Foreign Investments in the U.S. - Foreign Investment Review Process Outlined In Proposed CFIUS Rules - Regulations Pertaining to Mergers, Acquisitions, and Takeovers by Foreign Persons
On April 23, 2008, the Treasury Department issued proposed regulations for reviewing and regulating foreign investments in the United States. The proposed regulations implement 2007 legislative amendments made to the manner in which the Committee on Foreign Investment in the United States (CFIUS) reviews mergers, acquisitions, and takeovers by or with any foreign person which could result in foreign control of certain categories of U.S. businesses.
The proposed rules formally establish CFIUS and its responsibilities in statute, and are intended to strengthen reviews of national security issues raised by foreign investments. The 2007 law (Foreign Investment and National Security Act of 2007 (FINSA)) expanded the scope of CFIUS reviews to cover transactions involving critical infrastructure and energy and requires a second-stage review of most proposed acquisitions by foreign state-owned companies.
"These regulations reflect America's strong and continued commitment to safeguarding U.S. national security in a manner that reinforces the longstanding U.S. policy of welcoming foreign investment. The proposed regulations increase clarity and make additional improvements based on experience," said Assistant Secretary for International Affairs Clay Lowery.
One key aspect of the proposed rulemaking is that the Department of Treasury has clarified that "the regulations do not provide, and never have provided, an exemption based solely on whether an investment is 10 percent or less in a U.S. business." While the control of 10 percent or less generally does not trigger a CFIUS review, the regulations make clear that transactions are reviewed on a case-by-case basis where a range of factors are considered in determining "control" of the U.S. company. Depending upon these factors, a foreign entity can be considered to have control of the domestic U.S. company with less than 10 percent ownership. Additionally, CFIUS will review any non-investment motives, and the new regulations are intended to ensure high-level U.S. official involvement and review of any decision to approve or disapprove of any transaction which may have national security implications.
The Treasury Department is requesting comments on the proposed regulations; a public comment period will extend for 45 days until June 9. The Treasury Department will hold a public meeting to receive comments on the proposed regulations
on May 2, 2008. Further details on the meeting and submission of comments can be found in the opening pages of the
regulations.