regimes by strategically selecting jurisdictions with minimal worker participation requirements.

No public readout has been released from Session 7 or any prior Working Party sessions, underscoring the sensitivity of ongoing negotiations. The remaining confirmed Working Party dates include sessions on 17 and 25 June, then 2, 8, and 23 July, continuing under the Irish Presidency from July 2026.

Key Proposals on Employee Participation in EU Inc

The Commission's proposal takes a deliberately minimalist approach to worker involvement. Article 4 of COM(2026) 321 establishes that "matters that are not covered by this Regulation or by the articles of association shall be governed by national law" in the member state where the EU Inc has its registered office.

For employee participation specifically, the proposal states: "The EU Inc. is subject to the employee participation rules applicable in the Member State in which it has its registered office." This means an EU Inc registered in Germany would face mandatory board-level representation under German codetermination law, while one registered in Ireland would have no such requirement.

The proposal does include special provisions for cross-border conversions, divisions, and mergers. When an existing company transforms into an EU Inc through these mechanisms, the employee participation framework follows the rules established under existing EU directives on corporate mobility, which include safeguards designed to preserve pre-existing participation rights.

According to Global Workplace Insider, the proposal "explicitly allows EU Inc. companies to implement employee stock ownership plans and to issue different classes of shares with distinct voting rights." The regulation also enables EU Inc companies to opt into a harmonized EU scheme for employee stock options (EU-ESO), addressing taxation issues but not codetermination itself.

Member State Positions and Areas of Disagreement

The fundamental tension mirrors the decades-long stalemate that delayed adoption of the European Company (SE) statute. Countries with robust codetermination systems fear the EU Inc will enable companies to escape mandatory worker representation by relocating their registered office. Countries without such traditions worry that harmonized participation rules might impose unfamiliar governance structures.

Oxford Law Blog characterized the proposal's approach as "politically incendiary," noting: "it does nothing to prevent regulatory arbitrage through strategic registered office choices."

The European Trade Union Confederation has argued that employees' rights are insufficiently safeguarded, calling for the proposed regulation to be redrafted to align with the Commission's stated intention not to damage employment rights, according to A&O Shearman analysis.

"Our entrepreneurs, the innovative companies, will be able to register a company in any Member State within 48 hours and fully online."

Source: President von der Leyen, February 2026 presentation

Yet von der Leyen also insisted the proposal "will, in every way, respect existing social standards and labour law," including employee rights to participate on company boards, as reported by Science|Business.

Member state positions likely break along predictable lines:

• Strong codetermination states (Germany, Austria, Sweden): Seeking robust anti-circumvention provisions and preservation of national thresholds.
• Flexible governance states (Ireland, Netherlands, United Kingdom-influenced jurisdictions): Supporting the proposal's national law approach as appropriate subsidiarity.
• Mediterranean states (Spain, Italy): Concerned about potential competitive disadvantage if other jurisdictions become more attractive.

The fact that Session 7 required EMPL Committee participation suggests these divisions remain unresolved and require political rather than purely technical resolution.

Comparison with SE Worker Involvement Framework

The EU Inc proposal consciously borrows from, yet departs from, the compromise that enabled adoption of the Societas Europaea (SE) statute in 2001.

The SE framework established a negotiation-based model. According to Wikipedia's summary, "worker involvement provisions in the SE will be decided upon by negotiations between employees and management before the creation of the SE. If agreement cannot be reached, provisions contained in the Directive will apply."

The EU Inc dispenses with this negotiation requirement entirely, relying instead on automatic application of whichever national regime applies in the jurisdiction of registration. This streamlines formation but eliminates the employee voice that characterized the SE process.

Worker-participation.eu notes that SE negotiations historically created tensions between states with strong board-level representation systems (fearing dilution) and those with minimal or nonexistent systems (fearing imposition of unfamiliar structures). The EU Inc proposal resolves this by abandoning harmonization altogether in favor of pure national law application.

Practitioners have observed that the SE's "before and after principle" sometimes enabled strategic avoidance. ETUI research documented German companies converting to SE status just before crossing the 500-employee threshold that would trigger codetermination, then growing beyond 500 without incurring participation obligations.

The EU Inc proposal references existing cross-border mobility directives for conversion scenarios but provides no specific anti-avoidance mechanism for newly formed EU Inc companies.

Implications for Cross-Border Companies and Timeline

The Session 7 debates carry profound consequences for how the EU Inc will function in practice. The choice between harmonized participation rules and national law application will fundamentally shape whether the vehicle achieves its stated goal of reducing cross-border complexity.

For startups and scaleups, the national law approach offers maximum flexibility to select jurisdictions aligned with founder preferences and investor expectations. A venture-backed company could register in a jurisdiction without mandatory board representation, maintaining traditional governance structures familiar to Silicon Valley investors.

For established companies considering conversion, the analysis becomes more complex. Corporate Finance Lab observed: "employee representation on the board may be mandatory if the EU Inc. is registered in a jurisdiction such as Germany or Sweden, meaning governance structures will still vary depending on the member state of incorporation."

This variability undermines the premise of a truly unified corporate form. Instead of "one Europe, one market" with standardized rules, companies face 27 different versions of the EU Inc, each carrying the employee participation regime of its home jurisdiction.

Legislative timeline pressures are mounting. The Competitiveness Council conclusions from March 19, 2026 reflect strong political will to finalize the regulation by end of 2026. In Parliament, René Repasi (S&D, Germany) serves as rapporteur, with his draft JURI report expected on June 26, 2026 and amendments due July 17, according to The 28th Regime tracker.

Committee vote is expected in September 2026, with plenary vote timing still to be confirmed. If agreement is reached by end of 2026, the regime could become operational from early 2027.

Session 7's focus on the most contentious provisions suggests these deadlines face serious risk. Worker representation has historically proven the most difficult aspect of EU corporate law harmonization. The fact that no compromise has emerged after seven intensive Working Party sessions, with EMPL Committee now formally involved, indicates that fundamental disagreements persist.

What This Means for Companies and Advisors

Companies evaluating EU Inc should understand that employee participation will follow national law, not a harmonized EU standard. This creates both opportunity and complexity:

Action items for startups:

1. Evaluate jurisdiction selection strategically based on investor expectations around board composition and governance flexibility. Jurisdictions without mandatory codetermination may prove more attractive to venture capital.

2. Monitor the Repasi draft report due June 26 for potential amendments requiring negotiated employee involvement frameworks similar to the SE model.

3. Consider timing relative to growth milestones. Converting before crossing national thresholds could preserve flexibility, though anti-avoidance amendments may close this path.

Action items for established companies:

1. Conduct jurisdiction-by-jurisdiction analysis comparing current employee participation obligations with those that would apply post-conversion under different registered office locations.

2. Engage employee representatives early in any conversion discussion, particularly in countries with strong codetermination traditions where workforce opposition could derail plans.

3. Track Working Party session outputs once public readouts become available, watching for compromise language that might create EU-level thresholds or anti-circumvention provisions.

Action items for investors and advisors:

1. Revise governance term sheets and voting agreements to account for potential mandatory employee board representation depending on jurisdiction selection.

2. Factor national participation costs into jurisdiction selection models, recognizing that apparent savings from minimal registration fees may be offset by governance complexity in codetermination states.

3. Prepare alternative scenarios for both pure national law application and potential harmonized frameworks if Parliament substantially amends the Commission proposal.

The Session 7 debates will determine whether EU Inc becomes a genuine alternative to 27 national forms or simply adds a 28th layer of complexity. Companies planning to utilize the framework should follow developments closely, as the final compromise on worker representation will shape the vehicle's practical utility for cross-border operations.

For additional analysis of EU Inc's development, see our coverage of the tenth Working Party session, the Competitiveness Council's first formal debate, and the EESC Workers' Group warnings on regulatory arbitrage.