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Procedure
What jurisdictional thresholds trigger a review or application of the law? Is filing mandatory?
The target’s involvement in a strategic activity listed in the Monetary and Financial Code triggers the review of the Ministry of Economy (MOE). There is no specific threshold in terms of turnover, asset size, purchase price or enterprise value. Therefore, even minor transactions may be subject to screening.
The filing is mandatory, and the transaction cannot be closed before clearance has been granted (‘standstill effect’). The MOE may impose injunctions and interim measures in the case of breach of the notification requirements.
What is the procedure for obtaining national interest clearance of transactions and other investments? Are there any filing fees? Is filing mandatory?
Any investment falling within the scope of the review must be filed with the MOE for prior authorisation. There are no filing fees. A form template is available on the MOE’s website.
The Ministerial Order of 31 December 2019 specifies the information that must be provided in a request for authorisation. The filing must notably contain information on the identity of both the foreign investor (including the identity of its chain of control members) and the target entity, as well as their corporate structure, activities, markets, competitors, etc. Information on the projected investment must also be provided, notably regarding its financial modalities, the transaction size and the investment strategy of the investor.
The Ministerial Order of 10 September 2021 specified and in part formalised the list of information to be provided in an authorisation request. In particular, the investor will now have to provide a specific form (available on the European Commission website) if its chain of control includes an entity located outside the European Union, in compliance with EU Regulation 2019/452 of 19 March 2019 establishing a framework for the screening of foreign direct investment into the EU. The Ministerial Order of 10 September 2021 also made it mandatory for the investor to include certain information on the target (eg, IP elements, competitor’s market share, access and processing of French customer’s data). These new rules entered into force on 1 January 2022.
Furthermore, when applicable, investors will have to provide information regarding any potential significant capital ties or financial support received from a state or public body outside the European Union over the last five years. The investor must also certify that itself and, to the best of its knowledge, the members of its executive body in the case of legal persons, have not been convicted of certain listed offences in the last five years. If an investment fund is part of the chain of control, the request for prior filing must specify the identity of its manager and controlling shareholders (natural or legal persons).
In addition, prior to formally filing an authorisation request, the investor or the target may elect to approach the MOE through a formal comfort process to obtain its position on whether a particular transaction falls within the scope of the review. The target may submit such a request ahead of any investment project to obtain comfort on whether its activities should be considered strategic in the sense of the regime.
Finally, the MOE has the power to order an investor to file for review a transaction that has already been implemented that should have been subject to prior approval.
Which party is responsible for securing approval?
Only the foreign investor is responsible for submitting an application for authorisation. In the case of a chain of control involving several foreign investors, any foreign investor may make the application on behalf of all the other members of the chain.
How long does the review process take? What factors determine the timelines for clearance? Are there any exemptions, or any expedited or ‘fast-track’ options?
The MOE has 30 business days from the date of the notification of a complete file to indicate whether a transaction falls outside the scope of the review, is cleared unconditionally or requires further analysis.
Where further analysis is required and conditions are necessary, the MOE has an additional period of 45 business days to provide the investor with its final decision (ie, refusal of the investment or clearance with conditions).
Requests for information stop the clock.
In the absence of a response from the MOE within the stated time limit, the application is deemed to be rejected.
Furthermore, Decree No. 2020-892 of 22 July 2020 introduced a fast-track procedure for investments in French listed companies beyond a 10 per cent threshold in voting rights. The investor must give prior notice to the MOE of the projected investment. Unless the MOE objects, the authorisation is deemed granted within 10 days of the notification. If the MOE objects, the foreign investor should request prior approval under the normal route. The foreign investor should implement the transaction within six months of the notification. This procedure is temporary and has been extended to 31 December 2022.
The investor is exempted from filing an application for prior approval in the following situations:
Must the review be completed before the parties can close the transaction? What are the penalties or other consequences if the parties implement the transaction before clearance is obtained?
The transaction cannot be implemented until clearance is granted or the MOE confirms that the transaction is out of the scope of review (standstill effect). A foreign investment falling within the scope of the review that is completed without the MOE’s prior authorisation is null and void.
Law No. 2019-486 of 22 May 2019 on Business Growth and Transformation (the PACTE Law) reinforced the MOE’s enforcement powers in the case of breach to the standstill effect. As such, the MOE may enjoin the investor to:
In addition, if the protection of public order, public security or national defence is compromised or likely to be compromised, the MOE also has the power to pronounce the following interim measures:
The MOE may also impose monetary sanctions amounting to twice the value of the investment at stake, 10 per cent of the annual turnover achieved by the target company, €1 million for natural persons or €5 million for legal entities.
More generally, pursuant to articles 458 and 459 of the French Customs Code, infringement of the foreign investments control requirement may be subject to the following criminal penalties:
Can formal or informal guidance from the authorities be obtained prior to a filing being made? Do the authorities expect pre-filing dialogue or meetings?
The MOE may be approached informally to seek general guidance. Follow-up Q&A and meetings with the MOE and other involved ministries are customary.
The FDI Guidelines formalise the possibility to hold informal exchanges with the Ministry, both for the target and the investor, to clarify the purpose of the investment prior to the notification.
In addition, the investor may elect to approach the MOE through a formal comfort process to obtain its position on whether a particular transaction falls within the scope of the review. Potential foreign investors are also entitled to obtain comfort from the MOE at an earlier stage in the context of bid processes (eg, before they enter into exclusive discussions with the seller).
In the context of a contemplated transaction, the target may also submit such request to obtain comfort about whether its activity falls in the scope of the foreign direct investment review. This is an important tool for sellers of potential sensitive targets who would like to obtain better visibility of the process. However, the MOE specified in its guidelines that it will no longer accept notifications that concern both a request for comfort and a request for authorisation.
When are government relations, public affairs, lobbying or other specialists made use of to support the review of a transaction by the authorities? Are there any other lawful informal procedures to facilitate or expedite clearance?
There is no specific framework for informally approaching the MOE, including with the assistance of public affairs specialists.
Law No. 2016-1691 of 9 December 2016 on transparency, the fight against corruption and the modernisation of economic life requires lobbyists to register on a public register for transparency purposes. As of September 2020, nearly 2,100 lobbyists have registered and have declared more than 27,000 lobbying activity reports.
What post-closing or retroactive powers do the authorities have to review, challenge or unwind a transaction that was not otherwise subject to pre-merger review?
The transaction cannot be implemented until clearance is granted or the MOE confirms that the transaction is out of the scope of review (standstill effect). A foreign investment falling within the scope of the review that is completed without the MOE’s prior authorisation is null and void.
The PACTE Law reinforced the MOE’s enforcement powers in the case of breach to the standstill effect. As such, the MOE may enjoin the investor to:
In addition, if the protection of public order, public security or national defence is compromised or likely to be compromised, the MOE also has the power to pronounce the following interim measures:
The MOE may also impose monetary sanctions amounting to twice the value of the investment at stake, 10 per cent of the annual turnover achieved by the target company, €1 million for natural persons or €5 million for legal entities.
More generally, pursuant to articles 458 and 459 of the French Customs Code, infringement of the foreign investments control requirement may be subject to the following criminal penalties:
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