The partial federal government shutdown, now in its 27th day, has halted a range of government operations. Significantly for investors, this includes the operations of the Committee on Foreign Investment in the United States (CFIUS)—with important implications for ongoing and potential transactions involving foreign investors.
As specified in the Foreign Investment Risk Review Modernization Act (the CFIUS reform bill passed into law in 2018), CFIUS’s deadlines and time limitations are tolled during a lapse in appropriations. As a result, the time limits on CFIUS to complete its review or, if needed following that, an investigation (up to 45 days for either phase) of transactions is put on hold until the government shutdown ends and new funding for the government is signed into law.
The pause in CFIUS’s pending consideration of transactions is significant enough, but the implications are even more significant for potential transactions that could undergo the CFIUS process in the future. While the government is shut down, CFIUS is not accepting new filings for review. Thus, in transactions in which successful completion of the CFIUS process is a condition precedent to closing, parties should be aware that such a condition simply cannot be fulfilled while the government remains shut down.
Investors should also be aware that the effects of the shutdown on the CFIUS process will be felt well after the government reopens. As a result of the backlog of CFIUS filings that is likely to build up during the shutdown period, significant delays in the CFIUS process are expected in the weeks following the reopening of the government. Among other delays, this could substantially extend the time CFIUS takes to respond to draft pre-filings or to accept filings as complete and begin the official review process.
Participants in transactions involving foreign investors should closely monitor developments regarding the government shutdown and, when considering new transactions, should take into account the effects of the shutdown on the CFIUS process—as the ramifications may be more significant than previously anticipated.