Foreign law and ownership

What provisions and/or restrictions are there for foreign ownership? Belgium Van Bael & Bellis

Belgium’s open economy usually welcomes investors and is typically considered to be one of the most flexible countries for foreign investment in Europe. In principle, no general regulations or restrictions apply to foreign investments. However, in certain regulated industries (eg, banking and insurance, energy, broadcasting, telecoms and postal services), a notification to or the authorisation by the relevant regulator may be required. 

Bermuda BeesMont Group

Restrictions on foreign ownership of shares in Bermuda local (ie, domestic) companies apply. However, this does not affect Bermuda exempted companies which may be owned by non-Bermudians.

In local companies, 60% of the total voting rights must be exercisable by Bermudians (60/40 rule). In addition, restrictions govern the ownership of land by businesses (local or exempted).

A Bermuda local company must obtain a licence under Section 114B of the Companies Act to be owned and operated in a manner that is not compliant with the 60/40 rule. Therefore, a foreign entity will need a special licence if it wants to take control of a local limited liability company and carry on business in Bermuda. An application must be made to the Registrar of Companies, which will assess the application (before submitting it to the minister responsible for approving the issue of the licence) according to various criteria, including:

  • the economic situation in Bermuda;
  • the nature and previous conduct of the company;
  • any advantage or disadvantage that may result from the company carrying on business in Bermuda; and
  • the desirability of Bermudians retaining control of the economic resources of Bermuda.

The Companies Act was recently amended with the aim of facilitating direct foreign investment in Bermuda. A Bermuda company may be eligible for an exemption to the 60/40 rule if its shares are listed on a designated stock exchange (including the Bermuda Stock Exchange) and it engages in business in a prescribed industry – for example:

  • telecommunications;
  • energy;
  • insurance;
  • hotel operations;
  • banking; and
  • international transportation services (by ship or aircraft).

There are no restrictions on foreign ownership of exempted companies. However, for exchange control purposes, the issue and transfer of any securities in these companies involving non-residents must generally be notified to or receive the prior approval of the Bermuda Monetary Authority (BMA). Certain acquisitions will also require a change of control application to be made to the BMA (eg, acquisitions of regulated or licensed entities). In those cases, the BMA will evaluate the proposed controllers and senior executives according to the applicable criteria.

Canada Gowling WLG

Certain industries in Canada are subject to Canadian ownership requirements. For example, under the Telecommunication Act and its regulations, a Canadian telecommunications carrier cannot have more than 20% of its voting shares beneficially owned and controlled by non-Canadians and any corporation holding more than 66% of a Canadian telecommunications carrier cannot have more than 33.3% of its voting shares beneficially owned and controlled by non-Canadians.

Another example is Canada's non-resident ownership policy in the uranium mining sector, which requires a minimum level of resident ownership in individual uranium mining properties of 51% at the stage of first commercial production. Resident ownership levels of less than 51% will be permitted on a project-by-project basis if it can be clearly established that the project is in fact Canadian controlled. Exemptions are also granted in cases where it can be demonstrated that Canadian partners cannot be found.

The Canadian Transportation Act also requires that air carriers operating or proposing to operate a domestic air service be Canadian, unless they obtain an exemption from the minister of transportation, infrastructure and communities.

China Baker McKenzie

The PRC Regulations for Guiding the Direction of Foreign Investment and the Catalogue for Guiding Foreign Investment in Industries serve as general indicators of current policy governing foreign investment in various industries. The catalogue is revised every few years to embody changes in Chinese foreign investment policy.

These documents provide certain policy incentives or disincentives depending on whether a project is deemed ‘encouraged’, ‘permitted’, ‘restricted’ or ‘prohibited’. An enterprise in the encouraged businesses category, for example, may qualify for local (and generally more lenient) approval processes. An enterprise conducting restricted activities, on the other hand, may be subject to additional scrutiny by higher approval authorities during the establishment process. A foreign investor cannot directly acquire a target that falls within the prohibited category. Foreign shareholdings are also limited in certain sectors and require foreign investors to establish a joint venture with a Chinese party, in some cases with the Chinese party holding a controlling share.

While Chinese government policies continue to restrict or prohibit foreign investment in many industries, there are now more encouraged industries and fewer restricted and prohibited industries than in the past. The Chinese government is also starting to remove many of the existing restrictions on foreign investment in the free trade zones that recently have been established in several cities. The liberalisation of these sectors will occur on a nationwide basis in due course.

Denmark Danders & More

No provisions or restrictions exist in relation to foreign ownership, although customary know-your-client regulations apply, which may affect the ability of banks and legal advisers to assist with the transaction.

Germany Skadden Arps Slate Meagher & Flom LLP

German law does not generally impose restrictions on foreign investments in German companies. On the contrary, the attitude towards foreign investments is liberal. However, certain sectors (eg, media, banking and insurance) are governed by industry-specific rules granting German authorities the right to prohibit certain acquisitions. For example, the acquisition of a significant stake in a German bank by a foreign investor may be prohibited if it will jeopardise the effective supervision of the bank or if the acquirer is not regarded as trustworthy. The German authorities may also prohibit acquisitions by foreign investors of German business enterprises or shares in companies that produce defence industry products or encryption technology. In addition, acquisitions jeopardising the security or order of Germany may be prohibited.

Greece Karatzas & Partners Law Firm

In principle, there are no provisions or restrictions on foreign ownership in Greece. Cross-border mergers between limited liability companies governed by EU law are regulated by EU Directive 2005/56/EC, which has been transposed into Greek law by virtue of Law 3777/2009.

In view of the absence of relevant special provisions, mergers between a Greek legal entity and an entity governed by the law of a non-EU member state will also be accepted, with the application by analogy of Article 49a of Codified Law 2190/1920 on minority shareholders’ rights. However, Article 25(1) of Law 1892/1990 prohibits:

  • any transaction inter vivos (ie, between the living) by which an individual or legal entity of a nationality or registered seat outside the European Union or the European Free Trade Association is granted an in rem or in personam right on real estate in border areas; and
  • any transfer of shares or corporate units or any change of the shareholders or partners of any type of company which owns real estate in such areas.

Finally, certain sectors may have restrictions on foreign ownership (eg, the provisions governing the gas market recently applied to the privatisation of the Hellenic Gas Transmission System Operator SA as the Greek independent gas transmission operator). Guernsey Carey Olsen

No provisions or restrictions apply.

Hong Kong Baker McKenzie

Approval of (or limit on) foreign ownership of Hong Kong companies is industry based, and applies only to a handful of specific industries, such as the broadcasting sector.

India Trilegal

The exchange control regulations primarily govern foreign ownership of assets in India. These regulations list certain sectors:

  • where prior approval of the government is required before an investment can be made by a non-resident (eg, investments in the defence sector);
  • with restrictions on the investment limits that a non-resident can make (eg, foreign direct investment in infrastructure companies is permitted only up to 26% without having to obtain the government’s prior approval);
  • which have conditions that must be fulfilled before making foreign investment (eg, investment in a non-banking financial company is subject to certain minimal capitalisation norms); and
  • in which foreign investment is completely prohibited.

Italy Nctm Studio Legale

Foreign investments are not subject to specific restrictions under Italian law. However, legislation was recently enacted to guarantee that foreign investments in certain industries will not cause any prejudice to the integrity of public interests. For example, pursuant to Decree 21/2012 (as amended and ratified by Act 56/2012), foreign investments in certain strategic sectors (eg, defence and national security, energy, transportation and communication sectors) are subject to a national security review by the government.

In order to allow the government to exercise its powers, investments by non-EU investors in the sectors mentioned above must be notified to the government within 10 days of the purchase of the interest, along with a description of the transaction, its purpose and specific information about the purchaser and its business.

In regards to relationships with non-EU investors, where restrictions apply to Italian investments, the Italian authorities may apply, under foreign affairs reciprocity rules, the same restrictions exercised over the Italian investments in those jurisdictions.

Jersey Carey Olsen

Generally, no restrictions apply to foreign ownership of shares in Jersey companies.

Malaysia Tay & Partners

Generally, no restrictions apply to the acquisition of shares by foreign buyers, except that there may be a limit on foreign ownership of shares in certain industries (eg, financial services, oil and gas and telecoms).

There are generally no restrictions for foreign ownership for assets.

Peru Rodrigo Elías & Medrano Abogados

In general terms, Peruvian law does not restrict or limit foreigners (whether natural or legal persons) from undertaking any business activity or owning property in Peru, except for the limitations on shareholding ownership in certain regulated sectors (eg, aviation) and the ownership of lands located within 50 kilometres of the border zone. The latter is established by the Constitution for national security reasons, but this is not an absolute prohibition. Exceptions can be granted by the government due to public necessity and subject to the issuance of a supreme decree.

Switzerland FRORIEP

According to the Federal Law of real estate in Switzerland by non-residents (Lex Koller), foreigners are barred from the acquisition of residential real estate, irrespective of whether they purchase the property in question directly or via a controlling stake in an entity owning the property. There are few exceptions to this rule, which is applied strictly by the authorities.

Turkey Moro─člu Arseven

In general, direct foreign investment is unrestricted so that foreign investors and their investments are treated the same as their local counterparts (Article 3(a) of the Direct Foreign Investment Code). However, some restrictions apply to foreign investments in order to prevent foreign capital majorities in strategic sectors, including the following:

  • A foreign shareholding of media service providers cannot exceed 50% of the registered capital. Further, foreign persons cannot be shareholders of more than two media service providers, nor can they be granted privileged shares (Article 19(f) of the Establishment of Radio and Television and Broadcasting Services Code).
  • Majority shareholders of civil commercial aviation operators with authority to carry passengers and cargo on scheduled or unscheduled flights must be Turkish (Article 9 of the Regulation on Commercial Air Transportation).
  • Restrictions apply if the nature of the transaction includes the transfer of real estate. Foreign real persons or persons having foreign capital can acquire real estate or limited real rights (rights in rem) subject to certain restrictions (Article 35 of the Land Registry Law).
  • Further requirements apply to purchasing real estate in military forbidden zones, military security zones or strategic zones (the Land Registry Law).

Turkish legal entities with foreign shareholders of more than 50% or which are otherwise controlled by foreign shareholders can acquire real estate or limited real rights (rights in rem) in Turkey subject to the following restrictions:

The real estate acquisition must be in line with the Turkish company’s purpose and scope (outlined in its articles of association). If the land is in a military or private security zone, permission for the military zones and private security zones must be obtained separately from the relevant authorities (Article 36 of the Land Registry Law).

Further, a notification process applies for legal entities with foreign shareholders when acquiring a real property in Turkey (the Regulation on the Application of Article 36 of the Land Registry Law). Accordingly, the Ministry of Economy must be informed within one month if a foreign entity becomes the controlling shareholder in a Turkish company (which owns real estate in Turkey) as a result of the share transfer.

USA Dechert LLP

Subject to certain industry-specific restrictions and state law exceptions (eg, certain restrictions sometimes seen with respect to foreign investments in agricultural real property) federal and state law generally do not restrict foreign ownership of, or investment in, US companies. However, such acquisitions may be subject to review by the Committee on Foreign Investment in the United States (CFIUS). If CFIUS determines that a transaction raises national security concerns, it can impose a range of mitigation measures on the parties (which may include requiring the certain information regarding sensitive US government activities to be shielded from the non-US investor, or even unwinding the transaction if concerns cannot be addresses through other measures).

In addition, the Commerce Department’s Bureau of Economic Affairs may require US companies to submit a report (the Survey of New Foreign Direct Investment in the United States (Form BE-13)) if a foreign person acquires 10% or more of the voting securities of the US company.

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