In the context of the worldwide economic crisis caused by the COVID-19 pandemic, the EU authorities issued guidelines to reinforce the protection of strategic sectors and vulnerable companies from foreign investment. However, the measures taken by France are not as far reaching as in other EU countries, as the French authorities chose to extend the measures to biotechnologies and take precautionary temporary measures with respect to listed companies.
Following the introduction of EU Regulation 2019/452 and the Action Plan for Business Growth and Transformation law, a new decree and ministerial order were published and will enter into effect on 1 April 2020. This new set of regulations takes into account the complexity of the existing structures of investment in private M&A transactions and allows a better understanding of the context of a contemplated transaction by the French administration.
A recent Supreme Court decision validates the substitution mechanisms in the context of M&A transactions. The mechanism is particularly helpful in M&A transactions where a sponsor signs the initial agreements and, once a structure has been agreed, substitutes a special purpose vehicle to carry out the transaction. However, M&A practitioners should remain vigilant when drafting substitution clauses to ensure that they clearly state the parties' intentions as to the full release (or not) of the original party.
The Action Plan for Business Growth and Transformation was recently adopted. This ambitious law introduces (among other things) a new arsenal for the French state to monitor foreign investment in sensitive industries. It has also brought with it several answers, clarifications and improvements to existing rules applicable to the preferred shares and free share allocation plans regimes, which will undoubtedly be useful to investors and companies undertaking private M&A transactions.
The recently adopted Action Plan for Business Growth and Transformation contains new rules that will be of interest to parties that undertake private M&A transactions, particularly those involving foreign investment. Further, it clarifies the measures that the minister of economy can take should an investor pursue an investment without prior authorisation or fail to comply with the conditions set out by the minister in such prior authorisation.