3 - CFIUS Flashcards
The US federal interagency group with authority to review foreign investments in US businesses and certain real estate transactions
CFIUS - Committee on Foreign Investment in the US
Who is CFIUS chaired by? Where are the day to day functions of CFIUS carried out?
Secretary of the Treasury, Dpt of the Treasury
Why was CFIUS established?
To review foreign investments in the US for major implications to US national interest.
Which transactions can CFIUS review (3)?
Covered…
Control transactions
Investments
Real estate
a _____ is one in which
(1) a foreign person invests in a US business that is involved in a TID US business), and
(2) the foreign person acquires at least one of the following rights:
access to material nonpublic technical information,
board membership or
observer rights,
or any involvement in substantive decision making of the TID US business regarding critical TID
Covered investment
What Are the Components of a TID US Business?
critical technology, critical infrastructure and sensitive personal data
Are certain transactions beyond the reach of CFIUS?
yes Passive investments with <10% interest Incremental acquisitions Securities underwriter transactions Acquisitions pursuant to a condition in an insurance contract Lending transactions “Greenfield” investments
investment is a type of foreign direct investment (FDI) in which a parent company creates a subsidiary in a different country, building its operations from the ground up.
“Greenfield” investments
Which transactions are required to be filed with CFIUS?
Substantial Interest and Critical Technology
A filing is required under substantial interest if:
(1) a covered transaction involves a TID US business
(2) a foreign person obtains a 25% or more voting interest in the TID US business
(3) a foreign government (other than the governments of Australia, Canada, and the United Kingdom, which receive special treatment under the rules) holds a 49% or more voting interest in the foreign person.
If a filing is not mandatory, should a foreign investor still make a voluntary filing?
Parties can file voluntarily, however, and the reason they sometimes do so is to obtain clearance of the transaction before closing. Once CFIUS has cleared a transaction, it remains cleared forever (with some limited exceptions), and CFIUS-related risk is largely eliminated. So, not notifying CFIUS of a transaction can be a risky decision.
What is “Excepted Investor” status?
CFIUS rules provide some exemptions for “excepted investors” with sufficiently close ties to “excepted foreign states” (currently, Australia, Canada, and the United Kingdom).
At least 75% of board and observers and all of its 10% or greater shareholders must be from excepted investors.
Who prepares the CFIUS filing?
The foreign investor and the target company typically prepare the CFIUS filing jointly.
What two forms do parties have the option to file?
short-form “declaration”- 30 day review, no fee
long-form “notice” - 3-6 month review, fee required
Can the CFIUS process result in conditions being imposed on a transaction?
Yes. A CFIUS determination that a transaction could threaten or impair national security does not necessarily mean that the transaction will be blocked. In many cases, CFIUS can clear a transaction subject to conditions
to mitigate the perceived risks the transaction otherwise would pose. If necessary, CFIUS will engage with the parties to negotiate such conditions. If CFIUS foresees national security concerns early in the process, it may
open such negotiations even in the pre-filing phase, before the parties submit their formal notice.
