FRANCE: French Foreign Investment Rules Amended

Monday June 11 2012

Rules applicable toFrench foreign investments subject to the prior authorization procedure have been amended by a Decree dated May 7, 2012. It modifies the scope of the regulatory framework in order to comply with the freedom of movement and establishment of capital required by the treaty on the functioning of the European Union.

Under the former regulatory framework, the direct or indirect acquisition of the business of a company, and the direct or indirect acquisition of more than one third of the shares or voting rights of a company, when the registered office of these companies were located in France, were considered as foreign investments.

The new decree removes all reference to indirect acquisitions. Indirect acquisitions are therefore generally no longer subject to prior-authorisation requirements, even if they involve sensitive activities. There is, however, one exception to the new rule. Under the new Article R. 153-5-2 of the MFC, authorisation is still required for the acquisition by French companies directly or indirectly controlled by EU or non-EU investors of a business with sensitive operations that is owned by a company with a registered office located in France.

Failure to comply with this obligation may lead to the application of civil fines and/or criminal penalties and the transaction being declared invalid.

This information will be updated as more details become available