Defining who can use the EU Inc.
One of the core elements of the European Parliament's draft report is the view that there should be no trade-off between competitiveness and the European social dimension. Reflecting this, the draft confirms that the EU Inc. framework cannot be used to reduce workers' rights or protections under EU or national labour law.
The draft report also adds nuance to the regime's innovation focus. Rather than relying on either an undefined notion of "innovative" or a definition too prescriptive to sit alongside related EU initiatives — such as the forthcoming European Innovation Act or the EU Startup and Scaleup Strategy. Seven activities are listed: construction, cleaning, hospitality, road freight transport, residential care, meat processing and preserving, and investigation and security services, on the basis that they are unlikely to develop new or significantly improved products, services or processes. The Commission would be empowered to update this list by delegated act.
For businesses considering the EU Inc. in the future, eligibility may become a more important strategic consideration than originally anticipated, particularly if the list of excluded activities continues to evolve over time.
Digital formation, backed by stronger preventive checks
The draft report keeps the Commission's three core principles for incorporation, fast, digital, and only once, and proposes to go further on preventive controls. To strengthen trust in the new form, competent authorities would need to verify applicants' identity and legal capacity and check the information submitted, broadening preventive control beyond tax evasion and money laundering to also cover sanctions circumvention, concealment of beneficial ownership and identity fraud.
These stronger preventive controls are intended to establish the EU Inc. as a trusted European label. If adopted, they could bring additional burdens for the competent authorities carrying them out, though how significant these prove to be will depend on the digital infrastructure underpinning the regime by the time the Regulation takes effect.
Employee participation could become more complex for cross-border businesses
One of the more significant changes proposed by the European Parliament concerns board-level employee participation. Rather than linking participation rights solely to the Member State in which an EU Inc. is registered, the draft report would place greater emphasis on where employees are actually based.
Under the draft report, employee participation rights would follow the location of the workforce rather than the registered office.Participation rights would follow the employees' place of employment rather than the registered office, with the highest applicable level of protection prevailing where staff are spread across several Member States. Where the applicable regime cannot be determined this way, a negotiation procedure modelled on the European Company (SE) framework would apply instead.
When operating across several Member States, this could reduce opportunities to rely on a single national regime and increase the importance of workforce location when assessing governance requirements.
New ownership models broaden the EU Inc. toolkit
The draft report also expands the Commission's proposed Employee Stock Options (EU-ESO) with a new Employee Share Ownership Plan (EU-ESOP), under which shares are issued to eligible staff directly rather than via warrants. Both instruments are positioned in the draft report as a complement to fair wages and social security, not a substitute for them.
The draft report further introduces a voluntary steward-owned variant, the "EU Inc. SO," separating control from economic value. This lets founders protect a company's purpose and independence from short-term pressure and hostile takeovers, while adding a tool aimed at long-term, resilient growth.
What happens next?
The text of the draft report is not final and will undergo further changes before it is adopted as the European Parliament’s position on the EU Inc. proposal in October 2026. In parallel, the Council is expected to finalise its position in the autumn. Member States have been broadly supportive of the overall goals of the proposal but have been demanding stricter safeguards as well as the removal of the provisions concerning insolvency law.
Taken together, these developments suggest that the EU Inc. is evolving into more than a simplification tool for innovative companies. The emerging debate is increasingly focused on balancing competitiveness with worker protection, corporate governance and broader public policy objectives.
For businesses with cross-border growth ambitions, the coming negotiations will be particularly important in determining who can use the regime and under what governance and employee participation requirements.
