On July 23, 2020, the Government published a Decree no. 2020-892 (the "Decree")1 and a Ministerial Order (the "Ministerial Order")2 both of July 22, 2020 on the temporary lowering of the threshold triggering control of foreign investments in French listed companies. The Decree aims to temporarily reduce the threshold triggering review of non-EU/EEA investments when targeting French listed companies in the context of the COVID-19 pandemic. As explained by the French Minister for the Economy, "[w]hile most foreign investment transactions are opportunities for French companies, the volatility of financial markets and the very sharp decline in the valuations of a large number of companies make them particularly vulnerable to potential unfriendly transactions, which calls for increased vigilance ».3
The Decree follows the March 25, 2020 European Commission's ("EC") communication in which the EC urged Member States to protect "critical health infrastructure, supply of critical inputs, and other critical sectors" (link to blog). Some EU countries have already adopted measures to strengthen FDI screening in light of the COVID-19 pandemic, including, Germany, Italy and Spain.
The Decree is the second step of the French Government's move to protect national companies in the context of the Covid-19 crisis. Indeed, on April 30, 2020, the French Minister for the Economy published a Ministerial order extending the scope of French foreign investment control to the R&D activities related to the biotechnology sector.4
The new rules will enter into force as from August 7, 2020,5 and stay in force until December 31, 2020. They will apply to non-EU/EEA transactions notified between these dates.
- Scope limited to non-EU/EEA investments in French listed companies active in "sensitive" sectors
- The French FDI regime requires prior approval for foreign investments in French entities active in one of the "sensitive" sectors listed in Article R.151-3 of the French monetary and financial code. It applies to (i) acquisitions of control over a French law entity by a non-French investor, (ii) acquisitions of all or part of a business line of a French law entity by a non-French investor and (iii) direct or indirect crossings of 25% of the voting rights in a French law entity by a non-EU/EEA investor (this threshold has been reduced from 33% to 25% by decree of December 31, 2019).
- The Decree temporarily reduces the triggering threshold for non-EU/EEA investments from 25% to 10% of the voting rights "when targeting French listed companies". Even though the wording of the Decree is somewhat unclear, it seems to follow from its preamble that it is intended to apply only to French listed companies active in the "sensitive " sectors listed in Article R.151-3 of the French monetary and financial Code.
- Simplified derogatory authorization procedure
Since April 1, 2020, a new two-phase procedure inspired from merger control is applicable, as a result of which simple transactions which can be cleared without conditions are expected to be approved in 30 business days (first phase), while transactions that may raise issues will be subject to an in-depth review which may last up to 45 additional business days (second phase) (link to blog).
The Decree introduces a specific procedure applicable to investments falling in its scope. Pursuant to Article 2 of the Decree and Article 1 of the Ministerial Order, a non-EU/EEA investor exceeding the 10% threshold and falling in the scope of the Decree shall file a simplified notification to the Ministry for the Economy (including information on (i) the amount of voting rights previously held by the investor and acquired in the context of the investments; (ii) securities owned by the investor giving it access to shares; (iii) existing rights of the investor to acquire additional shares in the future under an agreement or a financial instrument ; (iv) the objective of the investor with respect to the entity subject to the investment (e.g., acquisition of control); (vi) the financing of the investment and (vii) projected next steps as regards further investments and the target's governance).
The investment will be deemed authorized at the end of a 10 business day time-period following the date of notification, unless the Minister objects to it within this time-period and provided it is carried out within six months after the notification. In the event the Minister objects, the investor will be required to file a formal authorization request subject to the standard two-phase procedure following which the Minister can either (i) authorize the investment without condition, (ii) authorize the investment subject to specific conditions imposed on the investor or (iii) block the transaction.
As from August 7, 2020 and until December 31, 2020, any non-EU/EEA investment exceeding 10% of the voting rights in a French listed company active in a "sensitive" sector will require a prior simplified notification to the Minister for the Economy. The Minister may then object the investment, in which case a full notification will have to be made and the investment will be subject to comprehensive FDI control.
3. Website of the French Ministry for the Economy, April 30, 2020, available here: https://www.tresor.economie.gouv.fr/Articles/2020/04/30/covid-19-adaptation-du-controle-des-investissements-etrangers-en-france-ief-pendant-la-crise-sanitaire
4. Ministerial Order of April 27, 2020 applicable from May 1, 2020 (NOR: ECOT2010256A).
5. The Decree states that the new rules are not applicable to investments carried out within 10 business days following the publication of the Decree.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.