EU Council backs EU Inc.: online company in 48 hours, but without some provisions

An EU company set up online for a maximum of 100 euros is a step closer. However, the Council narrowed the relief for stock options and removed the central register and common insolvency rules.

On Friday, 23 October, the Council of the European Union adopted its negotiating position on EU Inc., the so-called 28th legal regime. This is an optional company form intended to operate across the EU alongside 27 national systems. The draft keeps online registration within 48 hours for no more than 100 euros. This is reported by, among others, the EU Council, Mam Startup and EuNews.

The European Employee Stock Option Plan (EU-ESO) also remains. An employee will pay tax on stock options only when they are sold, not when they are granted, vested, or exercised. However, the Council narrowed the group of eligible companies to firms with fewer than 750 employees and turnover of up to 150 million euros. Earlier, thresholds of 1,000 employees and 450 million euros had been proposed. The campaign EU-INC, backed by more than 26,000 founders, investors and employees, lobbied to preserve EU-ESO.

The Council's mandate no longer includes a central European company register or a chapter on insolvency. In these matters, national law will apply. The Council also removed the non-discrimination clause and protects national rules on tax residency and exit tax (a tax charged when assets or a registered office are moved abroad). EU Inc. does not harmonise corporate income tax, VAT or employee contributions. National authorities will be able to delay registration or refuse it if there is a risk of money laundering or terrorist financing.

Irish Prime Minister Micheál Martin, whose country holds the Presidency of the Council, said it would become easier to start companies and retain employees. Dr Peter Möllmann of the German law firm PXR warns that the more national safeguards there are, “the greater the risk that Europe will create a politically acceptable framework that founders and investors simply will not use”.

Now the European Parliament must adopt its own mandate. Its Committee on Legal Affairs (JURI) has not yet voted, and rapporteur René Repasi is proposing different solutions from the Council, including on supplementing the rules with national law. Then the trilogues will begin, meaning negotiations between Parliament, the Council and the European Commission. The timeline is uncertain: unofficially, there is talk of an agreement by the end of 2026, while European Council President António Costa pointed to the end of 2027. The Council wants 21 months for implementation; the Commission had proposed 12.

For companies planning expansion in the EU, this means they will have to wait for the new form, while taxes and insolvency will still be governed by national law.