Source: https://www.proskauer.com/alert/foreign-investment-review-under-cfius-expands-with-new-legislation
Timestamp: 2019-02-21 07:50:01
Document Index: 584051818

Matched Legal Cases: ['arts 120', 'art 774', 'arts 730', 'art 810', 'art 110', 'art 331', 'art 121', 'art 73']

Foreign Investment Review Under CFIUS Expands With New Legislation - Insights - Proskauer Rose LLP
October 31, 2018 Read Time 15 mins
[i] Control is not limited to majority holdings, and under existing regulations that remain in effect presently includes: "the power, direct or indirect, whether or not exercised, through the ownership of a majority or a dominant minority of the total outstanding voting interest in an entity, board representation, proxy voting, a special share, contractual arrangements, formal or informal arrangements to act in concert, or other means, to determine, direct, or decide important matters affecting an entity . . .", 31 CFR 800.204. The definition of control is expected to be updated further under the final regulations. The term U.S. business means any entity, irrespective of the nationality of the persons that control it, engaged in interstate commerce in the United States, but only to the extent of its activities in interstate commerce. 31 CFR 800.226.
[ii] Under the Pilot Program Regulations, the full list of industries includes:
[iii] The term critical technologies means the following: (a) Defense articles or defense services included on the United States Munitions List set forth in the International Traffic in Arms Regulations (ITAR) (22 CFR parts 120-130). (b) Items included on the Commerce Control List set forth in Supplement No. 1 to part 774 of the Export Administration Regulations (EAR) (15 CFR parts 730-774) and controlled: (1) Pursuant to multilateral regimes, including for reasons relating to national security, chemical and biological weapons proliferation, nuclear nonproliferation, or missile technology; or (2) For reasons relating to regional stability or surreptitious listening. (c) Specially designed and prepared nuclear equipment, parts and components, materials, software, and technology covered by 10 CFR part 810 (relating to assistance to foreign atomic energy activities). (d) Nuclear facilities, equipment, and material covered by 10 CFR part 110 (relating to export and import of nuclear equipment and material). (e) Select agents and toxins covered by 7 CFR part 331, 9 CFR part 121, or 42 CFR part 73. (f) Emerging and foundational technologies controlled pursuant to section 1758 of the Export Control Reform Act of 2018. 31 CFR 801.204.
[iv] Information that provides knowledge, know-how, or understanding, not available in the public domain, of the design, location, or operation of critical infrastructure; or is not available in the public domain, and is necessary to design, fabricate, develop, test, produce, or manufacture critical technologies, including processes, techniques, or methods.
[v] The mandatory filing requirement does not apply to any transaction for which the following has occurred before October 11, 2018: "(i) The parties to the transaction have executed a binding written agreement or other document establishing the material terms of the transaction; (ii) a party has made a public offer to shareholders to buy shares of a pilot program U.S. business; or (iii) a shareholder has solicited proxies in connection with an election of the board of directors of a pilot program U.S. business or has requested the conversion of convertible voting securities." 31 CFR 801.103(b).
[vi] These country specific limiting provisions of the new legislation are not yet effective, and will not be until the final regulations are in place following the expiration of the Pilot Program.
[vii] FIRRMA expands the scope of review in several other ways as well, including: the type of investment structure, changes in the structure of investment, control via bankruptcy and those involving sensitive personal data of U.S. citizens, changes in a foreign investor's governance rights, even in the absence of any new investment, certain real estate acquisitions or leases (including vacant land) that would allow foreign person to collect intelligence, or could otherwise expose national security activities to foreign surveillance.
[viii] " . . . a waiver of a potential conflict of interest, waiver of an allocation limitation, or a similar activity, applicable to a transaction pursuant to the terms of an agreement governing an investment fund shall not be considered to constitute control of investment decisions of the investment fund or decisions relating to entities in which the investment fund is invested", subject to the FIRRMA regulations that provide for exceptions in extraordinary circumstances. 31 CFR 801.304(b).