Disclaimer: This translation is a working translation only and is not legally binding.
1. Why are foreign direct investments screened in France?
Foreign direct investments in business activities in France which, even if only occasionally,
contribute to the exercise of public authority or are likely to jeopardise national interests are
subject to prior approval from the Minister for the Economy in order to ensure the protection
of public order, public security and national defence interests (Article L.151-3 of the
Monetary and Financial Code). Because this goes against the principle of freedom to invest,
the regime is strictly governed by law and regulation.
2. When are foreign direct investments screened?
To assess whether a foreign direct investment in France is subject to screening, the Minister
for the Economy considers factors relating to the involvement of foreign investors (Article
R.151-1 of the Monetary and Financial Code), the nature of the transaction and degree of
resulting control over the target entity (Article R.151-2 of the Monetary and Financial Code),
and the degree of sensitivity of the target entity’s activities (Article R.151-3 of the Monetary
and Financial Code). Specifically, the following three cumulative conditions must be met:
(i) A foreign entity is present in the ownership chain of the direct acquirer. Non-
French investors (whether or not European) and French investors domiciled outside
of France for tax purposes are deemed foreign investors under the foreign direct
investment screening regulation in France. The investor’s nationality is determined by
considering the entire ownership chain of the direct acquirer. If any link in the chain is
foreign, the investor is deemed foreign.
(ii) The nature of the transaction is such that an investor (i) acquires control (as
defined in Article L. 233-3 of the French Commercial Code) of a French legal entity,
(ii) acquires all or part of a business line from a French legal entity, or (iii) crosses the
25% threshold of voting rights in a French legal entity (this threshold was temporarily
lowered, until 31 December 2023, to 10% for French companies whose shares are
listed on a regulated market). Note that the third scenario only applies to investors
from outside the European Union or European Economic Area.
(iii) Sensitive activities are carried out by the French target company. Only
investments that are (i) made in one of the sectors specifically listed by the regulation
and (ii) likely to jeopardise public order, public security or national defence interests
are subject to screening. There are three categories of sectors:
1. Inherently sensitive activities that fall mainly within the defence and security
sectors (Article R.151-3, paragraph I of the Monetary and Financial Code)
2. Activities relating to infrastructure, goods and services that are essential
to safeguard public order and public security, including, but not limited to,
the integrity, security and continuity of energy and water supplies,
transportation networks and services, public health, and food security (Article
R.151-3, paragraph II of the Monetary and Financial Code)
3. Research and development activities that relate to critical technologies
listed by Order of 31 December 2019 and to dual-use items and
technologies carried out in the sectors mentioned above (Article R.151-3,
paragraph III of the Monetary and Financial Code)
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