Foreing Investment in France

Foreign investment in France is by principle free of any administrative constraint.

However, in certain instances, foreign investment in France is subject to either (1) declaration to the administration, (2) prior authorization or (3) filing for statistical purposes.

These are the highlights if you want to know the essential of Foreing investement in France.  This entry was drafted by  Pech de Laclause, Bathmanabane & Partners for”E-IURE COMPENDIUM” 2018. Link to e-IURE Network.

This collaboration is a brief step-by-step guidance. In no case it can be considered as legal advice. If you want -or need – legal advice, ask for a lawyer or a law firm. In that case “Pech de Laclause, Bathmanabane & Partners“ is an excellent option in France,

1.-Operations subject to declaration

The following operations are subject to declaration to the administration when made by foreign investors or by French entities whose capital or voting rights are held at more than 33.33% by foreigners:

1. Incorporation of a business
2. Acquisition of all or part of an ongoing business

Any equity investment resulting in a stake exceeding 33.33% of the capital or the voting rights of a French entity

Any operation organized abroad resulting in a change of control of a foreign entity, itself holding capital or voting rights in an entity whose capital or voting rights are held by foreigners at more than 33.33%

The declaration must be made with the “Direction Générale du Trésor” of the French Ministry of the Economy, of Finances and of the Industry. There is no required format.

A general waiver is granted for the following operations: (i) creation or extension of the business of an existing French entity, increase in the stake in French entity under foreign control when made by an investor already owning over 50% of the capital or the voting rights, (ii) subscription to a capital increase of a French entity under foreign control, subject to the absence of increase of his/her stake, (iii) intra-group operations, (iv) operations relating to guarantees or donations to a French entity already owned by foreign investors, (v) the takeover up to 1.5 million Euros of businesses as a going concern (“fond de commerce”), restaurants, hotels, (vi) acquisition of arable land.

2.-Operation subject to prior authorization from the French Administration

A prior application must be made to the Minister of the Economy; the Minister has up to 2 months to respond, failing which the operation is deemed authorized.

• Investment made by non-European Union (or EEE) investors; including

1. Individuals citizen of countries that do not belong to the EU
2. French citizens not residing in France.

• Investment in certain industries considered to be sensitive (off-casino gambling, private security business, communication interceptions, encryption, national defense certified contractors, R&D businesses, manufacturing or trading weapons, ammunition, powder or explosives, military contractors, ….). A 2014 statute added to the list the following sectors when the public order is concerned: energy supply, water supply, transportation, IT-industry and public health.

1. Investment by EU (or EEE) investors

Investment in regulated sectors mentioned at article R.153-4 of the French Monetary and Financial Code, such as research, production and trading of weapons, business conducted by companies that receive national defense secrets, or other related national security organizations, or other business subject to security clearances (secret défense), in addition to the sectors added by the 2014 statute mentioned above.

Investment by French entities (subject to foreign control)

Investment in businesses (i) relating to encryption, (ii) holding or using national defense secrets (iii) conducting R&D, or producing or trading in weapons, ammunition, powder and explosives, for military use, (iv) that procure services or goods to the Ministry of Defense, or (v) that deal in gambling, private security, biotechnology, and some activities tied to IT systems in addition to the sectors added by the 2014 statute mentioned above.

3.-Operations subject to filing for statistical purposes

Operations involving amounts in excess of 15 million Euros require a filing with the Banque de France, when the operation relates to (i) the acquisition of at least 10% of the capital or voting rights, (ii) acquisition of real estate, (iii) operation between related parties such as loans and deposits.

Operations involving amounts in excess of 1.5 million Euros require a filing with the French Ministry of the Economy, when the operation relates to (i) real estate acquisition, (ii) acquisition of land for wine production, (iii) liquidation of direct investments in France, (iv) operation subject to authorization by the French Ministry of the Economy, or (v) disinvestment in a French entity (termination of business, liquidation, etc.).