USA Law and Practice Contributed by: Elena Rubinov, George Casey, Heiko Schiwek, Vinita Sithapathy, Pierre-Emmanuel Perais and Clara Pang, Linklaters LLP
ple, guidance will be needed to assist taxpayers in navigating complicated new foreign entity of concern (FEOC) rules, which deny tax credits to projects with certain direct, indirect or supply chain ties to “unfa-
tions in which foreign ownership is not limited but is subject to regulatory requirements. The US govern- ment also has four separate national security-based processes for regulating foreign investment. See 5.4 National Security Review/Export Control . 5.4 National Security Review/Export Control Inbound Foreign Investments Generally, four different US bodies are responsible for addressing national security concerns arising from inbound foreign investments: • CFIUS; • the Defense Counterintelligence and Security Agency (DCSA); • the Directorate of Defense Trade Controls (DDTC); and • the Committee for the Assessment of Foreign Par- ticipation in the United States Telecommunications Services Sector (“Team Telecom”). A single transaction can implicate more than one regime. CFIUS CFIUS is a panel that identifies and addresses national security risks arising from a variety of foreign invest- ments in US businesses and real estate. The CFIUS process includes a joint filing by the parties to a trans- action, followed by additional questions from CFIUS. CFIUS has jurisdiction over any acquisition of control of a US business and certain non-controlling invest- ments involving critical technologies, critical infra- structure or sensitive personal data (“TID Business- es”). Investments in TID Businesses can be subject to mandatory pre-closing CFIUS filings. If CFIUS has jurisdiction over a transaction, it may call in the transaction for review any time after closing. CFIUS offers a “safe harbour” against further review if it has cleared an acquisition of control or a non- controlling investment (though regarding the latter, incremental acquisitions that increase the investor’s rights can be subject to a new CFIUS case). DCSA One of the DCSA’s responsibilities is to mitigate for- eign ownership, control or influence (FOCI) of US busi-
vourable” jurisdictions, including China. Companies Involving Foreign Investors
For companies that involve a foreign investor, the Committee on Foreign Investment in the United States (CFIUS) is responsible for addressing any potential national security concerns; see 5.4 National Security Review/Export Control . 5.2 Primary Securities Market Regulators Federal securities laws are administered and enforced by the SEC. Alleged violations of state corporate law are addressed by state courts. State securities (“blue sky”) laws also apply depending on the state. If a US publicly traded entity is involved in the transaction, stock exchange rules may apply. Generally, the SEC’s rules and regulations and various federal laws, along- side applicable state corporate law, regulate the M&A space for a publicly traded entity. Additional regulators may include the Commodity Futures Trading Commis- sion (CFTC), which regulates the derivatives market in the United States, and FERC, which regulates whole- sale electricity markets and interstate transmission of electricity, natural gas and oil. As mentioned above, the state law of the target com- pany’s jurisdiction also governs certain acquisition aspects. State law may impose substantive require- ments of fairness on the transaction and may enable the target company to adopt anti-takeover defences, including implementing shareholder rights plans (also known as “poison pills”). US federal antitrust laws are enforced by the Antitrust Division of the Department of Justice (DOJ) and by the Federal Trade Commission (FTC). 5.3 Restrictions on Foreign Investments There are several sectors (eg, airlines and broad- cast communications) in which the US government restricts foreign ownership or attaches special regu- latory requirements for foreign owners. Waivers or licences allowing foreign owners to exceed standard limits are sometimes available. There are also situa-
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