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The French Ministry of Economy Releases Guidelines on Foreign Direct Investments

On September 9, 2022, the French Ministry of Economy released its guidelines ("Guidelines") on the regulation of foreign direct investments ("FDI"). These Guidelines come a few months after the French Ministry of Economy made available an application template form for FDI in France.

The Guidelines provide foreign investors with welcome clarification on the highly technical French FDI regulations—which are often perceived to be deliberately vague in order to give the Ministry a discretionary margin of appreciation, in particular regarding the list of the businesses which fall within the scope of the French FDI regulations.

This clarification is all the more timely as the Ministry's decisions are not published. While these Guidelines do not offer any definitive formula for determining whether the target's activity falls within the scope of the regulations, they do provide valuable indications for refining the preliminary analysis by means of a "sensitivity test" of the target entity addressing: the nature of its customers, the specificity and use of its products or services, the substitutability of its activity, the dangerousness of its activity, etc. In the case of research and development ("R&D"), the Guidelines specify that possible future applications of the results of this R&D shall be taken into account.

The Guidelines confirm that all the members of the chain of custody of the investor must be analyzed and that, if one of them is foreign, a control can be exercised. Thus, a leveraged buyout led by a fund structured in Luxembourg may fall within scope even if the fund is managed by a French management company. Moreover, if one of the managers controlling the management company resides abroad, the regulation may apply. The Guidelines also confirm that a person of French nationality residing abroad for tax purposes is considered as a foreign investor.

In accordance with the current state of the law, the Guidelines do not mention any size criterion for the target entity, nor any minimum threshold for the value of the transaction. This has the double disadvantage of dissuading some small investors and increasing the workload of the Ministry (which may increase the average processing time of applications).

In addition, these Guidelines provide further detail on the application procedure, the types of decisions rendered by the Ministry, and the main undertakings that may be requested from the investor. 

The Ministry invited Jones Day, among others, to submit comments in advance of the Guidelines' publication.

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