New Rules on Foreign Investments in U.S. Go into Effect
Barlas, Stephen, Strategic Finance
The congressional struggle to fix the federal oversight process for clearing sales of U.S. companies to foreign buyers came to an end this summer with the passage of a CFIUS reform bill. The new rules prescribed by the Foreign Investment and National Security Act of 2007 go into effect this month, and implementing language is due from the Treasury Department in April 2008. CFIUS is the Committee on Foreign Investment in the United States. Established two decades ago under what is known as the Exxon-Florio law, it is composed of representatives of various federal departments and is responsible for reviewing the sales of U.S. companies that may have national security value, in either a military or economic sense, to a foreign buyer.
The new law makes some changes to the composition of CFIUS, but changes to existing law are subtle and modest. CFIUS is now required to report to Congress on each transaction as it is considered. This is intended to ensure that no one gets caught by surprise as was the case with the attempt by Dubai Ports to acquire the American-owned P&O Ports, which exposed the shortcomings of the process in the eyes of Congress. The one major new addition to current law allows CFIUS to cancel a foreign purchase of a U.S. firm if some component of the company "materially breaches" a national security agreement after the deal is done--no matter how long after the fact. In terms of the implementing language due next April, one of the big issues will be which industries are subject to CFIUS review. Treasury is going to have to issue a final list that will undoubtedly get a thorough vetting by business groups.
No room for compromise on shareholder access.
The Securities & Exchange Commission (SEC) is expected to make a decision this month in regard to the two very conflicting shareholder access proposals it made in late July. …