The Situation: The French government issued on December 31, 2019, new rules substantially revising the French Foreign Direct Investments ("FDI") regulation. These new provisions mostly implement the recent PACTE law and the new EU FDI regulation which set up an EU screening mechanism.
The Result: The new rules greatly extend the scope of the (i) covered investments; (ii) investors; (iii) sensitive business; and (iv) government's grounds to refuse authorization. At the same time, the authorization proceeding is clarified and its timeline could, in the simplest cases, be accelerated.
Looking Ahead: By updating the French FDI regulation, the French government has clearly decided to extend not only its screening of any FDI in France but also its capacity to control and to impose harsh penalties for infringement of this regulation. Investors and companies alike should pay particular attention to foreign investment issues when contemplating an investment in a French company. This new regulation for foreign investments in France will apply to any application filed from April 1, 2020 (pending applications at this date will be regulated by current rules).
New Definitions: Extension of the Scope
As revised, the following are to be considered "covered investors": (i) any foreign legal entity or natural person; (ii) any French natural person living outside France; or (iii) any French legal entity controlled by any of the previous mentioned investors. Presently, the regulation covers the acquisition of control of French targets or the acquisition of all or part of businesses (asset deals), but the revised regulation will also cover any investment in which the investor will directly or indirectly, alone or jointly, own more than 25% of the French target's voting rights (excepted for EU investors and intragroup investments).
New Sensitive Businesses: Another Extension of the Scope
The amended French FDI names certain "sensitive" business activities and sectors that will trigger the foreign investment approval process. Sensitive activities are now divided into three categories:
Sensitive activities relating to national security and national defense (including crypto and data storage and processing); Businesses relating to specific facilities and infrastructure, goods, or services (energy, water, transportation, space, electronic communications, public health, agriculture and food industry, publishing and media); ·Certain businesses relating to...