As of today, October 12, 2023, corporations and law firms operating in the European Union (EU) need be cognizant of a new set of mandatory notifications that fall under the EU’s Foreign Subsidies Regulation (FSR). These requirements are in effect for all mergers and acquisitions (M&A) deals involving businesses that have been granted certain levels of non-EU governmental financial assistance and that meet certain defined financial thresholds. Now, these transactions are required to be notified, assessed and cleared before they can be finalized. The changes have substantial implications for the business landscape, adapting the ways corporations and large-scale businesses operate, particularly those involved in high-value M&A activities in the EU.
Under these new regulations, companies and legal entities will need to take a proactive approach, ensuring prompt and accurate reporting of foreign subsidies. The objective is to provide a level-playing field by avoiding distortion of the Single Market due to foreign subsidies. Here are some key elements of the new mandatory notification obligations that businesses should be prepared for:
- Compulsory notification for certain large-scale acquisitions: Any acquisitions that either have a financial turnover within the EU of at least €500 million, or have received financial contributions of more than €50 million from non-EU governments over the past three years, must now be mandatorily reported.
- Post-notification evaluation: Once notified, the Commission will evaluate the business transaction and the associated foreign subsidy. If it threatens to distort the competition, the Commission may impose suitable remedial measures.
- Standstill obligation: Companies should be aware of a standstill obligation during the notification and evaluation period. This means that all business transactions involved are on hold temporarily until clearance from the Commission is granted.
The mandatory notification obligations under the FSR represent a significant change for many corporations and law entities operating within, and in association with, the European Union. Here you can learn more about the details of the mandatory notifications and the potential consequences of non-compliance.
With the new regulatory terrain, companies and legal entities should be actively revising their compliance policies and seeking expert advice to mitigate potential risks. As they navigate through the changes, the key is to establish a streamlined process for notification, assessment and clearance, thus ensuring seamless business operations in the EU market under the new FSR.