Foreign investment control in France : new year, new reform !

Decree No. 2023-1293 of 28 December 2023 on foreign direct investments (“FDI”) in France, together with the Ministerial Order of the same date, introduced new amendments aimed at further strengthening and clarifying the French FDI screening mechanism.

Below is a summary of the key measures set out in these new texts, which entered into force on 1 January 2024:

1. Permanent adoption of the 10% voting rights threshold for listed companies held by non-EU investors

The temporary reduction of the threshold triggering the control procedure from 25% to 10% of voting rights in companies listed on a regulated market, originally introduced by Decree No. 2020-892 of 22 July 2020 in the context of the COVID-19 crisis, had subsequently been extended several times. It has now been made permanent in accordance with the announcement made by the Minister of the Economy, Bruno Le Maire, in January 2023.

The fast-track screening procedure for investments resulting in the crossing of this 10% voting-rights threshold in companies listed on a regulated market has been slightly amended: investors carrying out such transactions remain exempt from the standard authorization procedure, provided that their contemplated investment has been notified in advance to the Minister of the Economy. However, the previous six-month period to complete the transaction has now been removed. The Minister still has a period of ten business days from receipt of the prior notification to object to the transaction, failing which the transaction is deemed authorized.

2. Extension of the FDI screening procedure to the acquisitions of French branches of foreign entities carrying out sensitive activities

The scope of review now expressly covers the acquisition of control of a French legal entity “or any establishment registered with the French Trade and Companies Register.”

Drawing inspiration from the 2018 reform of the U.S. foreign investment control regime, this clarification aims to prevent circumvention strategies involving the acquisition of French branches or production units belonging to international groups.

3. Expansion of the scope of the screening procedure to additional sectors 

The list of strategic activities linked to essential infrastructure, goods or services has been further expanded, now also targeting the performance of missions related to: 

• “the security of penitentiary institutions, and
• the integrity, security, or continuity of the extraction, transformation and recycling of critical raw materials”.

In addition, the list of critical technologies (previously nine in total, including notably cybersecurity, artificial intelligence, quantum technologies, and biotechnology) subject to review in connection with research and development activities has been updated to include the production of “low-carbon energy” instead of “renewable energy” and to add photonics.

4. Simplification of FDI screening exemptions for intra-group restructurings

Previously, multiple exemption cases and conditions were provided. The new framework simplifies the exemption rule: an investor is now exempt from the authorization requirement where the ultimate investor in the control chain had, prior to the contemplated transaction, already acquired control, within the meaning of article L.233-3 of the French Commercial Code, of the target entity.

5. Additional clarifications regarding application files

The Ministerial Order harmonizes the terminology used to designate application files, which must now be referred to as either a “request for authorization” or a “prior request for review of an activity.”

It also increases the level of detail required, thereby clarifying the expected content of the filings. Applicants must now notably specify or identify:

• within the organizational chart identifying all entities and individuals within the control chain, the share capital and voting rights percentages and any special rights conferring control;
• within the list of competitors of the target (and its group) in France and the European Union, their respective market shares in France and in the EU, broken down by product or service category;
• within the list of intellectual property assets owned or used by the target, the individuals or entities holding intellectual property rights that are used but not owned by the target.

This reform confirms the importance of assessing potential FDI screening issues at an early stage of any contemplated investment or divestment project in France, while promoting greater transparency and regulatory predictability.