Competitiveness Council holds policy debate on EU Inc proposal

The EU Competitiveness Council held its first ministerial-level policy debate on the EU Inc proposal on May 28, 2026, marking a critical milestone in the legislative process toward creating a harmonized European company framework. After six technical working party sessions since March, ministers from all 27 member states addressed the proposal in a formal setting, with the Council presidency reporting "broad support" for the initiative alongside clarification requests on legal basis, insolvency, taxation, forum shopping, and worker safeguards.

Competitiveness Council Addresses EU Inc Proposal

According to the Council of the European Union, ministers convened on May 28, 2026 to discuss the 28th Regime Corporate Legal Framework: EU Inc., elevating the file from technical examination to political debate. The proposal allows companies to incorporate within 48 hours for less than €100, with no minimum capital requirements, through a fully digital EU-level platform.

The Cyprus Presidency, which received the Commission proposal COM(2026) 321 on March 18, 2026, immediately launched examination through the Council Working Party on Company Law. By the time of the ministerial debate, six working party sessions had been completed, with further sessions already scheduled for June 2 and June 17, 2026.

The Political Context

The debate took place within the broader "One Europe, One Market" roadmap, signed by EU leaders in April 2026, which targets completion of a unified single market by the end of 2027. The European Commission has called for the European Parliament and Council to reach agreement by the end of 2026, an ambitious timeline given the ordinary legislative procedure's typical 12 to 18-month duration.

"Europe has the talent, the ideas and the ambition to become the best place for innovators. Yet today, European entrepreneurs who want to scale up face 27 legal systems and more than 60 national company forms."

Source: President Ursula von der Leyen, European Commission, March 18, 2026

Key Discussion Points from the Policy Debate

The Council presidency note summarized delegations' positions following the working party sessions and identified several critical issues requiring further clarification:

Article 4: The National Law Gap

A central point of debate centers on Article 4 of the proposal, which states that "matters that are not covered by this Regulation or by the articles of association shall be governed by national law." Legal scholars have criticized this provision, arguing it creates 27 different versions of EU Inc rather than a truly unified framework. Each member state must designate which national company form serves as the residual reference, potentially reintroducing the fragmentation the regime aims to eliminate.

The International Monetary Fund estimates that persistent barriers to the EU single market represent the equivalent of a 110 percent tariff on services, underscoring the stakes for achieving genuine harmonization.

Worker Protection and Social Dialogue

Trade unions have raised concerns about potential regulatory arbitrage. Oliver Roethig of UNI Europa, representing 7 million workers, has called for ensuring "that labor law and workers' participation rights are not affected." The EESC Workers' Group held a full-day conference on April 21, 2026 titled "28th Regime: Why are alarm bells ringing?" where Commissioner Michael McGrath stated that competitiveness cannot come from weaker worker protection.

Member State Positions and Reactions

While the Council presidency note indicates "broad support" for the initiative's rationale and aim of facilitating innovative companies' cross-border operations, delegations have not yet aligned on how to address the identified concerns. The working party sessions revealed divergent views on:

• Scope: Whether to maintain universal access or restrict EU Inc to specific company categories
• Governance: Balance between harmonized rules and residual national law application
• Insolvency: Eligibility criteria for simplified procedures beyond the Commission's definition
• Digital procedures: Extent of mandatory digitalization versus member state flexibility

Fragmentation Versus Flexibility

The proposal's design reflects a fundamental tension. By choosing a Regulation (directly applicable EU law) based on Article 114 TFEU rather than a Directive requiring national transposition, the Commission sought to maximize harmonization. However, the residual role of national law in Article 4, combined with member state discretion on issues like access to stock exchanges and specialized courts, may dilute the uniformity investors and founders require.

A comparison with the Societas Europaea (SE), established in 2001 with a €120,000 minimum capital requirement, shows why earlier European company forms failed to gain traction. The SE can only be created by existing companies through specific cross-border configurations, limiting its relevance for startups. EU Inc aims to avoid these pitfalls through zero minimum capital and universal eligibility, though critics argue the national law gaps recreate similar barriers.

What This Means for the Legislative Timeline

The May 28 ministerial debate represents a procedural milestone but does not conclude the Council's examination. According to the legislative train schedule, the proposal must proceed through parallel tracks:

Council Process

• Working Party sessions continue: June 2 and June 17, 2026 sessions already scheduled
• General Approach target: Council must agree on negotiating position before trilogues
• Cyprus Presidency ends: June 30, 2026, with Ireland taking over for second half of 2026

European Parliament Process

• JURI Committee: The Legal Affairs Committee has not yet appointed a rapporteur as of May 28
• Commissioner presentation: Michael McGrath presented to JURI in early May
• Committee vote: Typically occurs several months after rapporteur assignment
• Plenary vote: Required before trilogue negotiations begin

The Commission's end-of-2026 target requires both institutions to move at an exceptional pace. Even if agreement is reached by December 2026, the Regulation would need 12 months after entry into force before application, meaning the earliest availability would be late 2027 or 2028.

Comparison with Other Legislative Files

| Legislative Proposal | Proposal Date | Target Agreement | Status (May 2026) | |---|---|---| | EU Inc (COM/2026/321) | March 18, 2026 | End of 2026 | Council working party examination, no rapporteur | | Industrial Accelerator Act | March 4, 2026 | N/A | Also debated at May 28 Competitiveness Council | | Digital Networks Act | 2025 | 2026 | Ongoing |

The parallel consideration of the Industrial Accelerator Act, which aims for 20% of EU GDP from industrial sectors by 2035, indicates the Council is managing multiple competitiveness files simultaneously, potentially straining institutional bandwidth.

Next Steps and Implications for Cross-Border Businesses

For Founders and Startups

Do not wait for EU Inc to make expansion decisions. Even with the best-case scenario of end-2026 political agreement, companies cannot register as EU Inc until late 2027 at the earliest. The legislative text will undergo substantial amendments during trilogues, particularly on:

• Standard template content for articles of association (delegated to implementing acts)
• National law designation for gap-filling in each member state
• Simplified insolvency eligibility beyond the R&D thresholds in Recommendation C(2026) 1800
• Tax treatment of EU Employee Stock Options across 27 jurisdictions

Consider tracking the Council working party sessions and Parliament JURI Committee developments through official Council and Parliament sources. Position EU Inc as a potential future option rather than an immediate alternative to national company forms or Estonian e-Residency.

For Investors and Advisors

Prepare for legal due diligence complexity during the transition. The Article 4 gap-filling mechanism means portfolio companies that eventually convert to EU Inc will still have material differences based on registration jurisdiction. Cross-border VC funds should:

• Monitor which member states designate investor-friendly national forms (e.g., Dutch BV, Belgian SRL) as residual law
• Track whether implementing acts for standard templates accommodate multi-class shares, weighted voting, and SAFE/KISS instruments
• Assess whether the balance sheet plus solvency test for distributions provides adequate creditor protection compared to traditional legal capital regimes

The EU Inc tax implications remain a moving target. While the proposal harmonizes the timing of stock option taxation (at disposal of shares), member states retain control over capital gains rates and characterization of income.

For National Governments and Regulators

Designate specialized chambers now, even before the Regulation enters into force. The Commission's Communication accompanying the proposal calls on member states to establish specialized judicial chambers or courts with jurisdiction over EU Inc. disputes. Early designation signals commitment to uniform application and builds institutional expertise before the first EU Inc registrations.

Member states must also decide which national company form serves as the Article 4 residual reference. This choice will materially affect investor perception and competitive positioning within the single market.

What to Monitor

The legislative process enters a critical six-month window where the text can still be shaped:

1. Rapporteur assignment: JURI Committee appointment and initial draft report (likely June/July 2026)
2. Council General Approach: Presidency conclusions defining negotiating position (target: autumn 2026 under Irish Presidency)
3. Implementing acts scope: Whether Article 8 templates accommodate venture-typical governance structures
4. Worker participation provisions: Any amendments strengthening or clarifying co-determination interaction

Cross-border businesses should maintain flexibility in entity structure planning while monitoring these developments through the legislative timeline and official EU institutional sources. The policy debate at the Competitiveness Council confirms political will exists, but converting that will into operational law that truly harmonizes 27 systems remains the central challenge for the remainder of 2026.