EU Regulation on Investment - France Case Study

EU Regulation on Investment – France Case Study Presented by: Angelos Dimopoulos Date: January 17, 2022 Member States: France - The legal framework - Scope of application 1. Investors 2. Transactions/ investments 3. Regulated sectors - The procedure and scope of review - Legal effects/ outcomes The Legal Framework  Code monétaire et financiere 1. Articles L151-1-L.151-177 2. Article R151-1-R.151-17 3. décret no 2019-1590 dated 31 December 2019 4. arrêté dated 31 December 2019 Investors 1. A foreign individual 2. A French individual whose tax residence is outside of France 3. A foreign legal entity 4. A legal entity incorporated under French law controlled by one or several individuals or legal entities listed above. Investments 1. Direct or indirect acquisition of a controlling stake, within the meaning of article L. 233-3 of the French Code de commerce, of the share capital and voting rights of a company having its registered office located in France ('share deal'); a. Holding of a majority of voting rights b. De facto control (effectively determine decisions taken at shareholders' meetings the power to appoint or remove a majority of management or supervisory board members 2. Acquisition of all or part of a branch of activity (branche d'activité) of a company having its registered office located in France ('asset deal'); 3. For non-EU/EEA investors only, the acquisition of more than 25 percent of voting rights of a French entity whether made, directly or indirectly, by a sole investor or by several investors acting in concert ('threshold crossing') 4. Exempted transactions a. Intra-group transactions (i.e. entities of which at least 50% of the share capital or the voting rights is directly or indirectly held by the same parent company) b. Share deals following an authorized threshold crossing Regulated Sectors 1. Telecoms/ data processing a. Activities relating to any means of telecommunication detection and interception b. Activities relating to company's data systems security, data capturing cryptology activities 2. National Defense and security a. Activities carried out by companies holding national defense secrets in custody or b. Activities carried out by companies having study or supply contracts with French Ministry of Defense c. Production or sale of weapons, ammunitions, gunpowder or explosive materials for military use d. Activities deemed to prevent the use of pathogenic or toxic materials in the context of terrorist activities e. Private security activities 3. Critical industries a. energy supply b. water supply c. transport network and services d. telecommunication networks e. establishments, facilities or works deemed vital within the meaning of the French 'Code de la défense' f. public health 4. R&D activities, in particular, relating to cybersecurity, energy storage, biotechnologies, artificial intelligence, robotics, additive manufacturing, semiconductors. 5. Other sectors: a. written and digital press b. gambling activities (except casinos) c. production, processing and distribution of agricultural products (regarding food safety) Formal Procedure 1. Notification 2. 2 Stage process a. Stage I 1) 30 working day window for answer 2) not subject to prior authorization 3) refuse to grant the authorization 4) grant the authorization without conditions 5) requires additional examination to grant its authorization. b. Stage II: 1) Additional 45 working days 2) Refuse authorization 3) Grant authorization without conditions 4) Grant authorization subject to conditions Conditional Authorization - - commitments that can be imposed  Preservation of the continuity of the target's activities  Security of its supply of products or services  Maintaining R&D capabilities and production in France  Sensitive activities are carried out by a French legal entity,  Information-access to French authorities  Governance requirements A proportionality test required Refusal To Authorize Commitments not sufficient - Serious presumption that the investor is likely to commit an offence or conceal an offence - Investor was convicted by a final judgment for a covered offence - Investor was sanctioned for breach of French foreign investment rules Investments Without Authorization - Request to submit a notice for authorization - Conditions imposed - Penalties - Unwinding the investment Conclusion  French investment screening as a 'welcome' step towards the modernization of investment screening