TerraLex Guide to Foreign Direct Investment - NEW

Foreign Direct Investment (“FDI”) in France is regulated at both a national and European Union (EU) level. Main domestic rules governing FDI screening: Articles L.151-3 et seq. and R. 151-1 et seq. of the French Monetary and Financial Code. These rules were introduced on the basis of EU Regulation 2019/452, which established an EU framework for FDI screening (the “EU FDI Framework”). An Order dated 31 December 2019 (last amended on 28 December 2023) further details the scope of some of the activities subject to French FDI screening and filing requirements.

The French Treasury Department published revised guidelines on FDI screening in France in 2025 (only available in French). If a transaction / investment is caught by the French FDI regime, filing is mandatory and filing has a suspensory effect.

The authority in charge of FDI screening is the Ministry of Economy, through the French Treasury Department. An Interministerial Committee on Foreign Investment in France supports the screening depending on the sector.

Both the non-French investor and the target may voluntarily request an opinion from the Ministry of Economy before initiating an investment in order to confirm whether prior authorization is required (request for prior review). The Minister of the Economy shall deliver his opinion within 2 months. However, silence on the part of the Minister by this deadline does not constitute a waiver of the authorization request.

Informal pre-filing contacts are possible via email ([email protected]), in case of a complex transaction or in case of doubt about the sensitive nature of an activity. This step is, however, not a prerequisite for filing an application for authorization, a request for prior review, or prior notification of a threshold crossing.

Filing is required if three cumulative conditions are met:

1. The transaction qualifies as an “investment” (acquisition of control, acquisition of a business, crossing of voting thresholds).
2. The investor qualifies as “foreign”.
3. The target operates, even partially, in a “sensitive” sector. Note: There are no financial thresholds: both the size of the parties and the size of the transaction are irrelevant.

Condition #1 – Nature of investment An investment qualifies, irrespective of the size of the parties or of the transaction, if it involves:

• Acquisition of control of a French company (presumed at >40% voting rights),
• Acquisition of all or part of a business line (branch of activity) of a French company,
• For non-EU investors (or EU investors controlled by non-EU entities):
  • Crossing the 25 % voting rights threshold in a French company,
  • Crossing the 10 % voting rights threshold in a listed French company.

Condition #2 – Relevant investors A foreign investor is:

• Any non-French national (individual not tax domiciled in France),
• Any non-French legal entity,
• Any French entity ultimately controlled by the above,
• The test applies to the entire chain of control, so if one entity in the chain is foreign, the investment is foreign. It is sufficient that only one member of the chain of control (ie. any entity up to the ultimate parent company) is a non-French investor for the investment to be foreign.

Condition #3 – Sensitive activities The French FDI control regime applies if the target engages in “sensitive activities” in relation to:

• Defense and national security,
• Critical infrastructure/goods/services (energy and water supply, transport, public health, and food safety),
• R&D in critical or dual-use technologies (as listed by decree).

Exempted transactions FDI screening is not required if the ultimate investor in the chain of control already has control of the entity that is the subject of the investment, unless the purpose of the investment is to transfer a branch of activity outside of France or to circumvent compliance with the conditions set out in a previous FDI authorization.

FDI screening assesses whether an investment threatens public order, public security, or national interests. The Minister of Economy may block or impose conditions if risks cannot be mitigated.

Links to foreign governments or prior criminal/fiscal offenses are relevant factors, as well as previous non-compliance with the French FDI regime.

Filing is required before closing. Filing has a suspensory effect (ie. the investment cannot be completed during the screening phase).

Investments must be at a sufficiently advanced stage before authorization can be requested through a filing.

Derogatory regime for investments crossing the 10% voting rights threshold Non-EU investors (or EU investors who controlled by non-EU entities) crossing the 10% voting rights threshold in a listed company are exempt from the authorization requirement, provided the intended investment project is notified in advance and unless the Ministry for Economy objects.

No.

Applications must contain detailed information about investor (incl. any significant capital links or financial support from a non-European country), target (incl. designation of a contact person), and transaction.

A standard form setting out the information requested is available on the French treasury’s website. Applications must be in French (except some annexed documents and the EU notification form required under the EU FDI Framework, which may be in English).

Applications must be submitted electronically on plateforme-ief.dgtresor.gouv.fr. However, prior notifications of crossing the 10% voting rights threshold in a listed company (s. infra) must be submitted at [email protected].

The investor is responsible for filing the authorization request. Any entity involved in the chain of control of an “investor” can file the application.

A prior request for review to confirm the necessity for filing may be submitted both by the investor or the target.

Unauthorized investments are null and void.

The investor may be ordered to restore the previous situation, to modify the investment, or to refile. The Minister of Economy may also take precautionary measures (e.g., suspension of voting rights or dividends, appointment of a State representative) if the protection of national interests appears compromised.

Financial penalties incurred can reach up to twice the investment value, 10% of target’s turnover, €5m (companies) or €1m (individuals). Criminal sanctions are possible (incl. up to 5 years imprisonment and ban on conducting business in France).

Filing has a suspensory effect. Hence, the investor may not complete the investment pending approval.

Any investment made prior to approval constitutes an unauthorized investment and may trigger similar financial and/or criminal penalties and/or precautionary measures as for failing to make a filing.

Only investments meeting the requirement for mandatory filing may be reviewed under FDI screening. Note, however, that there are no financial thresholds and that the transaction size is irrelevant.

At the end of a Phase 1 review (simple review), the Minister of Economy may:

• decide that the investment is not eligible for FDI screening,
• approve the investment without conditions,
• decide to open a in-depth review phase - in sensitive or complex cases - to determine whether the preservation of national interests can be
  guaranteed by attaching conditions to the authorization (Phase 2).

At the end of a Phase 2 review (deeper review), the Minister of Economy may:

• approve the investment without conditions,
• approve the investment, subject to binding conditions, or
• prohibit the parties from completing the investment.

Silence on the part of the Minister within the prescribed timeline shall be deemed as a rejection of the request for approval.

Conditional approval is possible to ensure that the proposed investment will not harm the national interests.

Conditions may consist in: a transfer of sensitive activities, governance changes, restrictions on data access.

Their duration may vary from a few years to the entire period of control over the target by a non-French investor. Conditions may be revised at investor or Minister of Economy’s request.

After formal notice has been given to the investor, non-compliance may trigger a withdrawal of approval, injunctions to comply or to restore the previous situation or to transfer all or part of the sensitive activities, precautionary measures for the protection of national interests and daily penalty payments (up to EUR 50,000 per day).

Financial penalties incurred can reach up to twice the investment value, 10% of target’s turnover, €5m (companies) or €1m (individuals). Criminal sanctions possible (incl. up to 5 years imprisonment and ban on conducting business in France).

Decisions and injunctions can be appealed:

• Informal appeal (‘recours gracieux’) to the Minister of Economy within 2 months. Silence constitutes rejection of the appeal.
• Judicial appeal before an administrative court within 2 months of the initial decision (or of the express or implicit rejection of the informal
  appeal).

The Minister of Economy has a maximum of 75 business days from a complete filing to reach a decision.

• Phase 1: 30 business days (with possible suspension if filing is incomplete)
• Phase 2 (if applicable): 45 days from the date the investor receives the decision to continue the in-depth review. The guidelines specify that deadlines may be suspended during Phase 1 if the application is incomplete. The suspension period runs from the date the authority requests additional documents or information to the date the required materials are submitted.

In phase 2, requests for additional information or clarification do not suspend the deadlines. However, as far as possible, specific constraints (e.g., insolvency proceedings, cash flow shortages, etc.) will be taken into account if they are duly justified.

The completion of an authorized investment transaction must be reported by the investor to the Treasury Department within 2 months of the transaction being carried out.

Investors must provide all necessary documents (no right to invoke secrecy).

If necessary, the Treasury Department may request information from the target target that is not shared with the investor for confidentiality reasons.

FDI screening is confidential toward the general public. However, France must inform the EU Commission and other EU Member States via the EU notification form to be completed by the investor as part of filing.

The information published annually by the Minister of Economy concerning the main statistical data relating to FDI screening guarantees the protection of national defense secrets and the anonymity of the individuals and legal entities concerned.

Other regimes to be aware of when considering an investment in France:

• EU Foreign Subsidies Regulation 2022/2560 of 14 December 2022 (known as FSR): Mandatory prior approval from EU Commission on acquisitions subsidized by a non-EU country in a way that would distort competition on the EU market, where the target generates an EU turnover €500 million, and the Acquirer (or group to which it belongs) has received total cumulative "foreign subsidies" from a non-EU country in excess of €50 million over the previous 3 years. Foreign subsidies may involve loans, guarantees, direct subsidies, tax breaks, public procurement, etc. Concerned transactions must be approved before they can be completed (standstill obligation).

• Merger control above certain turnover thresholds (see. [TerraLex Pre-Merger Notification Guide](https://www.terralex.org/insights-cross- border-guides/pre-merger-notification-guide))

• Reporting of non-French direct investments to or from France must be reported to the Banque de France for the establishment of France's balance of payments and international investment position.

• Mandatory disclosure of “cross-border tax arrangements” (EU Directive 2018/822, known as DAC6).