M&A Deals and Foreign Trade Law – Deloitte Services Regarding Investment Control
As of 18 July 2017, the existing (notification) obligations under German foreign trade law for corporate acquisitions by foreign investors were aggravated. Deloitte provides practitioners who deal with foreign investors’ M&A transactions with an assessment guideline detecting and minimizing foreign trade law risks.
Previously, we reported in the Deloitte Tax News about the trend that foreign trade law is gaining more and more importance as regards corporate acquisitions, and that the notification requirements for foreign investors were aggravated as of 18 July 2017.
As a quick reminder: German foreign trade law foresees two types of investment control procedures. The cross-sectoral examination (sec. 55 ff. German Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung, hereinafter referred to as FTPO) which is applied irrespectively of the concerned line of business. And the sector-specific examination (sec. 60 ff. FTPO) which applies only if the target company is engaged in an especially sensitive line of business, e.g. weapons of war or other military goods.
Scope of Application of Investment Control
1. Assessment Guideline
The rules on investment control apply if the envisaged transaction fulfills the following general and special preconditions:
2. Deloitte Risk Radar
In order to provide potentially concerned parties with indications as to whether their envisaged transaction might trigger notification requirements according to German foreign trade law, Deloitte Legal developed the following risk matrix. The matrix provides information as to the gradual probability of whether the German authorities will consider the transaction a risk for the public order or security.
A Danger Foreseen Is Half Avoided
If one of the two possible investment control procedures is applicable according to German foreign trade law, we are happy to assist. Usually, the following steps would be to examine carefully: (1) Is a notification obligation given, to duly notify the transaction to the authorities, (2) should a certificate of non-objection be applied for, and (3) how to address the risk of prohibition of, or instructions for the transaction by the authorities within the M&A agreement.
Sec. 55 ff. German Foreign Trade and Payments Ordinance
Sec. 60 ff. German Foreign Trade and Payments Ordinance
9th Amendment to the German Foreign Trade and Payments Ordinance, BAnz AT 17.07.2017