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On 8 September 2022, the French Ministry of Economy and Finance, in charge of approving foreign direct investments (FDI) into strategic sectors, issued its first guidelines, intended to make the process of FDI into France more transparent and clear.

The guidelines are a summary of existing practice. This is even more useful that decisions authorizing or refusing foreign investments are not public. However, FDI decisions may be subject to freedom of information requests: the Ministry considers that only undertakings from foreign investors would be deemed confidential.

The first striking item is that part of the guidelines concerns the definition of “strategic sectors”. It is clear that the Ministry does not intend to depart itself from case-by-case definitions, which shall evolve depending on the context and facts of each case. For instance, the level at which a subcontractor operates may trigger the control or not.

The guidelines therefore mainly focus on the clarification of other items; definition of a foreign investor, the type of controlling investment operations under scrutiny, and on the procedure.

Regarding the definition of a “foreign investor“, the guidelines confirm an extensive approach. An investor can be any type of entity, with or without legal existence, and the foreign investor can sit at any level within the chain of control.

Interestingly, the guidelines pay specific attention to private equity funds. But the message is not clear. The Ministry seems to be willing to consider the chain of control on a case-by-case basis, in light of shareholders rights and obligations, whereas the applicable provisions solely focus on the identity of the management company.

Regarding the type of controlling investment operations, the guidelines clarify that the control applies if and when the investment thresholds are reached. This may create difficulties when the thresholds are reached as part of a progressive investment: the control will take place at a time when the foreign investor will already hold shares, whereas the first investment is conditioned by the possibility to complete its investment plan without risking potential refusal from the Ministry at a later stage.

Another complex situation is to assess whether several investors hold joint control. The guidelines confirm that a case-by-case approach should also prevail on this criterion. The mere existence of a shareholder agreement is not sufficient to qualify joint or concerted control among its members. Veto rights and other specific rights to decide on the operation of the entity at stake will be taken into account. But the list of decisions at stake is particularly broad, as it may encompass dispute resolution or lock-up. In case of joint control, all the concerned foreign investors will need to clear the operation.

Regarding the procedure itself, the guidelines formalize the possibility to hold informal exchanges with the Ministry in case of complex situations, both for the target and the investor, notably to clarify the purpose of the investment.

Regarding timelines, the Ministry appears to depart from previous practice in two ways. First, the signing and closing dates will be taken into account only if they are justified. Second, it will no longer accept notifications that would be grounded both on the request for opinion and request for authorization. But the good news is that clock does not stop in phase two, which cannot last more than 45 business days.

Regarding undertakings that investors may condition the clearance of an investment, the guidelines confirm that they are not subject to negotiation during phase two. However, both the investor, but also the Ministry, may request their revision over time.

Lastly, the guidelines cover sanctions: the amount will depend on the context and the behavior of the investor. Importantly, the Ministry considers that its action in case of fraud or omission is not time-barred. This might however be called in question in light of the general principles prevailing on sanctions.