Alert
Alert
07.09.18
Hundreds of American companies may have inadvertently become “foreign persons” for CFIUS purposes, at risk of being caught up in the Trump Administration’s restrictions on foreign investment.
Many people know that the Committee on Foreign Investment in the United States (CFIUS) has broad jurisdiction to review for national security concerns any complete acquisition of a U.S. business by a “foreign person.” Some people also know that CFIUS’s jurisdiction includes investments where a foreign person obtains “control” of the U.S. business. The term “control” is defined more broadly than one might expect for CFIUS purposes, and the only clear “safe harbor” is for investments of less than 10 percent voting power and solely for the purpose of a passive investment.
It is less well known that by accepting foreign investments, an American company can itself become a “foreign person” for purposes of CFIUS. That means that future investments or acquisitions by the American company of U.S. businesses will be subject to CFIUS review, just as if the American company were a Chinese, or German or Canadian firm.
Read More: CFIUS: Inadvertent “Foreign Person” Status