Under French law, investments made by foreign entities in French companies that conduct activities considered “sensitive” or strategic to French national interests may require prior authorisation by the French Minister of the Economy. A newly published decree and ministerial order, both dated 31 December 2019, modify and clarify the rules and procedures governing foreign investment authorisations in France. The provisions of this legislation become effective on 1 April 2020.

The new Decree No. 2019-1590 provides for additional sectors of activities that fall under the foreign investment regulations, including print and digital media, food safety and critical technologies (i.e., cybersecurity, AI, robotics, additive manufacturing, semiconductors, quantum technologies and energy storage).

The decree also modifies the definition of investments subject to prior authorisation. As of 1 April 2020, shares exceeding 25% of voting rights in an entity governed by French law will trigger control of investments for non-EU investors. This threshold previously was 33.33%.

In terms of procedure, the new decree provides that investors must submit an application for authorisation. The Minister of the Economy has 30 business days from the date of receipt of the application to notify the investor that the investment (i) is not subject to the prior authorisation requirement, (ii) is subject to it and is authorised without conditions, or (iii) requires further examination. In the latter case, the Minister has an additional 45 business days to conduct the examination. In the absence of a response from the Minister within the stated time limit, the application is deemed to be rejected.

The decree also allows both the target company and the investor to file a written preliminary request to the Minister to confirm whether the contemplated investment is subject to the prior authorisation requirement. The 31 December 2019 Ministerial Order specifies the information that the investor must provide when filing an authorisation application or a preliminary request.

Finally, the new decree provides further details on the Minister’s powers to impose sanctions in the event of non-compliance with the foreign investment regulations.

Pursuant to Article L. 151-3-1 of the French Financial and Monetary Code, failure to comply with the obligation to obtain prior authorisation exposes the investor to administrative sanctions, among other things. In particular, the Minister may order the investor to:

• Apply for authorisation to regularise the transaction

• Amend the transaction

• Return to the status quo ante at the investor’s expense.

The Minister’s decision may be accompanied by a per diem penalty and precautionary measures, such as suspending the investor’s voting rights and preventing the investor from disposing of assets or receiving dividends.

Under the new decree, the Minister may impose sanctions in cases of emergency, exceptional circumstances or imminent threat to the public order. In such cases, the investor must be provided with formal notice and will have a minimum of five business days to submit its observations.

The new decree sets at EUR 50,000 the amount of the per diem penalty that the Minister may impose on the investor in addition to other injunctions.