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Foreign investment in France

Analysis of new rules in 2020


Theoretically, financial relations between France and the rest of the world are unrestricted. It should be understood that an investor (French or foreign) domiciled outside French territory or an entity governed by foreign law may take control of a French company without having to seek authorisation.

This being said, for some time now, there has been asystem for controlling foreign investment in a limited number of sectors considered strategic. In the wake of Regulation 2019/452 of 19 March, 2019, establishing a framework for filtering foreign direct investment in the European Union, this system was reformed by the PACTE Act of May 20, 2019, which has just been supplemented by Decree 2019-1590 of December 31, 2019 and an Order of the same date.

Foreign investment in France, a stricter and simplified framework

Overall, the regime thus established is stricter than before in that the scope of the investments concerned has been broadened and the arsenal of sanctions tightened, but the procedure has been clarified and, according to the promoters of the text, simplified. The new rules will apply to authorisation requests submitted from 1st April 2020.

The investor is either an individual, French or foreign, not domiciled on French territory, or an entity governed by foreign law, or even an entity governed by French law, but controlled by an investor from the first two categories.

Investments subject to authorisation are those consisting of acquiring control of an entity governed by French law or acquiring all or part of a branch of activity of such an entity. Investors located in a country outside the EU must also request authorisation if the planned investment would directly or indirectly, alone or jointly, exceed the threshold of 25% of the voting rights of an entity governed by French law. Previously, the threshold was set at 33%.

With regard to the sectors concerned, it should be noted in particular that the following fall within the scope: print media and online press services for political and general information, the food security sector, "critical technologies" (cybersecurity, artificial intelligence, quantum technologies, etc.).

Authorisation of foreign investment in France, towards shorter response times

With regard to the authorisation procedure, the reformers sought to shorten the response times, keeping in mind that no response within the stated timeframe means a refusal. To this end, an advance ruling has been put in place, called a "preliminary request for review of an activity". It allows a French legal entity or a potential investor (with the consent of the entity concerned) to submit a request for an opinion to the Minister of the Economy to determine whether all or part of the planned investment falls within the scope of the scheme. As regards the processing of the authorization request, the Minister must inform the investor, within 30 working days from the date of receipt of the request, either that the investment does not fall within the scope, or that it does fall within the scope and is unconditionally authorized, or that it falls within the scope but that further examination is necessary to determine whether it can be authorized subject to conditions, or finally that the authorization is refused, and in this case reasons are given.

In case of doubt, it is strongly advisable to submit the project for an opinion because of the arsenal of sanctions available to the Minister. Note in particular that the Minister has the power to issue an injunction with a penalty payment (up to 50,000 euros per day), for example requiring the investor to restore the previous situation at their own expense.

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Read more: Foreign investments control in France

Article published in Option Finance on 20/02/2020

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