U.S. companies in tech, infrastructure and data seeking foreign investment will require approval from the Committee on Foreign Investment in the United States (CFIUS) before closing certain transactions. Last year, President Trump signed into law the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), which outlined the expansion of CFIUS jurisdiction to review certain foreign acquisitions and investments in U.S. businesses on grounds of national security. FIRRMA left the specifics to regulations to be passed by the U.S. Department of Treasury (Treasury).
On September 17, 2019, Treasury issued proposed regulations (the Proposed Rules) to implement FIRRMA. The Proposed Rules are subject to public comment before they become final.
- CFIUS will have authority to review certain non-controlling foreign investments in “TID U.S. Business” (short for tech, infrastructure, and data), defined to include companies that:
- are involved in “critical technologies,” as originally set forth in the Pilot Program, (see our previous alert) which remains in place for now without change;
- are involved in “critical infrastructure” (including energy, telecommunications, finance, manufacturing, and transportation); or
- collect “sensitive personal data” of U.S. citizens (including certain identifiable data and genetic data).
- Jurisdiction over transactions in which a foreign party obtains “control” over a U.S. business with national security implications remains mostly unchanged.
- CFIUS will have authority to review the purchase or lease of certain U.S. real estate by a foreign person.
- CFIUS filings will be mandatory for (i) a foreign person’s acquisition of a substantial interest in a TID U.S. Business where a foreign government holds a substantial interest in the foreign person, and (ii) critical technology investments under the Pilot Program.
- Filers will have the option to file a “short-form” declaration rather than a full blown filing for all transactions. CFIUS will review such declarations within 30 days of receipt.
- Comments concerning the Proposed Rules may be submitted until October 17, 2019. This is the only opportunity for interested parties to influence and shape the final regulations that will set out CFIUS’s expanded jurisdiction. The final regulations will go into effect no later than February 13, 2020. We recommend that all parties who will be affected by FIRRMA review the Proposed Rules and submit comments where appropriate.
For a detailed analysis of the Proposed Rules, click on the link below.