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How Foreign Funds and LPs Can Avoid Filing Mandatory Declarations With CFIUS for Investments in US Critical Technology Businesses

on Monday, 05 July 2021.

Fund managers have long had to address the risk of acquiring US businesses in certain sectors subject to review by the Committee on Foreign Investment in the US (CFIUS).

The risks associated therewith increased, however, when then-President Trump signed the Foreign Investment Risk Review Modernization Act of 2018 into law in August 2018. Notably, the new legislation introduced requirements for mandatory filings to be made 30 days pre-completion by non‑US – 'foreign' from the US perspective – private funds that invest in certain critical US sectors and sometimes by their foreign LPs​​​.​

The new filing requirements are significant because the time consumed by preparing and submitting a detailed filing to CFIUS is contrary to the rapid deal execution demanded by private funds. Given a choice, US vendors and investees will favour dealing with funds and LPs that do not need to make pre-completion filings with CFIUS. Therefore, foreign LPs have an interest in understanding when they may need to make a mandatory filing and whether their funds are exempted from that requirement.

This article describes the types of US businesses that give rise to mandatory filings with CFIUS; examines the rights to information and governance that can subject a foreign private fund or a foreign LP to the filing requirement; and explains how foreign LPs can avoid US‑oriented funds that will suffer delayed deal execution from a mandatory CFIUS filing due to how they are structured or who is controlling them.

How Foreign Funds and LPs Can Avoid Filing Mandatory Declarations With CFIUS for Investments in U.S. Critical Technology Businesses | Private Equity Law Report (pelawreport.com). Read the full article by signing up to a free trial on Private Equity Law Report.

For more information or specialist legal support, please contact Thomas Dick on 07968 559217, or please complete the form below.

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