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Foreign investment in France: major tightening of conditions for equity investments in French companies due to Covid 19



Following the adoption of the European Regulation n°2019/452 dated March 19, 2019, which establishes a framework for the screening of foreign direct investments, the French foreign investment regime has been reinforced as of April 1, 2020, notably through:  

(i) a broadening of the definition of foreign investment in order to include all the actors of the chain of control, up to the ultimate beneficiary, 

(ii) an extension of the activities covered by a prior authorization of the Ministry of Economy and Finance,  

(iii) a strengthening of the notion of investment in a French company or French assets subject to the prior authorization of Ministry of Economy and Finance by lowering, from 33.33% to 25%, the threshold of voting rights owned, directly or indirectly, by a foreign investor (excluding EU and EEA having executed a convention on administrative assistance with France).  

Within the context of the current Covid-19 crisis, and in order to protect the key economic sectors, the Minister of Economy, Bruno Le Maire, announced on April 29, 2020 that France would further reinforce its control over foreign investments through the following two policies

(i) In order to protect notably the companies working on a vaccine against Covid-19, biotechnologies have been included, by ministerial order published on April 30, 2020, in the list of key technologies subject to the State's control. This modification shall be effective as of May 1st, 2020. 

(ii) Lowering, for strategic listed companies, of the threshold above which the acquisition of a stake by a non-European investor will be subject to the oversight and authorization of the Ministry of Economy and Finance to 10% of the share capital (versus 25% of the voting rights currently). This policy, which has not yet been legally formalized, is set to enter into force for the second trimester and end on December 31, 2020.

For more information on investing in French and other European companies, download our guide to M&A in Europe and China.

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