Starting Feb. 13, 2020, U.S. companies in tech, infrastructure and data seeking minority or controlling foreign investment will require approval from the Committee on Foreign Investment in the United States (CFIUS) before closing certain transactions.

The change stems from the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), which was signed into law by President Donald Trump in 2018, expanding CFIUS’ jurisdiction to review certain foreign acquisitions of and investments in U.S. businesses on the grounds of national security. On Jan. 13, the U.S. Department of the Treasury issued final regulations to implement FIRRMA (the Regulations). A summary of the new regulations and key takeaways follows.

What U.S. Companies and Foreign Investors Need to Know

Key Takeaways:

  • CFIUS has the authority to review certain minority foreign investments in U.S. businesses in critical technology, critical infrastructure and sensitive personal data of U.S. citizens.
  • Fund managers will have to ensure that their fund documents do not trigger a CFIUS review if they provide foreign limited partners with certain governance rights and access to certain nonpublic information.
  • CFIUS filings are now mandatory for certain foreign acquisitions where a foreign government holds a substantial interest in the foreign party as well as for investments in companies involved in certain critical technology industries.
  • Certain investors from Australia, the United Kingdom and Canada are exempt.
  • 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.
  • CFIUS has authority to review the purchase or lease of certain U.S. real estate by a foreign person.
  • The new Regulations will have a significant impact on investment in large segments of U.S. technology. CFIUS will also require more information in its determination, including the U.S. business’ critical technology, government contracts and data-gathering practices.

For a detailed analysis, read my comprehensive breakdown of the new rules.