Bruno Le Maire announced on April 29 an update of the foreign direct investment (FDI) screening procedure in France, in the context of the current health and economic crisis. This crisis threatens to weaken French companies, notably those operating in sensitive sectors. While most foreign investments are opportunities for French companies, the volatility of financial markets and the very sharp fall in valuations of a large number of companies make them particularly vulnerable to possible unfriendly operations, which calls for heightened vigilance.
The minister for the Economy and Finance announced on April 29 an update of the foreign direct investment (FDI) screening procedure in France, in the context of the current health crisis. This evolution is twofold: the long-term inclusion of biotechnologies in the list of critical technologies likely to be subject to FDI screening and the lowering from 25 to 10% of the threshold of voting rights acquired in company which triggers the procedure. This new rule will apply for a limited period of time, only for listed companies, and for investors from third countries (European Union and European Economic Area investors are exempted).
Inclusion of biotechnology in the list of critical technologies subject to the foreign investment screening procedure
Bruno Le Maire signed a decree including biotechnologies in the list of critical technologies likely to be subject to specific screening.
As a reminder, the French FDI legal framework already protects activities which are "essential to the protection of public health" . However, with regard to biotechnologies, the challenge of protecting public health is sometimes more distant and prospective. The addition of biotechnologies to this list will give the French authorities wider margins to assess operations in this sector.
Lowering of the shareholding threshold to 10% until the end of 2020
The Minister also announced the temporary lowering of the voting rights threshold in sensitive companies requiring authorisation.
Under the usual procedure, the takeover by a foreign investor of any sensitive French company must be authorised. This also applies whenever a foreign investor, outside the EU and the EEA, crosses the threshold of 25% of voting rights within the company. This 25% threshold will be lowered to 10% only for listed companies, which have sometimes dispersed ownership and for which minority shareholding can be destabilising if unfriendly.
In order not to unduly affect the ability of companies to finance themselves on the markets, this reinforced control will be exercised in the following ways:
- EU and EEA investors are exempted;
- This exceptional measure should end on December 31, 2020;
- It should be implemented according to a special procedure. First, the investor crossing the 10% threshold will have to notify it to Directorate General of the Treasury. Then the Minister for the Economy and Finance will have 10 days to decide whether the transaction should be subject to further review, and undergo an at-length authorisation procedure As a result of this assessment, the French government might not authorise this foreign investor to own more than 10% of the voting rights of such a sensitive French company.
The decree lowering the threshold will be sent to the « Conseil d’Etat » in the coming days, and should enter into force in the second half of 2020.
Learn more about FDI screening procedure in France: