Foreign Direct Investments in France

In principle, there are no restrictions on foreign investments in France. However, in certain sensitive or strategic business sectors prior authorisation of the investment must be sought from the Directorate General of the Treasury of the Ministry of Economy and Finance (the “MoE”). The MoE published FDI Screening Guidelines for the first time in September 2022, which provide valuable clarifications on the FDI rules, main concepts and review processes.

In addition, if a foreign investment exceeds €15 million, there are also statistical declarations to file with the Bank of France immediately following the investment.

The prior authorisation process applies to investments from foreign investors in strategic or publicly sensitive sectors.

Targeted investments:

• acquisition of control by a foreign investor in a French legal entity;
• acquisition of all or part of the business of a French company;
• investments leading to the direct or indirect detention by a non-EU/non-EEA investor of 25% or more of the voting rights in a French company (NB: the threshold is 10% for investments in French listed companies).

Strategic or publicly sensitive sectors: these include activities related to gambling, private security, R&D activities on pathogenic or toxic agents, phone-tapping systems, information technologies, information systems security, goods and technologies with a dual use, but also defence-related activities (i.e. nuclear, weapons, explosives, security of information systems, national defence secrets), law enforcement, energy activities, drinking water, electronic communications, aerospace, transport networks, public health activities (e.g. storage, treatment and transmission of sensitive data), print and online press services for political and general information, food security, transformation or distribution of agricultural products, R&D activities in key technologies (i.e. cryptology, cybersecurity, robotics, AI, semiconductors, quantum technologies, energy storage, biotechnologies, renewable energy R&D), and the extraction and processing of critical raw materials.

Foreign investors must anticipate FDI clearance issues before planning transactions in strategic or publicly sensitive sectors in France.

Since January 2024, the “IEF Platform” (https://plateforme-ief.dgtresor.gouv.fr/) has become the exclusive means for foreign investors and their legal counsels to electronically submit FDI applications and all related materials. This allows the step-by-step tracking of the processing of submissions.

The FDI Screening Guidelines specify that it is possible to seek an opinion from the MoE when the transaction is only an investment project, to confirm whether the French company’s activity actually falls within the scope of the FDI screening.

The foreign investor and its legal advisors file a mandatory request for prior authorization online, which includes information regarding the investor (i.e. its structure, the composition of its board of directors, its activities and a list of its French and foreign competitors), the target (with a list of its French competitors and competitors operating in the EU), a list of its existing French clients, a list of intellectual property (patents, trademarks, licenses) held or used and the investment itself (including the amount, the structure and strategies).

The MoE then has two months to issue its opinion.

The clearance process with the MoE generally occurs between the signing and the closing of a transaction and is a condition precedent of said closing, since it is mandatory and suspensory. A transaction that closes without the MoE's authorisation is null and void.

It is a two-phase regime which may not exceed 75 business days.

The MoE has an initial 30-business-day period from the receipt of the complete application file to notify the foreign investor that the investment is either (i) outside of the scope of review, or (ii) that clearance is granted without conditions, or (iii) that it will need further examination to determine whether French national interests can be preserved with the granting of an authorisation subject to conditions.

When further analysis is required and mitigating conditions are necessary, a second phase begins, lasting a maximum of 45 business days, at the end of which the MoE communicates one of three possible outcomes to the investor: (i) the transaction is authorised without conditions, or (ii) the transaction is authorised subject to conditions in order to safeguard national interests, or (iii) the transaction is not authorised.

If no response is received by the investor at the end of the 30-business-day first phase, the clearance is deemed rejected. If no response is received by the investor at the end of an additional 45-business-day second phase allotted to the MoE for further examination, the clearance is also deemed rejected.

The grounds on which the MoE can refuse an authorisation are strictly limited to whether there are doubts regarding the investor’s character or whether it is impossible to prescribe sufficiently strong conditions to protect national interests.

The MoE’s decision may be challenged before the French administrative courts within the two months of the decision.

The MoE’s decisions are not made public, but aggregated statistics are published on its website regarding the number of filings, the country of origin of the foreign investors and the strategic or sensitive sectors involved (e.g. Foreign Investment Screening in France Annual Report 2023).

The MoE can indeed impose that the clearance is conditional (mitigation measures) insofar as the conditions are proportional to the objective of ensuring that the contemplated transaction will not adversely affect public policy, public safety, or national security. Conditions may be such as the continuation of the line of business in France, the maintaining of sufficient capacities and IP rights in France to keep supplying said activities, governance or organisation measures (rarely), safeguard of knowledge and know-how, or a duty to report to specific French authorities. The MoE can very rarely condition its clearance to the sale of part of the target’s share capital or part of its business to a separate entity approved by the MoE.

These conditions may be amended at the investor’s request, at the time of completion, (i) in the event of an unforeseeable change in the economic and regulatory conditions for the carrying out of the strategic activities, (ii) in the event of a change in the shareholding structure or chain of control of the target, or (iii) pursuant to a condition set out in the initial authorisation of the MoE.

Conditions may also be amended at the MoE’s own initiative, (i) in the event of a change in the shareholding structure or chain of control of the target, or (ii) pursuant to a condition set out in its initial authorisation.

The list of sanctions which can be imposed by the MoE (without any specific time limitation) has been significantly expanded should foreign investors fail to comply with French FDI rules. The sanctions are mostly the following:

If an investment requiring approval is carried out without an authorisation, the MoE may:

• order the investor not to proceed with the transaction, to change it, or to restore it to its previous state, and to order that an application for approval of the transaction be filed with the MoE;
• impose a penalty of up to €50,000 per day to do so;
• order important protective measures such as the suspension of the investor’s voting rights, the prohibition or limitation of distributing dividends, or the temporary suspension or prohibition of the free disposal of assets, appoint a temporary representative within the target to ensure the preservation of national interests, etc.

In the event of non-compliance with the requirements or commitments of an authorised investment, the MoE may:

• revoke the authorisation of the investment;
• order the investor to comply with its obligations, if necessary by imposing a penalty;
• impose other conditions, including the restoration of the previous situation or the removal of assets.

In both cases, the MoE can chose to order fines of up to the highest of (i) twice the amount of the investment at stake, (ii) 10% of the target’s annual worldwide turnover before tax, or (iii) €5 million for legal entities and €1 million for individuals. Imprisonment of up to 5 years or confiscation of the property and assets is also possible.

Finally, the agreement can be considered null and void when the prior approval of the MoE has not been obtained.

Employee rights:

• In share or asset deals, impacted companies may need to inform and consult their Social and Economic Committee.
• At least 2 months before signing the share or business transfer, all employees of companies with less than 250 employees must be informed by the seller of any proposed change of control of the business or of the company, in order to give the employees the opportunity to make an offer to purchase (although there is no obligation on the seller's part to consider or accept any such offer).

Antitrust clearances:

• EU antitrust clearance is required if the French operation is deemed to have an EU dimension.
• French Competition Authority clearance is required if: the operation is not deemed to have an EU dimension, the aggregate turnover in France exceeds €150 million and at least two of the participants individually have a turnover in France exceeding €50 million.

UBO declarations: companies (and branch offices) registered with the French Trade and Companies Registry must disclose and keep updated the mandatory declaration on the identity of their ultimate beneficial owners (i.e. all individuals directly or indirectly holding more than 25% of the company or exerting control over it).