USA LAW AND PRACTICE Contributed by: George Casey, Heiko Schiwek, Elena Rubinov, Vinita Sithapathy, Kristina Trauger, Pierre-Emmanuel Perais, Clara Pang and Gregory Gewirtz, Linklaters
7.2 Primary Securities Market Regulators Federal securities laws and regulations for public com- panies focus on the adequacy of disclosures relating to a given proposed transaction, and, if applicable, the tender offer process or proxy solicitations. Fed- eral securities laws are administered and enforced by the SEC; alleged violations of state corporate law are typically challenged by private plaintiffs in state courts (private plaintiffs also often challenge violations of fed- eral securities laws in federal courts). State securities (ie, “blue sky”) laws may apply, depending on the rel- evant state. If a US publicly traded entity is involved in the transaction, stock exchange rules may also apply. The state law of the target company’s jurisdiction of incorporation will govern many aspects of an acquisi- tion. State law may impose substantive requirements of fairness on the transaction and may provide the target company with anti-takeover defences, such as the ability to implement shareholder rights plans (eg, “poison pills”). Federal antitrust laws are enforced by the Antitrust Division of the Department of Justice (DOJ) and by the Federal Trade Commission (FTC). 7.3 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 situ- ations in which foreign ownership is not limited but is subject to regulatory requirements (eg, obtaining authorisation from the Federal Energy Regulatory Commission for certain investments of at least USD10 million in the electric energy sector). The US govern- ment also has four separate national security-based processes for regulating foreign investment. See 7.4 National Security Review/Export Control . 7.4 National Security Review/Export Control Four US bodies are responsible for addressing nation- al security concerns from inbound foreign investments in technology businesses:
• the Committee on Foreign Investment in the United States (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 involve more than one regime. CFIUS CFIUS is a multi-agency panel charged with identi- fying and addressing national security risks arising from foreign investments in US businesses and cer- tain transactions involving US real estate. The CFIUS process normally involves a joint filing by the parties to a transaction, followed by additional questions from CFIUS. CFIUS has jurisdiction over any acquisition of control of a US business (often including US activi- ties of a non-US parent) and certain non-controlling investments in companies involved with critical tech- nologies, critical infrastructure or sensitive personal data (“TID Businesses”). Investments in TID Busi- nesses can sometimes be subject to mandatory pre- closing CFIUS filings. If CFIUS has jurisdiction over a transaction, it can call in the transaction for review at any time after closing. However, CFIUS offers a “safe harbour” against fur- ther review if it has cleared an acquisition of control or a non-controlling investment (though, in the latter case, incremental acquisitions that increase the inves- tor’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- nesses that hold facility security clearances and (since 2024) certain other uncleared defence contractors and subcontractors. The DCSA does not approve transac- tions, but failure to receive FOCI mitigation could lead to the DCSA terminating a contractor’s facility clear- ance or covered contract. FOCI mitigation is based on the sensitivity of the contractor’s activities and the nature of the foreign ownership, and comes in various forms that combine varying degrees of governance
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