U.S. Treasury Department Issues Final Regulations To Implement CFIUS Reform

On January 13, 2020, the U.S. Department of the Treasury ("Treasury") issued final regulations (the "Final Regulations") implementing certain provisions of the Foreign Investment Risk Review Modernization Act ("FIRRMA"). The Final Regulations supersede the proposed regulations implementing certain provisions of FIRRMA that Treasury issued on September 17, 2019 (the "Proposed Regulations"). While the Final Regulations generally hew closely to the Proposed Regulations, there are critical differences that may affect deal timing, certainty, feasibility and cost. Because the Final Regulations will take effect in just a few weeks — on February 13, 2020 — investors and companies must assess with urgency whether their near-term transactions may have potential new or different CFIUS considerations.

Investors and companies must assess with urgency whether their near-term transactions may have potential new or different CFIUS considerations.

The View from Washington

Passed in 2018 with broad bipartisan support, FIRRMA is the most significant reform of the Committee on Foreign Investment in the United States ("CFIUS") in its history. Except for a mechanism to adopt a filing fee, the Final Regulations fully implement all of the provisions of FIRRMA. The Final Regulations expand CFIUS' jurisdiction to cover two specific types of transactions that U.S. national security stakeholders had identified as posing potential national security risks: (i) non-controlling, non-passive investments in U.S. businesses involved in specified ways with critical technologies, critical infrastructure or sensitive personal data ("TID U.S. Businesses"); and (ii) certain transactions involving real estate located in proximity to certain identified sensitive U.S. government locations.

Join our client call, " Treasury Issues Final CFIUS Regulations: What's In, What's Out and What's Next," on Wednesday, January 22, at 11:00 a.m. EST. Mario Mancuso, P.C., Shawn Cooley and Luci Hague will lead an interactive discussion of the new regulations, their policy drivers, and their anticipated impacts on cross-border dealmaking.

Here are eight key things to know about the Final Regulations.

1. A new definition of "principal place of business" may provide some clarity to U.S. private equity sponsors that CFIUS will not have jurisdiction to review their investments solely based on the jurisdiction in which their investment vehicles are organized.

   Under an interim rule that accompanied the Final Regulations, which also becomes effective on February 13, 2020, an investment fund's "principal place of business" is defined as the primary...