France has established a foreign direct investment (“FDI”) screening regime under which any foreign investor (either from EU/EEA or outside of EU/EEA) who wants to invest in sensitive business sectors in France must obtain the FDI prior approval of the French Ministry of Economy and Finance (“Minefi”). Over the last years and even recently, the scope of the FDI regulation in France has been considerably broadened. For further information regarding the last French FDI screening regime modifications that entered into effect on April 1, 2020, please kindly refer to our previous client alert.
In the context of the COVID-19 pandemic and related economic crisis, the French government took further steps to ensure that the French companies weakened by the crisis do not become easy target for hostile takeover. The purpose of this “client alert” is to set out the key features of the new French FDI screening regime regulations that entered into force in the context of the COVID-19 pandemic.
Key Feature # 1 – Extension of the list of sensitive business sectors
Under the French FDI screening regime, approximately 20 business sectors are considered as sensitive: defense-and-security-related-sectors; activities essential to guarantee the supply of water, energy, gas and electricity as well as transportation network; AI; robotics; semiconductors; media and press activities; food safety; quantum technologies and energy storage, etc.
In the context of the COVID-19 pandemic situation, a new ministry order entered into force on April 27, 2020 (Arrêté du 27 avril 2020 relatif aux investissements étrangers en France) and extended the list of sensitive business sectors to "research and development activities relating to biotechnologies". That addition, together with another provision (i.e., activities when they concern infrastructures, goods or services essential to guarantee the protection of public health) was deemed to provide complete protection over the French health sector against hostile acquisition in the COVID-19 pandemic global context.
Key Feature #2 – Lowering the FDI screening regime threshold to 10% participation interest in French listed company
A new decree and ministry order dated July 22, 2020 (Décret et Arrêté du 22 Juillet 2020 relatif à l'abaissement temporaire du seuil de contrôle des investissements étrangers dans les sociétés françaises dont les actions sont admises aux négociations sur un marché réglementé) and effective as from August 5, 2020, lower the FDI screening threshold to 10% participation interest (in terms of voting rights) in French listed company for non EU/EEA foreign investors only acting alone or in concert. This is deemed to be only a temporary protection up to December 31, 2020, to prevent hostile or opportunistic acquisition in the context of the financial crises caused by the COVID-19 pandemic situation.
An ad hoc screening procedure has been set up by the Minefi in order not to jam the exchanges on the French stock exchange market. Therefore, a foreign investor is exempted from filing a foreign investment prior approval application with the Minefi in the connection with its contemplated acquisition of 10% participation interest in a French listed company provided that the foreign investor sent a prior notification to the Minefi which was not opposed by the Minefi within 10 business days of the notification receipt.
Such notification must contain information regarding their actual participation interest into the French listed target company (shares, securities giving access to shares, voting rights etc.) as well as the usual information contained in the statement of intent any investor must file with the French stock-exchange authority (Autorité des marches financiers): investment financing, whether the investor is acting alone or in concert, whether the investor plans to cease or continue its purchases, whether the acquirer intends to take control of the company, the strategy the investor intends to pursue in relation to the target company, etc.