New Law Establishes FDI Screening Regime
The Screening of Third Country Transactions Act 2023 has been signed into law and is currently expected to come into force in Q2 2024. Tara Kelly of Mason Hayes & Curran LLP explains how the new regulatory hurdle will impact M&A
How will the Act affect FDI in Ireland?
The Act will introduce Ireland’s first investment screening regime, enabling the Minister for Enterprise, Trade and Employment to review certain transactions involving the acquisition of assets or companies in Ireland for potential risks to security or public order. In practice, the Act creates an additional regulatory hurdle for many investors into Ireland because transactions meeting the relevant criteria will need to be notified to, and approved by, the Minister before completion.
When must a transaction be notified to the Minister?
Four criteria must be met for a transaction to be notifiable. These include:
A third country undertaking, or a connected person, as a result of the transaction acquires ‘control’ of an asset or an undertaking in the State, or changes the percentage of shares or voting rights it holds in an undertaking in the State from 25% or less to more than 25%, or from 50% or less to more than 50%. The cumulative value of the transaction, and each transaction between the parties to the transaction, is at least €2 million in the 12 months before the transaction.
The transaction is not an internal reorganisation, and
The transaction relates to, or impacts on, one or more of the matters referred to in the relevant section of the EU Screening Regulation.
What is a ‘third country’?
A ‘third country’ is any country other than a member of the EEA and Switzerland. For example, a company incorporated in or controlled by a resident of the UK or the US would be considered a ‘third country undertaking’ under the Act.
What sectors will be affected?
For a transaction to be notifiable, it must relate to or impact on one or more of the following matters: critical infrastructure, critical technologies and dual use items, supply of critical inputs, access to sensitive information, and freedom and pluralism of the media.
Who must make the notification to the Minister?
The obligation to notify is on all parties to the transaction unless a party is not aware of the transaction.
What are the risks of not notifying?
It is a criminal offence not to notify a notifiable transaction, and penalties include fines of up to €4 million and/ or up to five years imprisonment.
Can a transaction complete once it has been notified?
No. If a transaction meets the criteria for notification, or is called in by the Minister, the parties cannot take any action for the purposes of completing or furthering the transaction, until the Minister issues his screening decision approving the transaction.
Can the Minister review a transaction even if it is not notified?
Yes. The Minister may call in for review transactions that should have been notified but were not. The Minister may also call in transactions that were not required to be notified where the Minister has reasonable grounds for believing the transaction affects, or would be likely to affect, the security or public order of the State. The Minister cannot review any transaction that completed more than 15 months before the commencement of the Act.
Tara Kelly is a Partner and Head of Competition & Antitrust at Mason Hayes & Curran LLP. For more information and expert guidance on the implications of the Act on your transaction, visit MHC.ie/Competition.