--- canonical: "https://euincnow.com/eu-inc-employee-participation" dateModified: "2026-11-10" --- # EU Inc Employee Participation: Why Board Seats Hold Up the Vote Employee participation means employees' rights to elect or appoint some members of a company's board. Under the Commission proposal, an EU Inc would follow the participation rules of the member state where it has its registered office. The Council kept that rule in October 2026 and added an optional mechanism for large branches in other member states. Parliament has not agreed its position, and the issue has delayed its committee vote. None of these rules is law yet. ## What employee participation means - The EU Inc proposal uses the definition in Directive 2001/86/EC. Employee participation is the influence of employees or their representatives in a company's affairs through board appointments. This includes the right to elect or appoint some board members, or to recommend or oppose their appointment. - This is often called board-level co-determination. It is a separate topic from information and consultation, such as a works council or a European Works Council. Those rights already have an EU legal framework and continue to apply. The [Council mandate's recital 16][1] states that the registered-office rule is limited to board-level participation. - National systems differ widely. Some member states require employee board members once a company passes certain headcounts. Others have no such rules for private companies. That difference is the centre of the dispute. ## The Commission rule: the registered office decides - Article 12(1) of the [Commission proposal][2] covers an EU Inc formed from scratch or created through a domestic conversion, merger or division. That company is subject to the employee participation rules applicable in the member state of its registered office. - Article 12(2) covers cross-border conversions, mergers and divisions. These follow the negotiation procedures already set out in Directive (EU) 2017/1132. In such an operation, the company negotiates with employees or their representatives once the directive's threshold is met. - Recital 16 says the legal form must not be used to circumvent employee rights. The rule itself is simple: one company, one national participation regime. ## Why the rule is disputed - The proposal lets founders choose their member state of incorporation. An EU Inc could therefore be registered in a country with no board-level rules and employ a large team in a country that has them. Under the Commission's rule, the second country's rules would not apply to that company. - [Euronews reported][3] that unions and centre-left MEPs fear companies could choose weaker board-level protections. Business-friendly lawmakers argue that applying several national systems to one company would complicate the regime. The disagreement is about what should happen when the workforce is mainly outside the registered-office country. ## The Council branch mechanism - The Council agreed its negotiating mandate on 23 October 2026. Its [summary of changes][4] says the Commission's basic model was retained. A new mechanism addresses companies registered in one member state that exceed participation thresholds in another. The Council describes it as optional for each member state and flexible for companies. - [Article 12(2a) to (2d) of the mandate][5] work as follows: * **A member state opts in.** A member state with participation rules can choose to apply the mechanism. It communicates its threshold to the Commission, which publishes the thresholds on the EU central interface. * **A trigger applies over a full year.** The obligation starts when the average number of employees of the company's branches in that member state exceeds its threshold during a financial year. * **The company chooses how to comply.** By the end of the following financial year, it either forms a subsidiary EU Inc in that member state that employs the branch staff, or amends its articles of association to grant at least those employees the rights required by that state's law. * **Employees enforce it.** Employees and their representatives can bring proceedings in the member state where the branches operate. Authorities are not required to monitor headcounts proactively. - The mechanism applies to branches. A subsidiary formed in the other member state is a separate company subject to the rules that govern it. The mandate also adds a new Article 103a on abuse through wholly artificial arrangements. All of these are Council negotiating terms, not adopted law. ## Where Parliament stands - The lead committee is Legal Affairs (JURI). The rapporteur is René Repasi (S\&D). The official [procedure file][6] still showed Awaiting committee decision at our 10 November 2026 check, with no plenary date listed. Two Parliament documents set out the proposals on the table. Neither is Parliament's adopted position. ### The rapporteur's draft report - Repasi's [draft report of 29 June 2026][7] replaces the registered-office rule in Article 12. Its amendments 99 to 104 propose: * **Place of employment.** Participation rules follow the member state where employees habitually work, not the registered office. * **Thresholds by country.** An EU Inc with employees in another member state introduces board-level representation under that state's law once its headcount there reaches the national threshold. Employees of branches and subsidiaries in that state count, and a group parent counts group employees. * **The highest level.** If the registered-office law already gives an equivalent level, nothing changes. Where several member states with board-level rules are involved, the arrangement with the highest proportion of employee representatives on the board applies. * **Negotiation as a fallback.** Where the applicable law cannot be determined, a negotiation procedure modelled on the European Company (SE) rules in Directive 2001/86/EC applies. The result cannot lower an existing level of participation. - The Employment committee's [opinion][8], adopted on 10 September 2026 by 26 votes to 19 with 7 abstentions, proposes a similar approach in its amendment 54. It adds that the highest level applies unless otherwise negotiated and agreed with the employees. An opinion advises the lead committee; it does not decide Parliament's position. ### The negotiations since September - **No majority in October.** [Agence Europe reported][9] that Repasi's compromise amendments did not secure a majority on 5 October 2026. Shadow rapporteur Pascal Canfin (Renew) defended the registered-office principle and rejected using EU Inc to spread national co-determination rules to other countries. - **A possible compromise path.** In [another report][10], Repasi said a proposal from Berlin based on a mandatory local subsidiary could be a basis for compromise with strict safeguards. He warned against splitting a workforce across subsidiaries to stay below thresholds. - **The latest attempt.** [Agence Europe reported on 6 November][11] that the rapporteurs would meet on 11 November. A committee vote is envisaged for 16 November only if they find a solution. * These negotiation accounts come from press reports. Parliament needs a committee vote and a plenary mandate before negotiations with the Council can start. The end-2026 political agreement target depends on this step. * The three versions of Article 12 side by side. Free to reuse from the EU Inc assets page. ## What it could mean for founders - The final rule is unknown, so treat the following as planning examples, not legal advice. * **An early-stage team in one country.** Many national participation rules start only above a headcount threshold. A small team may never reach it. Check the threshold in the country where the company is registered and where people work. * **A company with a growing team abroad.** Under the Council text, a large branch in an opted-in member state could require a subsidiary or amended articles. Track average headcount by country and by legal entity, not only in total. * **Choosing a country to avoid board seats.** Do not base the decision on that alone. The final text may change, the Council adds an anti-abuse article, and other employment, tax and management rules follow where people actually work. * **Investor documents.** Investors may ask how board composition could change as the company grows. Keep founder and investor governance plans flexible until the rules are final. - A company formed today under national law follows that country's participation rules. Cross-border conversions already include employee negotiation procedures. The Europe formation hub compares the national forms available now. ## What to watch next - Whether the 11 November talks produce an agreement on Article 12. - Whether JURI votes on 16 November or at a later meeting. Only a recorded vote in the procedure file confirms it. - Parliament's plenary mandate and the start of negotiations with the Council. - The final wording of Article 12 in an agreed text. * Follow the EU Inc tracker for the current stage and the news page for dated updates. ## Frequently asked questions ### Would every EU Inc have to give employees board seats? - No. Under the Commission proposal and the Council mandate, an EU Inc follows the employee participation rules, if any, of the member state where it has its registered office. Many national rules apply only above headcount thresholds, and some member states have no board-level participation rules. The final text is not agreed. ### Which country's employee participation rules would apply to an EU Inc? - Article 12 of the Commission proposal applies the rules of the member state of the registered office. The Council kept that rule and added an optional mechanism for branches in another member state that exceed that state's threshold. Parliament has not adopted its position, so the final rule can still change. ### What did the Council change on employee participation? - The October 2026 Council mandate lets each member state choose to apply a branch mechanism. If an EU Inc's branches in that state exceed its threshold over a financial year, the company must form a local subsidiary or extend the required rights through its articles of association by the end of the following financial year. ### Why has the Parliament committee vote on EU Inc been delayed? - Press reports say the political groups have not agreed on employee participation. The committee vote planned for 8 October 2026 did not take place. At our 10 November 2026 check, the official procedure file still showed Awaiting committee decision and listed no plenary date. ### What does Parliament's rapporteur propose? - René Repasi's draft report of 29 June 2026 would apply the participation rules of the country where employees habitually work. Above a national threshold, that country's board-level rules would apply, and the highest level would apply across several countries. It is a draft, not Parliament's adopted position. ### Would employee participation rules affect a small startup? - Often not at an early stage, because many national rules start at headcount thresholds. A company that grows a large team in another member state should monitor headcount by country. The thresholds and any final EU Inc mechanism need to be checked when the rules are known. ### Does this change works councils or information and consultation rights? - No. The Council mandate states that the registered-office rule is limited to board-level participation. Information and consultation rights continue to follow the existing EU directives and national law. ## Source URLs [1]: https://data.consilium.europa.eu/doc/document/ST-14376-2026-INIT/en/pdf#page=20 [2]: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52026PC0321 [3]: https://www.euronews.com/2026/10/28/eu-inc-is-the-eus-flagship-start-up-plan-really-dying-over-workers-rights [4]: https://data.consilium.europa.eu/doc/document/ST-14376-2026-INIT/en/pdf#page=4 [5]: https://data.consilium.europa.eu/doc/document/ST-14376-2026-INIT/en/pdf#page=82 [6]: https://oeil.europarl.europa.eu/oeil/en/procedure-file?reference=2026%2F0074%28COD%29 [7]: https://data.europarl.europa.eu/distribution/reds_iCmRp-Dft/JURI-PR-790143/JURI-PR-790143_en.pdf#page=73 [8]: https://data.europarl.europa.eu/distribution/reds_iCmOp/EMPL-AD-788967/EMPL-AD-788967_en.pdf#page=35 [9]: https://agenceurope.eu/en/bulletin/article/13953/13/lack-of-agreement-among-european-parliament-rapporteurs-leads-to-postponement-of-committee-vote-on-28th-regime [10]: https://agenceurope.eu/en/bulletin/article/13954/4/28th-regime-berlins-proposals-on-employee-participation-could-be-avenue-for-compromise-says-rene-repasi [11]: https://agenceurope.eu/en/bulletin/article/13977/32/28th-regime-for-european-companies-european-parliament-rapporteurs-envisage-a-16-november-vote