Foreign Investment Regulatory Counsel: New York Compliance Guide

The Committee on Foreign Investment in the United States (CFIUS), chaired by the U.S. Department of the Treasury, reviews certain foreign investments for potential national security concerns. The Bureau of Economic Analysis (BEA) separately administers mandatory statistical surveys covering certain foreign direct investments in U.S. .usinesses. Depending on the transaction and industry, additional review may involve agencies such as the Federal Communications Commission (FCC), the Federal Trade Commission (FTC), or the Department of Justice (DOJ).

Foreign investors may face different filing obligations depending on the transaction and the U.S. .usiness involved. Certain CFIUS transactions are subject to mandatory declarations, while other covered transactions may be reviewed through voluntary declarations or formal notices. Large mergers and acquisitions may also require Hart-Scott-Rodino (HSR) premerger notification when the statutory tests and thresholds are satisfied. BEA reporting may apply to certain foreign acquisitions or establishments of U.S. .usinesses. Retaining experienced Foreign Investment Law attorneys can help identify which requirements apply before a transaction closes.

CFIUS generally has jurisdiction over covered control transactions in which a foreign person acquires control of a U.S. .usiness. FIRRMA also expanded CFIUS jurisdiction to certain non-controlling investments in TID U.S. .usinesses when the foreign investor receives specified rights, such as certain board or observer rights or access to material nonpublic technical information.

Some transactions are subject to mandatory declaration requirements under the CFIUS regulations. These requirements can apply to specified transactions involving critical technologies and certain transactions in which a foreign government acquires a substantial interest in a TID U.S. .usiness. The mandatory rules contain detailed conditions and exceptions, so the presence of a foreign investor alone does not automatically make a CFIUS filing mandatory.

Parties may use a short-form declaration where permitted or submit a formal notice. A declaration generally receives a 30-day assessment period. A formal notice generally receives a 45-day review, followed in appropriate cases by a 45-day investigation. Certain matters may also be referred to the President for a decision under the applicable statutory framework.

Parties may also address identified national security concerns through mitigation measures, including agreements with appropriate government agencies. Transaction documents should account for these potential requirements when regulatory approval is material to closing.

Section 310 of the Communications Act establishes restrictions on foreign ownership of certain FCC licensees. Direct foreign ownership above specified statutory limits and certain indirect foreign ownership can require FCC review or approval. The applicable rules depend on the type of license and the ownership structure.

Defense-related investments can also create foreign ownership, control, or influence (FOCI) concerns when a U.S. .ompany performs classified work. Depending on the circumstances, mitigation arrangements may be required under the National Industrial Security Program. Energy transactions may involve additional federal or state regulatory review, including requirements applicable to regulated utilities or nuclear facilities.

CFIUS has authority over certain foreign real estate transactions involving specified locations and functions, including property within the regulatory scope of the CFIUS real estate rules. A transaction does not necessarily need to involve the acquisition of an operating U.S. .usiness for CFIUS real estate jurisdiction to become relevant.

Foreign financial institutions establishing or acquiring U.S. .anking operations may also require federal and state regulatory approvals. Transactions involving New York-regulated financial institutions can require review by the New York State Department of Financial Services in addition to applicable federal authorities.

Foreign investors may use New York corporations, limited liability companies (LLCs), limited partnerships, or other U.S. .ntities to hold or operate investments. The appropriate structure depends on factors such as governance, liability protection, financing, tax treatment, and the investor's intended level of control.

Corporate groups managing complex ownership structures may consult specialized Business, Corporate, & Securities Law attorneys to prepare organizational documents, ownership arrangements, and transaction agreements that reflect applicable regulatory requirements.

Cross-border investments can involve U.S. .ederal income tax, New York tax obligations, withholding requirements, and applicable income tax treaties. The tax consequences depend on the investor's residence, entity classification, type of income, financing structure, and the nature of the investment.

Foreign investors disposing of U.S. .eal property interests must also consider the Foreign Investment in Real Property Tax Act (FIRPTA). In general, the transferee must withhold 15% of the amount realized when a foreign person disposes of a U.S. .eal property interest, subject to statutory exceptions and special rules.

BEA reporting may apply when a foreign person acquires at least a 10% voting interest in a U.S. .usiness and in certain circumstances involving the establishment or expansion of a U.S. .usiness. These statistical surveys are separate from CFIUS and should not be treated as a substitute for national security review.

Failure to comply with a mandatory CFIUS declaration requirement can result in civil penalties. The applicable penalty can be substantial and may be based on the transaction value under the governing rules. Parties should therefore determine whether a mandatory filing applies before closing rather than relying on post-closing review.

Acquirers should review the target's technology, export classifications, government contracts, data holdings, foreign ownership structure, and regulatory history before closing. Particular attention may be necessary where the target handles controlled technical information or defense-related technology.

Export Administration Regulations (EAR) and International Traffic in Arms Regulations (ITAR) may restrict the transfer of technology or technical data to foreign persons. Identifying these issues early can help transaction parties determine whether licenses, authorization, mitigation measures, or structural changes are necessary. Engaging knowledgeable CFIUS Compliance attorneys can help deal teams evaluate filing requirements and address national security concerns before closing.

Transactions involving New York targets may require simultaneous attention to CFIUS, antitrust, tax, industry-specific licensing, and New York corporate requirements. Different agencies operate under separate statutory authorities and timelines, making early coordination particularly useful when several approvals are required before closing.

Transaction agreements should allocate regulatory risks clearly. Depending on the deal, provisions may address CFIUS approval conditions, regulatory covenants, long-stop dates, termination rights, and reverse termination fees if required approvals are delayed or denied.

SJKP's attorneys assist multinational corporations, private equity investors, and domestic businesses with cross-border transaction structuring, regulatory review, corporate governance, and foreign investment compliance.

Transaction teams should evaluate regulatory issues during the term-sheet or preliminary negotiation stage. Reviewing the foreign investor's ownership structure, the target's business activities, technology classifications, government contracts, data holdings, and regulated licenses can help identify potential filing requirements.

Where CFIUS may apply, parties should determine whether the transaction is covered, whether a mandatory declaration requirement exists, and whether a voluntary filing would provide a useful path to regulatory certainty. HSR requirements should also be evaluated separately when the transaction satisfies the applicable statutory tests and thresholds.

Cross-border investment transactions often require coordination among federal agencies, New York regulators, foreign advisors, tax professionals, and transaction counsel. SJKP's attorneys assist international investors, domestic targets, and corporate leadership with regulatory reviews, transaction structuring, and cross-border compliance strategies involving New York.