A foreign investor must obtain the prior authorisation of the Minister for the Economy when it acquires control of a French entity, buys a line of business, or crosses twenty-five percent of the voting rights (ten percent in a listed company), and that entity carries on a sensitive activity. The twenty-five percent threshold does not apply to nationals and companies of the European Union and the European Economic Area, who are caught only on an acquisition of control or of a line of business (Article R. 151-2 of the Monetary and Financial Code). Sensitive activities cover defence, dual-use goods and information systems security, but also energy, water, transport, communications, health, food, critical raw materials, the press, and research into ten critical technologies including artificial intelligence, semiconductors and quantum. The Minister answers within thirty working days, then within a further forty-five if additional review is opened, and silence means refusal.
The practical consequence for a transaction timetable is that the French filing is rarely the last condition precedent to be satisfied, but it is the one that cannot be accelerated. A fund acquiring a French software company with two hundred employees, believing itself outside the scope because the target sells to civilian customers, discovers at the eleventh hour that its research falls within the critical technologies list because of the destination of the technology. The analysis has to be done at the term sheet stage, not at signing.
Who counts as a foreign investor
The definition is broader than apparent nationality. Under Article R. 151-1 of the Monetary and Financial Code, an investor means any natural person of foreign nationality, any French natural person not domiciled in France within the meaning of Article 4 B of the General Tax Code, any entity governed by foreign law, and any French entity controlled by one of those persons. The text adds the notion of a chain of control: the investor and the persons controlling it are all treated as investors. A French subsidiary held by a Luxembourg holding company itself controlled by a US fund is therefore, for these purposes, a US investor. Control is assessed under Article L. 233-3 of the Commercial Code.
This architecture explains why the analysis always starts with tracing the whole ownership chain up to the ultimate beneficial owner, and why a structure that looks European on its first level may be treated as non-European on its third. It also means that a change in the identity of the ultimate controlling person, without any movement at the level of the French target, can itself trigger the control. Structuring decisions taken for tax or financing reasons therefore have a regulatory consequence that should be checked before, not after, they are implemented.
What triggers authorisation: three operations, two thresholds
Under Article R. 151-2, an investment requires authorisation where an investor acquires control of an entity governed by French law or of an establishment registered in the French trade and companies register, acquires all or part of a line of business of a French entity, crosses alone or in concert the threshold of twenty-five percent of the voting rights of a French entity, or crosses the threshold of ten percent of the voting rights of a French company listed on a regulated market.
The decisive point, often overlooked, appears in the final paragraph of that article: the twenty-five and ten percent thresholds apply neither to a natural person who is a national of a Member State of the Union or of the European Economic Area having concluded an administrative assistance convention with France and domiciled in one of those States, nor to an entity all of whose members in the chain of control satisfy those conditions. A European investor is therefore caught only by an acquisition of control or of a line of business. Crossing the ten percent threshold in a listed company also benefits from a lighter procedure under Article R. 151-5, a prior notification from which exemption arises, absent objection, after ten working days, and an exemption exists for internal reorganisations where the ultimate investor already controlled the target, subject to the exceptions in Article R. 151-7.
Sensitive activities: a list that has grown considerably
Article L. 151-3 covers activities participating in the exercise of public authority, activities liable to prejudice public order, public security or the interests of national defence, and activities relating to arms, ammunition, powders and explosive substances. Article R. 151-3 sets out the detail in three blocks. The first covers war materials, dual-use goods and technologies in Annex IV to Regulation (EU) 2021/821, entities holding national defence secrets, information systems security services provided to operators of vital importance, and suppliers to the Ministry of Defence.
The second block, by far the broadest, covers infrastructure, goods or services essential to guarantee the integrity, security or continuity of energy supply, water supply, the operation of transport networks and services, space operations, electronic communications networks and services, public health, food security, the press, and the extraction and processing of critical raw materials. The third covers research and development into critical technologies or dual-use goods where intended for use in one of the activities of the first two blocks. The list of critical technologies is fixed by the Order of 31 December 2019, whose Article 6, as in force since 1 January 2024, names cybersecurity, artificial intelligence, robotics, additive manufacturing, semiconductors, quantum technologies, energy storage, biotechnology, low-carbon energy production technologies and photonics. A French software start-up is therefore not automatically outside the scope: everything depends on the destination of its technology.
The review: thirty working days, then forty-five, and silence means refusal
The timetable is set by Article R. 151-6. Within thirty working days of receiving a complete application, the Minister states either that the investment is not subject to control, or that it is and is authorised unconditionally, or that it is and requires additional review. Absent a reply within that period, the application is deemed refused. Where additional review is opened, the refusal or the authorisation, with conditions where appropriate, is given within forty-five working days of receipt of that first decision, and silence again means refusal. In calendar terms that means six weeks to nearly four months, on top of the time needed to assemble the file and the preliminary discussions with the Treasury.
The rule that silence means refusal imposes a discipline. An investor who has received no answer by the deadline cannot complete, and the transaction documents must say so: the authorisation is a condition precedent, with a long-stop date calculated on the statutory timetable rather than on optimism, and with an allocation between the parties of the risk of conditions being imposed. Drafting that condition precedent loosely is how a buyer ends up either in breach of French law or in breach of its own share purchase agreement.
The conditions attached to an authorisation
Most sensitive authorisations come with conditions. Article R. 151-8 states what they may pursue: ensuring the continuity and security in France of the sensitive activities, in particular by ensuring that they are not subject to the legislation of a foreign State liable to obstruct them, which is a direct reference to US extraterritoriality; preserving knowledge and know-how and preventing their capture; adapting internal governance and the manner in which the acquired rights are exercised; and fixing how the administration is to be informed. The Minister may go so far as to condition the authorisation on the sale of part of the shares or of a line of business to an entity approved by him. The authorisation designates which of the investors answers for compliance with the conditions.
These commitments survive the transaction. They may be revised at the investor’s request where economic and regulatory conditions have changed unforeseeably, where the shareholding has changed, or under a clause of the authorisation itself, the Minister deciding within forty-five working days with silence meaning refusal; they may also be revised at the Minister’s initiative, who must then state his intention with reasons and allow the investor forty-five working days to submit observations (Article R. 151-9). Monitoring these commitments, routinely neglected after closing, is an obligation whose breach is itself sanctioned.
What an investor who did not apply is exposed to
The civil sanction is the most radical: any undertaking, agreement or contractual clause which directly or indirectly effects a foreign investment in a field subject to authorisation is void where that authorisation has not been obtained (Article L. 151-4). An entire acquisition may therefore be annihilated, with the consequences one can imagine for the financing and the security package.
To that are added the Minister’s powers. Where an investment has been completed without authorisation, he issues one or more injunctions: to file an application, to restore the previous situation at the investor’s expense, or to modify the investment, with a periodic penalty payment where appropriate; he may also take protective measures, in particular suspending the voting rights attached to the irregularly acquired shares, prohibiting or limiting the distribution of dividends, or suspending free disposal of all or part of the assets (Article L. 151-3-1). Finally, the financial penalty under Article L. 151-3-2 may reach the highest of three amounts: twice the value of the irregular investment, ten percent of the target’s annual turnover excluding tax, or five million euros for a legal person and one million for a natural person.
The European dimension and what the firm does
France does not decide alone. Regulation (EU) 2019/452 establishes a cooperation mechanism under which a Member State screening an investment informs the Commission and the other Member States, which may submit comments and an opinion. The final decision remains national, but the mechanism lengthens the timetable and brings into the file considerations raised by other capitals. A reform of that framework has been under negotiation, tending towards a common minimum scope of screening across the Union, so an investor should expect the field to broaden rather than narrow.
The firm advises investors and targets on French foreign investment control: scope analysis on the ownership chain and on the target’s actual activities, preliminary discussions with the Treasury, preparation of the application file, negotiation of the conditions, and drafting of the condition precedent and risk allocation in the transaction documents. After closing it handles the monitoring of the commitments and applications to revise them. Where an operation has been completed without authorisation, it handles the regularisation and the representations on the injunctions and penalties. A scope opinion is generally possible within a few days on the strength of the shareholding chart and a description of the target’s activities.
Planning an acquisition in France and unsure whether it requires clearance? The firm gives a scope opinion on the ownership chain and the target’s activities, and handles the filing and the conditions.
Frequently asked questions
Which thresholds trigger foreign investment control in France?
Acquiring control of a French entity, acquiring all or part of a line of business, crossing twenty-five percent of the voting rights, or crossing ten percent in a company listed on a regulated market, where the target carries on a sensitive activity. The twenty-five and ten percent thresholds do not apply to investors from the European Union or the European Economic Area meeting the conditions of Article R. 151-2, who are caught only on an acquisition of control or of a line of business.
Which activities count as sensitive?
Article R. 151-3 lists three blocks: war materials, dual-use goods in Annex IV to Regulation 2021/821, national defence secrets, information systems security for operators of vital importance and suppliers to the Ministry of Defence; infrastructure and services essential to energy, water, transport, space, electronic communications, public health, food security, the press and critical raw materials; and research and development into critical technologies intended for use in those activities.
How long does the authorisation procedure take?
Thirty working days from receipt of a complete application for the first decision, then forty-five working days from that decision where additional review is opened. Silence means refusal at both stages. In calendar terms, six weeks to nearly four months, to which must be added the time needed to assemble the file and the preliminary discussions with the Treasury. The long-stop date in the transaction documents should be built on that timetable.
What is the risk of completing without authorisation?
Any undertaking, agreement or clause effecting the investment is void under Article L. 151-4. The Minister may order the investor to file an application, to restore the previous situation at its own expense or to modify the investment, with periodic penalty payments, and may suspend voting rights, limit dividends or suspend free disposal of the assets. The financial penalty may reach twice the value of the investment, ten percent of the target’s turnover, or five million euros, whichever is highest.
Is a European investor subject to the control?
Partly. An investor from the Union or the European Economic Area meeting the conditions of Article R. 151-2 escapes the twenty-five and ten percent voting rights thresholds, but remains subject to authorisation when it acquires control of a French entity carrying on a sensitive activity or acquires a line of business. The exemption is also lost where any member of the chain of control up to the ultimate beneficial owner falls outside those conditions.
Further reading: OFAC and extraterritoriality, sanctions against Russia, governing law and jurisdiction clauses.
Written by Hervé Guyader, avocat at the Paris Bar, doctor of law. This content is general information and is no substitute for advice on your own matter.