International Newsletter : Corporate, M&A and Private Equity
Karine Khau-Castelle
Decree of July 30, 2026 clarifies foreign investment screening for third-country listed targets
France’s foreign direct investment (“FDI”) screening regime has reached a new milestone with the publication of Decree No. 2026-718 of July 30, 2026, which came into force on August 17, 2026. To fully appreciate the scope of this latest reform, it helps to retrace the evolution of the regime as it applies to listed companies, a regime that has undergone near-constant change since 2020.
Under Article R. 151-2 of the French Monetary and Financial Code, a non-European investor seeking to acquire a stake in a French company listed on a regulated market and operating in a sensitive sector has historically been required to obtain prior authorisation from the Minister for the Economy before crossing the 25% voting-rights threshold.
In the wake of the COVID-19 crisis, Decree No. 2020-892 of July 22, 2020, temporarily lowered that trigger to 10%, in order to guard against opportunistic stake-building in companies whose market valuations had sharply declined. Initially set to expire on December 31, 2020, the measure was renewed year after year, before being made permanent by Decree No. 2023-1293 of December 28, 2023, effective January 1, 2024. The same decree extended the scope of FDI review to the acquisition of French branches of foreign entities and to certain critical raw-material extraction and processing activities.
Although the 10% threshold was now a permanent feature, a practical difficulty persisted: the Code’s reference to a “regulated market”, a concept defined in Article L. 421-1 with EU markets primarily in mind, left room for doubt as to whether companies listed exclusively on non-EU exchanges fell within its scope. The Decree of July 30, 2026, resolves this ambiguity. It amends Article R. 151-2 to incorporate the definition of a regulated, and delegates to the Minister for the Economy the power to draw up a list of recognised third-country markets. The accompanying Arrêté of July 30, 2026, establishes that list, which comprises the London Stock Exchange, SIX Swiss Exchange, Toronto Stock Exchange, Singapore Exchange, Japan Exchange and Korea Exchange. Crucially, this clarification does not alter any other parameter of the regime: the investor’s nationality and the sensitive nature of the target’s activity remain independent conditions that must also be satisfied.
The practical implications for cross-border M&A are immediate. Deal teams can now determine with greater certainty, from the outset of a transaction, whether a proposed acquisition of shares in a French company listed on one of these markets will require FDI notification once the 10% threshold is crossed. This enhanced predictability streamlines the drafting of FDI-related conditions precedent and allows for a more accurate calibration of the closing timetable — FDI clearance being, alongside merger-control approval, a mandatory step before completion of any significant stake in a sensitive company.
A brief reminder of the sanctions regime is warranted. Completing an investment that required prior authorisation without having obtained it exposes the parties to three categories of sanction. First, under Article L. 151-4 of the French Monetary and Financial Code, any agreement, undertaking or contractual clause giving direct or indirect effect to the investment is struck with absolute nullity. Second, under Article L. 165-1 of the French Code, the offence carries a criminal penalty of up to five years’ imprisonment, confiscation, and a fine of up to twice the value of the irregular investment (with the maximum fine quintupled for legal entities). Third, Article L. 151-3-2 empowers the Minister to impose an administrative pecuniary sanction capped at the highest of the following amounts: twice the value of the irregular investment, 10% of the target company’s annual turnover, or €5 million for legal entities and €1 million for natural persons. It is precisely the risk of triggering these sanctions through a misqualification of the target’s listing market that the reform of July 30, 2026, is designed to mitigate.
Karine Khau-Castelle, Partner, Corporate Law – Mergers & Acquisitions