Foreign investment and sensitive sectors regimes enable government across the world to scrutinise foreign shareholders investing in sectors considered sensitive in the particular jurisdiction. We have seen the number of regimes significantly increase and scrutiny intensify throughout 2020.
November, however, appears to have been a bumper month in terms of foreign investment developments tracked by our Regulatory Research Team. Below we highlight the top 5 shareholder disclosure FI developments we tracked through November.
(1) UNITED KINGDOM NATIONAL SECURITY AND INVESTMENT BILL
On 11th November 2020, the UK Government introduced the long-awaited National Security and Investment Bill in the House of Commons. The Bill provides the government with new powers to screen investments, and aims at tightening the rules governing foreign investment across Britain’s critical infrastructure and parts of its defence industries.
The National Security and Investment Bill will enable the Secretary of State to ‘call in’ statutorily defined acquisitions of control over qualifying entities and assets (trigger events) to undertake a national security assessment.
“Trigger events” include the acquisition of more than 15%, 25%, 50% and 75% of the votes or shares in a qualifying entity. It is expected that transactions in over 17 sections will be subject to mandatory notification.
Read more here.
(2) ABU DHABI TO ALLOW 100% FDI LICENSE FOREIGN OWNERSHIP
The regulatory landscape in the Middle East has transformed significantly in recent years, particular in terms of foreign ownership restrictions. Contrary to what we are seeing in the EU, this development from Abu Dhabi displays a common theme seen across the region of markets opening up to foreign investors.
This welcome announcement from the Abu Dhabi Department of Economic Development implements “Foreign Direct Investment Licenses”, which will enable investors to hold 100 per cent ownership of their businesses in Abu Dhabi.
The license covers 122 different economic activities related to the agricultural, industrial and services sectors.
Read more here.
(3) SPANISH GOVERNMENT MODIFIES THE MECHANISM OF FOREIGN INVESTMENT CONTROL
On 19 November 2020, the Spanish government modified the mechanism of foreign investment control in Spain.
Highlights of the amendment include:
- Amendments to the definition of foreign direct investment which includes acquisitions of a stake equal to or greater than 10% of the share capital of the Spanish company.
- A transitional regime for investments by EU and EFTA residents until 30 June 2021 – The Royal Decree provides that the Investment Control Mechanism will also be applied to foreign investments in companies listed in Spain or unlisted provided that the value of the investment exceeds 500 million euros.
- Extension of some of the sectors subject to the authorisation scheme.
Read more here.
(4) INDIA FOREIGN INVESTMENT LIMIT IN DIGITAL MEDIA FIRMS REDUCED TO 26%
The Indian Ministry of Information & Broadcasting has issued a circular stating that digital media companies which have more than 26% FDI will have to reduce it to 26% by October 2021. The limit applies to the following Indian entities:
- Digital media entity streaming/uploading news and current affairs on websites, apps, or other platforms
- News agency which gathers, writes and distributes/transmits news, directly or indirectly, to digital media entities and/or news aggregators.
- News aggregator, being an entity which, using software or web application, aggregates news content from various sources, such as news websites, blogs, podcasts, video blogs, user submitted links, etc in one location.
Read more here.
(5) THAILAND’s DBD PROPOSAL TO REMOVE SECTORS FROM LIST 3 OF THE FOREIGN BUSINESS ACT
On November 2, 2020, it was widely reported by Thai media that Thailand’s Department of Business Development (DBD) has drafted ministerial regulations that would remove telecommunications, treasury centre activities, and software development businesses from List 3 of the Foreign Business Act (FBA).
If the proposed amendments are implemented, the updated regulations would provide that foreign entities would no longer need to obtain permission from the DBD’s director-general and the Foreign Business Commission before engaging in these activities.
Read more here.
