The Council’s Position on EU Inc.: Rethinking Article 4 on the Applicable Law

On 23 October 2026, the Council adopted its negotiating position on the proposal for a Regulation on the 28th regime corporate legal framework – ‘EU inc.’.. As discussed in an earlier post on this blog, the Commission’s proposal seeks to establish an optional European company form governed by a largely self-standing and directly applicable legal framework, designed to facilitate cross-border business and investment, particularly for startups and scaleups.

The Council’s position retains the proposal’s main objectives but introduces amendments to several aspects of the framework. From a private international law perspective, one of the most significant changes concerns Article 4, which governs the relationship between the Regulation, the articles of association and national law.

A revised framework for the applicable law

Under the Commission’s proposal, Article 4 provides that EU Inc. companies are governed by the Regulation and their articles of association. Matters not covered by either are governed by national law, including provisions implementing Union law, applicable to the relevant national legal form in the Member State in which the company has its registered office. Member States are accordingly required to designate the national legal form whose rules will apply to EU Inc. companies.

The Council’s position substantially revises this arrangement. The revised Article 4 identifies three categories of rules governing an EU Inc. company: (a) the Regulation itself; (b) the articles of association, where and to the extent that the Regulation expressly requires or permits a matter to be regulated by them; and (c) national law, for matters governed neither by the Regulation nor by the articles of association in accordance with the preceding point.

Article 4 – Rules applicable to EU Inc. companies

1. 1. EU Inc. companies shall be governed by this Regulation and by their articles of association which shall comply with this Regulation : 
      (a) by this Regulation,
      (b) where and to the extent that this Regulation expressly requires or permits a matter to be regulated by the articles of association, by their articles of association, which shall comply with this Regulation, and
      (c) in the case of matters neither governed by this Regulation nor the articles of association in accordance with point (b), by national law.
   2. Matters that are not covered by this Regulation or by the articles of association shall be governed by national law, including the provisions transposing Union law, which apply to the relevant national legal form in the Member State in which the EU Inc. has its registered office. For the purposes of paragraph 1, point (c), Member States shall designate one or more national legal forms and/or specify or lay down provisions.
   3. Member States shall designate the relevant national legal form referred to under paragraph 2, the provisions of which apply to EU Inc. companies.

Two changes deserve particular attention. First, the articles of association are no longer framed as a general means of supplementing the Regulation: their role is expressly confined to matters which the Regulation requires or permits them to regulate. Secondly, the revised provision gives Member States greater flexibility in determining how national law supplements the European framework. Whereas the Commission’s proposal relied on the designation of a relevant national legal form whose rules would apply to EU Inc. companies, the Council’s text allows Member States to designate one or more national legal forms and/or specify or lay down provisions. The implications of this change merit closer examination.

A European company form, but how autonomous?

The objective of a 28th regime is to offer companies an alternative to the existing 27 national corporate law systems. Its added value therefore depends not merely on the creation of a European legal form, but also on the extent to which companies choosing that form can rely on a sufficiently predictable and uniform set of rules throughout the internal market.

The possibility for Member States to designate more than one national legal form and/or to specify or lay down relevant provisions may facilitate the integration of EU Inc. into domestic legal systems. It also raises the question of whether the exercise of this discretion could result in different national rules applying to companies incorporated under the same European legal form. The extent of any such differences will depend on the choices made by Member States and on the matters left to national law under the final text of the Regulation.

Reliance on national law is not, in itself, incompatible with the idea of a European company form. The Societas Europaea, for instance, also operates within a legal framework combining Union law with national law. The relevant question is therefore not whether EU Inc. can be entirely detached from national legal systems, but whether the relationship between European and national rules is sufficiently clear and consistent to deliver the advantages expected from a 28th regime.

This is particularly important because the proposed Regulation seeks to reduce the legal and administrative obstacles faced by companies operating across borders. If the rules supplementing the European framework differ significantly between Member States, some of the complexity that EU Inc. is intended to overcome may persist, albeit in a different form.

The private international law dimension

Article 4 must also be considered in the context of the wider system of rules governing companies’ activities. Its function is to establish the rules applicable to matters falling within the corporate framework established by the Regulation; it should not be understood as determining the law applicable to every legal relationship involving an EU Inc. company.

Contractual obligations, non-contractual liability and employment relationships may be governed by other applicable Union instruments or national conflict-of-laws rules, depending on the subject matter and the relevant provisions. The existence of a common European company form does not, in itself, entail the application of a single law to all legal relationships in which the company is involved.

The removal of Chapter X on insolvency from the Council’s text further illustrates the importance of distinguishing the scope of the proposed corporate regime from the wider legal framework within which EU Inc. companies will operate. Insolvency-related matters will have to be addressed under the applicable rules outside that chapter.

The distinction is significant: the creation of a European company form does not necessarily entail the creation of a comprehensive European regime governing all legal issues connected with that form. The effectiveness of EU Inc. will therefore also depend on how its corporate rules interact with the other applicable instruments of Union law and national law.

Concluding remark

The revision of Article 4 is more than a technical adjustment. It concerns the balance between the autonomy of a European company form and the continued relevance of national corporate law. The negotiations with the European Parliament will provide an opportunity to clarify the operation of the revised provision and the role of Member States in determining the national rules applicable to matters left outside the Regulation.

Ultimately, the success of EU Inc. will depend not only on the speed and cost of incorporation, but also on the legal certainty it offers throughout a company’s lifecycle. The challenge is not to eliminate the role of national law, but to ensure that its residual application does not undermine the coherence and predictability that justify the creation of a 28th regime in the first place.