Controlling foreign investments in France: new rules applicable from January 1, 2024 

By decree No. 2023-1293 of December 28, 2023, accompanied by an order of the same date, a number of changes have been made to the control regime for foreign investments in France.

The adoption of these regulations was prompted by the French Ministry of the Economy's desire to tighten controls on foreign investments in French entities.

As a reminder, as this is a prior authorization procedure, the operation covered by the application falling within the scope of control must be authorized by the Ministry before it is carried out. Failure to comply with this obligation may result in various types of penalty (fines, penalties, injunctions, etc.).

1. Perpetuation of foreign investment status for a 10% stake acquired by a non-European investor in a listed French company

As a temporary measure, until December 31, 2022, the threshold for acquiring voting rights likely to trigger control in listed French entities with sensitive activities had been lowered from 25% to 10%.

Although this measure was extended until December 31, 2023, it has now been decided to make this rule permanent (Article R.151-2 4° of the French Commercial Code). Any non-European (non-EEA) investor crossing the threshold of 10% of voting rights in a listed company will be required to give prior notification (rather than an application for prior authorization). The foreign investor will be exempted from the requirement for prior authorization if the Minister has not responded within ten business days of the filing of the prior notification.

2. No application for prior authorization needed when control has already been acquired

Another new feature is that any investor of last resort in a chain of control is now exempt from having to apply to the Ministry of the Economy for prior authorization if, prior to the investment, it had already acquired control within the meaning of Article L.233-3 of the French Commercial Code (Article R.151-7 I of the French Monetary and Financial Code). 

However, this exemption cannot be applied in the two situations listed in Article R.151-7 II of the French Commercial Code: 

- The effect of the investment is to prevent an investor from complying with the conditions for which he has been made liable pursuant to Article R. 151-8 II of the French Monetary and Financial Code in connection with a previously issued authorization.

- The purpose of the investment is to transfer abroad all or part of a branch of one of the activities listed in Article R. 151-3 of the French Monetary and Financial Code.

3. Extension of the definition of "French entity”

The initial wording of Article R.151-2 1° of the French Monetary and Financial Code stipulated that an investment included the acquisition of control, within the meaning of Article L.233-3 of the French Commercial Code, of a French entity. While the notion of "French entity" was not clearly defined, the guidelines issued by the French Treasury stated that a branch in France of a foreign company is not considered to be a French entity. Thus, an investment transaction involving such a branch was not subject to foreign investments control. 

However, as of January 1, 2024, this is no longer the case, since Article R.151-2 1° of the French Monetary and Financial Code now expressly refers to any "establishment registered with the French Commerce and Companies Register". This change of position was explained by the Ministry of the Economy in order to guard against strategies to circumvent the regulations.  

4. Extension of the list of activities carried out by French entities that fall within the scope of foreign investment control

The list of business sectors covered by foreign investments regulations has been extended. 

Article R.151-3 of the Monetary and Financial Code now stipulates that the following activities are also considered as sensitive: 

- Ensuring the safety of prisons. 

- The integrity, safety or continuity of the extraction, processing and recycling of critical raw materials.

- Research and development activities in photonics and low-carbon energy production technologies.

5. Content of the applications for authorization and their submission via the IEF platform 

The terms governing the content and transmission of applications for authorization and notifications to the Ministry of the Economy have been specified. 

First of all, Articles 1 and 1-1 of the order of December 31, 2019 listing the documents and information to be included in applications for authorization have been supplemented. By way of illustration, it is now stipulated that the organization charts must specify "for each of the entities in the chain of control, the percentage holding in capital and voting rights of the entities that control it, as well as, where applicable, the existence of specific rights conferring control within the meaning of Article L. 233-3 of the same code or III of Article L. 430-1 of the same code." 

Lastly, as of October 1, 2023, investors must submit their applications for prior authorization and their applications for prior examination of a business via the " Plateforme IEF" (Article R.151-16 of the French Commercial Code and Article 5 of the order of December 31, 2019). In addition, the aforementioned Articles now specify that notifications and all correspondence relating to foreign investments (including declarations of completion of authorized operations) must be sent to the Ministry of the Economy by email to iefautorisations@dgtresor.gouv.fr.