• Are You a Non-U.S. Party? Do You Want to Merge with or Acquire a U.S. Business?
  • June 22, 2009 | Author: William A. Newman
  • Law Firm: Sullivan & Worcester LLP - New York Office
  • A Primer for the Non-U.S. Party on the Required Information for the CFIUS Filing

    Mergers, acquisitions and other takeovers of U.S. businesses by non-U.S. parties may require that the parties file a notice with the Committee on Foreign Investment in the United States, or CFIUS. Though much of the information required in the filing by the foreign party and its parent entities is quite detailed and technical, it can be organized into eight general areas.

    1.  Are You a Foreign Government? The foreign party must state whether a foreign government or a person controlled by or acting on behalf of a foreign government:

    • holds or controls any of the acquirer’s ownership interests;
    • holds the right to appoint any of its principal officers or any members of its board of directors;
    • holds any rights that relate to control; or
    • has any arrangements with other foreign persons that hold any interests in the acquiring foreign person.

    2.  Are You Planning On Materially Altering the U.S. Business? The notice must include any plans of the foreign party and its parents to materially alter the U.S. business in certain aspects, including any plans to:

    • reduce or sell research and development facilities;
    • change product quality;
    • shut down facilities or remove them from the U.S.;
    • consolidate or sell any product lines;
    • modify or terminate contracts involving classified information or contracts with certain governmental agencies; or
    • eliminate domestic supply.

    3.  Whose Deal Is This? CFIUS wants to know whether the actual party in interest is the named party to the transaction or a parent of the named party.

    4.  Who Are Your Directors, Officers and Substantial Shareholders?  Each acquiring foreign party must provide detailed information as to:

    • each member of its board of directors, including non-affiliated directors;
    • each executive officer; and
    • each individual owning more than five percent or more of the foreign party.

    5.  Who Is Your Parent? Each immediate, intermediate and ultimate parent (defined as an owner of fifty percent or more) is required to provide the same information as to its directors, officers and owners.

    6.  What Is Your Name, Rank and Serial Number? The information to be disclosed by individuals is name, address, date and place of birth and national identity number, plus a curriculum vitae or an equivalent. In an effort to determine national security ramifications, individuals must also provide the dates and nature of service with a foreign government and foreign military service. CFIUS permits this information (other than the curriculum vitae) to be contained in a separate appendix.

    7.  Don’t Forget the Attachments! The completed notice requires the foreign party to submit several attachments:

    • annual reports, in English (with a certified translation), of the acquiring foreign party, unless its results are consolidated with those of a parent;
    • annual reports, in English (also with a certified translation), of the intermediate and ultimate parents of the foreign party;
    • organizational charts that illustrate all of the entities above the foreign party, up to and including the ultimate control person, including ownership percentages;
    • the opinion of the filer as to whether it is a foreign party or is controlled by a foreign government and whether the transaction could result in foreign control of a U.S. business; and
    • any documents or agreements setting forth any arrangements among foreign parties that hold ownership interests in the foreign party to act in concert on matters affecting the U.S. business.

    8.  Have There Been Any Critical Changes? While the matter is pending before CFIUS, each filing party must promptly advise of any critical changes in the plans, facts and circumstances addressed in the notice and in the information that was provided. Each filing party must also file amendments to the notice describing those material changes. This requirement presents a significant challenge for a foreign party to “freeze” the affairs of its corporate parents and to be aware of (a) all material changes in ownership, (b) certain changes in the management of businesses over which the filing persons may have no control and no knowledge and (c) any other proceedings before CFIUS in which any other member of the corporate family may be engaged. Therefore, best practices for the filing parties are to involve each of their ultimate parents fully in the preparation of the filing and its processing, to ensure that all relevant changes are properly communicated and advised to CFIUS.   

    Of course, the descriptions of these 8 items are summaries only. Reference should be made to the regulations for the complete and definitive requirements. The assistance of a competent legal advisor in responding to these requirements is recommended. 

    Later posts to this blog will address the information that a U.S. business who is a party to a covered transaction must provide in its notice filed with CFIUS, as well as other tips for filing. More complete information about the filing can be found in our white paper, “Complying with the Voluntary Review Process When Investing in or Acquiring a U.S. Business.”