EU Inc. survives Council negotiations, but are Europe’s founders getting what they asked for?

On Friday, 23 October 2026, the Council of the European Union adopted its negotiating position on the proposed 28th corporate regime (EU Inc.), retaining the ambition of allowing companies to incorporate online within 48 hours for no more than €100 and operate across the EU single market.

The agreement comes just over a week after the EU–INC campaign, backed by more than 26,000 founders, investors and startup operators from across Europe, warned that the legislation was being stripped of its most important provisions.

But the questions remains: Are Europe’s founders getting what they asked for? Or the watered down version?

A win, with strings attached

One of the most significant developments is the survival of the proposed European Employee Stock Option Plan (EU-ESO), a mechanism designed to help startups attract and retain talent.

In its earlier warning, the EU–INC campaign argued that removing harmonised stock-option rules would undermine one of the framework’s central advantages. Startups often depend on equity incentives to compete for employees against larger companies offering higher salaries.

The Council has now retained the scheme, including provisions intended to defer taxation until shares are sold, rather than when options are granted, vested or exercised.

However, eligibility has been tightened. The Council’s position restricts the relevant tax provisions to companies with fewer than 750 employees and annual turnover not exceeding €150 million, compared with an earlier compromise proposing thresholds of 1,000 employees and €450 million.

Dr. Peter Möllmann, founding partner of German law firm PXR, shares with EU-Startups: “The Council has preserved the original idea of EU Inc. as an optional, digital and Europe-wide regime. But the more restrictions and national safeguards are added, the greater the risk that Europe creates a politically acceptable framework that founders and investors will simply not use.”

The missing pieces

Other concerns raised by the startup community appear less resolved.

The Council’s full negotiating mandate confirms that plans for a central European company register have been removed, alongside the requirement for real-time tracking of registrations.

Although digital registration and a simplified digital share register remain part of the framework, these are not equivalent to a single centralised European company register.

For founders and investors, the distinction matters. A shared registration infrastructure could have helped simplify due diligence, company verification and cross-border financing. Without it, businesses may still need to navigate different national administrative systems.

The Council has also removed the dedicated insolvency chapter from the Commission’s original proposal. This means EU Inc. companies would continue to face applicable national insolvency rules rather than benefiting from the proposed simplified European procedures.

Another unresolved issue concerns freedom of incorporation. The Council maintains the optional nature of EU Inc., allowing companies to choose the new framework instead of existing national corporate forms. However, the structure will still operate within national legal systems, which will govern matters not harmonised by the regulation.

This leaves open the concern that the regime could develop into 27 national variations rather than becoming the recognisable, predictable European standard sought by its supporters.

Despite this, Micheál Martin, Taoiseach of Ireland (the country currently holding the presidency of the Council of the European Union), was positive in his comment shared to the press.

“I warmly welcome the agreement on ‘EU Inc.’ reached in the Council today. As Presidency, Ireland has placed strong emphasis on improving Europe’s competitiveness. This is a measure that will make a real and practical difference to startups and SMEs looking to scale up across the EU. It will be easier to establish, easier to attract and retain talented staff, easier to take advantage of the Single Market, one of Europe’s greatest strengths.”

Workers’ rights in focus

The Council’s position also attempts to address concerns raised by European trade unions, which have warned that the new structure could allow businesses to take advantage of differences between national employment and corporate governance rules.

Under the negotiating mandate, EU Inc. companies would generally remain subject to the employee participation rules of the member state where they have their registered office.

However, the Council has introduced an optional mechanism allowing member states to address situations where a company incorporated elsewhere exceeds employee participation thresholds in their territory.

The agreement also strengthens safeguards against abuse, permitting national authorities to delay or refuse registration on grounds relating to money laundering, terrorist financing or other criminal activity.

These provisions are aimed at calming concerns about regulatory arbitrage and employee representation – although the optional nature of the participation mechanism leaves questions about consistency across the EU.

This introduces a potential trade-off. Additional national checks may offer stronger protections, but could make implementation more complex and weaken the simplicity that entrepreneurs originally sought.

Taxation remains another limitation. Beyond the specific provisions for employee stock options, EU Inc. does not create a unified European tax regime. Companies would continue to comply with applicable national corporate tax, VAT and employment obligations.

What’s next?

Friday’s agreement represents a political milestone, but EU Inc. has not yet become law. The Council has adopted its negotiating mandate, establishing the position that member states will defend in discussions with the European Parliament.

The Parliament still has to establish its own position on the proposal, which could seek to restore, add or remove elements of EU Inc. As of 26 October 2026, the status of the legislative file remains at “Awaiting committee decision“.

Once Parliament agrees its negotiating position, representatives of the Parliament, Council and Commission can begin interinstitutional negotiations, commonly known as trilogues, to establish a final legislative text.

The Council is also proposing a 21-month implementation period. Meaning even if EU institutions reach an agreement before the end of 2026, companies would not immediately be able to register under the new regime.

But there are reasons for cautious optimism. The proposed framework remains alive, its principal incorporation commitments have survived and the employee stock-option scheme has been retained, albeit in a more restricted form.

The next stage will determine whether the European institutions can reconcile the competing demands for simplicity, investor confidence and regulatory protection without compromising the framework’s usefulness.

Editor’s Note: EU–INC is an independent, founder-led advocacy campaign pushing for a common European startup standard, while EU Inc. is the European Commission’s proposed corporate legal framework, introduced on 18 March 2026. The campaign helped build momentum behind the reform but does not control the legislative process.

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