French FDI Guidelines: Key Takeaways

The French Treasury has recently published long-awaited guidelines on the application of the French FDI regime, which has been substantially amended over the last few years (especially with the entering into force of the so-called PACTE bill in 2019).
The guidelines do not expand on how the French State reaches its decisions as to whether a specific transaction falls within the scope of the rules or not. The Treasury confirms what investors and practitioners have known for a long time: parties are “strongly recommended” to file in case of doubt, which can be a frequent situation in practice (especially for companies that can enter the value chain of sensitive activities with no real knowledge of the destination of their products).
But the guidelines provide helpful confirmations or clarifications based on past decisional practice, most importantly the following:
  • Greenfield investments in newly formed companies do not fall within the scope of the rules;
  • Moving from joint control to sole control does not require an authorisation;
  • A filing is only required when the 25% voting rights threshold is crossed for the first time, not for each additional tranche of 25%.
  • French FDI rules apply as soon as the chain of ownership involves a foreign entity, even though ultimate control would be - or remain - French;
  • Investment funds can be regarded as investors, irrespective of the management company and even when they have no legal personality;
  • Only Iceland, Liechtenstein and Norway can be considered equivalent to European investors (and therefore exempt from filing when crossing a 25% threshold): this does not apply to UK investors;
  • The exemption for intra-group transactions only applies if one single shareholder holds more than 50% of both parties, which means that it does not apply to management companies operating fund to fund transfers or in the case of continuation funds.
The Treasury will update the guidelines moving forward, which should increase transparency and provide helpful guidance for all investors. We will use this blog to provide regular updates.