You have signed a letter of intent to buy a French company. The price is agreed, the bank is ready, and closing is scheduled in six weeks. Then your French counsel asks a question nobody raised during the negotiations: have you filed for IEF clearance in Paris? IEF stands for investissements étrangers en France, France’s foreign-investment screening regime. If your deal falls inside it, you are not allowed to close before the Minister for the Economy authorises the transaction, and closing without that green light exposes you to orders to unwind the deal, a freeze of your voting rights, and a fine of up to twice the amount invested. This article explains, for a foreign buyer, how to tell whether your acquisition needs prior authorisation, how the filing works and how long it takes, and what happens if you close without permission or break the commitments attached to it. The rules sit in the Monetary and Financial Code (Code monétaire et financier), the business courts call it the greffe when your company is registered, and every acronym below is explained as it appears.
I. Are you a foreign investor buying a sensitive French business?
Authorisation is required only when three conditions are met at the same time: you qualify as a foreign investor, your transaction takes one of the legal forms of a covered investment, and the target carries on a protected activity in France. The Treasury (Direction générale du Trésor, the arm of the Ministry for the Economy that examines the files) states this three-part test on its official guidance page: if any one condition is missing, the investment is not subject to authorisation. Most failed self-assessments come from skipping one of the three steps, so take them in order.
A. Are you a foreign investor taking control or crossing 25 percent of the votes?
The first question is about you, not the target. Article R. 151-1 of the Monetary and Financial Code provides: “Lorsqu’il réalise un investissement mentionné à l’article R. 151-2 , constitue un investisseur au sens du présent chapitre : 1° Toute personne physique de nationalité étrangère ; 2° Toute personne physique de nationalité française qui n’est pas domiciliée en France au sens de l’ article 4 B du code général des impôts ; 3° Toute entité de droit étranger ; 4° Toute entité de droit français contrôlée par une ou plusieurs personnes ou entités mentionnées au présent 1°, 2° ou 3°.” In plain terms, you are caught if you are a foreign national, a French national living abroad for tax purposes, a foreign company, or even a French company controlled from abroad. The same article adds that every member of a chain of control counts as an investor, which means the screening looks through holding structures to the ultimate decision-makers. A Luxembourg acquisition vehicle owned by British-managed funds, for example, was treated as the foreign investor in the leading case discussed below, even though the direct buyer sat inside the European Union.
The second question is what you are doing. Article R. 151-2 of the same Code lists four acts that constitute an investment: acquiring control of a French-law entity or of a business registered with the French trade and companies register (registre du commerce et des sociétés, the RCS kept by the commercial court registry, the greffe), acquiring all or part of a business branch of a French entity, crossing directly or indirectly, alone or in concert, the threshold of 25 percent of the voting rights of a French entity, and crossing the 10 percent threshold in a French company whose shares are admitted to trading on a regulated market. The Code states the 25 percent rule as follows: “De franchir, directement ou indirectement, seul ou de concert, le seuil de 25 % de détention des droits de vote d’une entité de droit français”. Control itself is defined by Article L. 233-3 of the Commercial Code: “Toute personne, physique ou morale, est considérée, pour l’application des sections 2 et 4 du présent chapitre, comme en contrôlant une autre : 1° Lorsqu’elle détient directement ou indirectement une fraction du capital lui conférant la majorité des droits de vote dans les assemblées générales de cette société”. Majority of votes, a shareholders’ agreement giving you the majority, de facto control of general-meeting decisions, or the power to appoint most directors all count as control.
One nuance changes everything for European buyers. According to the Treasury’s official guidance, the 25 percent and 10 percent thresholds apply only when the investor comes from a country outside the European Union and the European Economic Area. An EU or EEA investor buying a minority stake below control in a non-listed French company does not trigger the procedure through the thresholds, while the same stake bought by an American, British, Swiss, Emirati or Singaporean investor does. Control acquisitions and branch acquisitions, by contrast, are covered regardless of where the investor comes from. Buying 30 percent of a Lyon software company from New York therefore raises the question; buying the same stake from Berlin as a purely financial minority holding normally does not, unless control is acquired with it.
Two practical traps deserve attention at this stage. First, acting in concert (de concert) aggregates your votes with those of your partners: two funds each taking 15 percent under a joint bidding agreement cross the 25 percent line together. Second, creating a brand-new French company from scratch, a greenfield subsidiary, is not one of the four listed acts, so a simple incorporation followed by a capital deposit at the bank and registration with the RCS generally sits outside IEF screening. If you are setting up rather than buying, our step-by-step guide to setting up a company in France as a foreign founder, from bank account and Kbis extract to VAT and first hire covers that path. The screening starts when you take over something that already exists: control, a branch, or a qualifying stake.
Threshold crossings carry hard consequences in French market law generally, which is why Paris treats the arithmetic seriously. In a decision of 30 August 2023, the Commercial Chamber of the Court of Cassation (Cour de cassation), appeal no. 21-21.850, ECLI:FR:CCASS:2023:CO00512, published in the Bulletin, ruled on threshold-crossing and mandatory takeover bids for a Luxembourg company listed on Euronext Paris, holding that “L’article L. 433-3, I, du code monétaire et financier édicte des dispositions spéciales applicables aux seules offres publiques obligatoires“, special provisions that derogate from the general voluntary-bid rules. The context differs from IEF screening, but the lesson travels: once French law attaches a legal consequence to crossing a percentage of votes or capital, courts apply the counting rules strictly, and investors who structure around the line lose. Count your votes before signing, including indirect holdings and concert parties, and assume the administration will do the same.
B. Is the company you are buying active in a sector France protects?
The third condition looks at the target’s business. Article L. 151-3 of the Monetary and Financial Code provides: “Sont soumis à autorisation préalable du ministre chargé de l’économie les investissements étrangers dans une activité en France qui, même à titre occasionnel, participe à l’exercice de l’autorité publique ou relève de l’un des domaines suivants : a) Activités de nature à porter atteinte à l’ordre public, à la sécurité publique ou aux intérêts de la défense nationale ; b) Activités de recherche, de production ou de commercialisation d’armes, de munitions, de poudres et substances explosives.” Two points in that single sentence surprise most foreign buyers. First, even an occasional activity is enough: a civil engineering group that once a year maintains a military site, or a software vendor with one defence contract alongside hundreds of private clients, can fall inside the perimeter through that one contract. Second, the text speaks of activities, not companies, so the screening can catch the acquisition of an entire group because one subsidiary, or one product line, touches a protected field.
The regulatory article that details the protected fields is Article R. 151-3 of the same Code, which opens with: “Les activités mentionnées au I de l’article L. 151-3 sont les suivantes”. Its list starts with the historic core of defence and weapons: “Les activités, comprenant celles mentionnées à l’ article L. 2332-1 du code de la défense , relatives aux armes, munitions, poudres et substances explosives destinées à des fins militaires ou aux matériels de guerre et assimilés”. It continues with dual-use goods and technologies: “Les activités relatives aux biens et technologies à double usage”, meaning civilian products that can also serve a military purpose, from cryptography to certain lasers, sensors and materials. Beyond that core, the Treasury’s guidance and the regulatory list extend to sectors any infrastructure or technology buyer will recognise: energy supply, water distribution, transport networks and services, electronic communications, public health and the protection of critical data, as well as certain critical technologies including components and systems used by vital operators (opérateurs d’importance vitale). A data-centre operator hosting hospital records, a subcontractor machining parts for a defence prime, a telecom installer working for a vital operator, or a biotech firm handling pathogens can each sit inside the perimeter without looking like a defence company at first glance.
Because the perimeter turns on facts, the worst approach is to guess from the target’s marketing brochure. Map the target’s real activities contract by contract: customer lists, framework agreements with public bodies, defence or dual-use certifications, licences for intercepted-communications or IT-security evaluation work, and any business done for operators of vital importance. The share purchase agreement should contain a specific warranty on these points, backed by disclosure of the relevant contracts, because the seller knows the customer base and you do not. Pay special attention to subcontracting: the screening reaches activities performed as a subcontractor for a protected operator, so a small supplier two levels down the chain can drag the whole acquisition into the procedure. Where the target mixes sensitive and ordinary activities, consider whether carving the sensitive branch out of the deal, or acquiring only the non-sensitive business, is commercially viable; Article R. 151-2 expressly covers acquisitions of branches of activity, so either side of a carve-out must be tested against the three conditions.
If all three conditions appear met, file. If the answer is genuinely unclear, French law offers a formal way to ask: the prior examination request (demande d’examen préalable, sometimes called a rescrit), covered in the next section. What you must not do is treat silence as consent. Unlike some foreign-investment regimes where only listed sectors are notifiable and everything else is free, the French test is deliberately broad at the edges, and the sanctions for closing without authorisation, detailed in Part II, are designed to hurt. Investment committees sometimes ask whether a filing slows the timetable unacceptably; the honest answer is that a controlled filing adds weeks, while an enforcement action adds months and can unwind the closing. When the target has any defence, energy, telecom, health-data or critical-technology footprint, the file should be opened before the purchase agreement becomes unconditional, and the agreement should make IEF clearance a condition precedent (condition suspensive) to closing, with a long-stop date consistent with the review timetable.
II. How do you get clearance and close without breaking French law?
Once the three conditions point toward a filing, the procedure is administrative, written, and handled in Paris by the Treasury under the authority of the Minister for the Economy. There is no hearing and no negotiation in the commercial sense; there is a file, an examiner (rapporteur), commitments you propose, and a formal decision. Understanding the sequence lets you schedule signing, financing and closing around it instead of discovering the timetable after you have committed to a fixed closing date.
A. How do you ask Paris for the green light, and how long does it take?
Start with the doubt-clearing step when you have one. Article R. 151-4 of the Monetary and Financial Code provides: “Lorsqu’il est saisi par une entité de droit français d’une demande d’avis aux fins de savoir si tout ou partie de l’activité de cette entité relève du I de l’article L. 151-3 , le ministre chargé de l’économie répond dans un délai de deux mois.” The target company itself can therefore ask whether its business falls in the protected perimeter, and the Minister answers within two months. The same article adds the investor-side route: “Dans les mêmes conditions, un investisseur peut, en accord avec l’entité exerçant les activités objet de l’investissement, saisir le ministre de la même demande. Dans ce cas, une copie de l’avis rendu à l’investisseur est adressée à l’entité exerçant les activités objet de l’investissement.” In practice this means you approach the target early, agree on a joint reading request, and obtain a written ministerial position within two months. A negative answer, your deal is outside the perimeter, removes the issue from the timetable entirely. A positive answer tells you to file for authorisation, and the work done for the request, activity mapping, holding chart, financing description, is directly reusable in the full application.
The full application is filed on the Treasury’s dedicated IEF platform, accessible at the address published by the administration (plateforme-ief.dgtresor.gouv.fr), with a fallback filing by email to the Treasury’s IEF unit if the online service is unavailable. An examiner acknowledges receipt and instructs the file, consulting the ministries concerned by the target’s sector, typically the armed forces, interior, industry, health or digital ministries depending on the activities. Build the file as the examiner will read it: who ultimately controls the buyer, with the full chain of control up to the natural persons or public bodies at the top; what the buyer intends to do with the French business over the coming years, employment, sites, research and development; and which guarantees protect the sensitive activities, governance arrangements, ring-fencing of data, continuity of supply to French public customers. The leading court decision shows what persuades. On 3 April 2020, the Council of State (Conseil d’État), decision no. 422580, ECLI:FR:CECHR:2020:422580.20200403, reviewed a ministerial authorisation granted on 16 December 2015 to “la société FII Co, société de droit luxembourgeois détenue indirectement par deux fonds d’investissement gérés par la société de droit anglais Warwick Capital Partners LLP, à prendre le contrôle de la société B… Industries, spécialisée dans la fabrication de fibres diverses pour les secteurs de l’automobile, de l’aéronautique et de l’électronique“. Third parties challenged the authorisation; the court upheld it, finding that the fund manager’s regulated status, eleven years of industrial experience, turnaround record and formal commitments to sustain the French company meant “la décision litigieuse n’était entachée d’aucune erreur d’appréciation au regard de la nécessité de préserver les intérêts protégés par l’article L. 151-3 du code monétaire et financier”. Regulated status, industrial track record and concrete, checkable commitments are the currency of this procedure. Promises to keep jobs or sites should be drafted as undertakings you can actually live with for years, because breach carries its own sanctions.
The timetable is fixed by Article R. 151-6 of the same Code: “Dans un délai de trente jours ouvrés à compter de la date de réception d’une demande d’autorisation, le ministre chargé de l’économie indique à l’investisseur ayant déposé la demande soit que l’investissement ne relève pas du I de l’article L. 151-3 , soit qu’il en relève et est autorisé sans condition, soit qu’il en relève mais qu’un examen complémentaire est nécessaire pour déterminer si la préservation des intérêts nationaux définis au I de l’article L. 151-3 peut être garantie en assortissant l’autorisation de conditions.” Within thirty working days of receiving the application, the Minister therefore gives one of three answers: outside the perimeter, authorised cleanly, or additional review needed to design conditions. The same article adds the rule that concentrates minds on complete filings: “En l’absence de réponse dans ce délai, la demande d’autorisation est réputée rejetée.” Silence for thirty working days means deemed refusal, not tacit approval, so diary the deadline from the receipt date and chase the examiner rather than assuming good news. Where additional review is opened, the refusal or the conditional authorisation is issued within forty-five working days of that step, which puts the full sequence at roughly three to four calendar months for a conditioned deal, before any pauses for supplementary questions. Plan financing commitments, works-council information procedures and management-package vesting around that horizon, and never promise the seller a fixed closing date that ignores it.
Most sensitive deals end with a conditional authorisation rather than a clean one or a refusal. Article L. 151-3, II allows the authorisation to be “assortie le cas échéant de conditions visant à assurer que l’investissement projeté ne portera pas atteinte aux intérêts nationaux visés au I”, and Article R. 151-8 explains that these conditions aim principally, in keeping with proportionality, to “Assurer la pérennité et la sécurité, sur le territoire national, des activités énumérées à l’article R. 151-3 exercées par l’entité objet de l’investissement”, and to “Assurer le maintien des savoirs et des savoir-faire de l’entité objet de l’investissement et faire obstacle à leur captation”, alongside governance adjustments and reporting duties to the monitoring authority. Expect commitments such as keeping the sensitive activity and its know-how in France for a defined period, maintaining supply to French public or strategic customers, prior notification of further transfers, governance seats or veto arrangements protecting the sensitive perimeter, and periodic reporting to the administration. Refusal remains possible: Article R. 151-10 provides that “Le ministre chargé de l’économie refuse, par décision motivée, l’autorisation d’investissement demandée, si la mise en œuvre des conditions prévues à l’article R. 151-8 ne suffit pas à elle seule à assurer la préservation des intérêts nationaux définis par l’article L. 151-3”, with the Minister entitled to consider the investor’s links with a foreign government or public body, and to refuse where serious doubts weigh on the investor’s integrity. The Treasury confirms these two refusal grounds in its guidance: no workable conditions, or integrity concerns. Draft the purchase agreement accordingly, with a balanced allocation of the refusal risk, hell-or-high-water undertakings only where the buyer truly accepts them, and a right to walk away or renegotiate if the conditions imposed would destroy the industrial logic of the deal.
B. What happens if you close without permission or break your commitments?
Closing without the required authorisation is the single most expensive mistake in this regime, because the Minister’s powers apply after the event and strike at the economics of the deal itself. Article L. 151-3-1 of the Monetary and Financial Code provides that where a foreign investment has been made without prior authorisation, the Minister takes one or more of the following measures: “1° Injonction à l’investisseur de déposer une demande d’autorisation ; 2° Injonction à l’investisseur de rétablir à ses frais la situation antérieure ; 3° Injonction à l’investisseur de modifier l’investissement.” The second order is the dramatic one: restore the previous situation at your own expense, which in practice means unwinding a completed acquisition, reselling the shares or assets, and absorbing the transaction costs, financing break fees and management time twice over. These orders can carry a daily penalty (astreinte) until complied with, and the same article allows protective interim measures while the file is examined: “Prononcer la suspension des droits de vote attachés à la fraction des actions ou des parts sociales dont la détention par l’investisseur aurait dû faire l’objet d’une autorisation préalable”. A buyer who closed without clearance can therefore find itself the legal owner of shares it cannot vote, unable to appoint directors, approve accounts or pay itself dividends, since the Minister may also ban or limit distributions attached to the irregular holding and freeze disposal of the related assets, or even install a court-style monitor inside the company to guard the national interests at stake. For a leveraged buyout, a voting freeze combined with a dividend ban can breach financing covenants within quarters.
Breach of commitments runs on a parallel track with the same logic. If the conditions attached to the authorisation are disregarded, the Minister may withdraw the authorisation, order compliance within a fixed deadline, or order substitute prescriptions including restoring the prior situation or selling all or part of the protected activities, again potentially backed by a daily penalty and the same protective measures. The statute builds in one procedural safeguard worth knowing: “Ces décisions sont susceptibles d’un recours de plein contentieux.” Orders and penalties are subject to full judicial review (recours de plein contentieux), meaning the administrative court re-examines facts and proportionality under Article L. 151-3-1, not merely legal regularity, which gives a buyer that considers an order excessive a genuine remedy before the judge. But judicial review suspends nothing by itself, so the voting freeze or the penalty clock keeps running while the case proceeds unless the judge grants interim relief.
The financial penalties sit on top of all this. Article L. 151-3-2 of the same Code applies where an investment was made without prior authorisation, an authorisation was obtained by fraud, the conditions of Article L. 151-3, II were disregarded, or enforcement orders were ignored. In those cases the Minister may, “après avoir mis l’investisseur à même de présenter ses observations sur les faits qui lui sont reprochés dans un délai minimal de quinze jours, lui infliger une sanction pécuniaire dont le montant s’élève au maximum à la plus élevée des sommes suivantes : le double du montant de l’investissement irrégulier, 10 % du chiffre d’affaires annuel hors taxes de l’entreprise qui exerce les activités définies au I de l’article L. 151-3, cinq millions d’euros pour les personnes morales et un million d’euros pour les personnes physiques.” Twice the deal value, ten percent of the French target’s annual turnover, or five million euros for a company, whichever figure is highest, sets the ceiling. The fifteen-day minimum to submit observations is a real defence right: use it to demonstrate good faith, a completed or pending regularisation filing, and concrete compliance steps, since the amount of the penalty must reflect the gravity and circumstances of the breach. Note the fraud limb carefully. An incomplete or misleading filing that secures an authorisation is treated like no authorisation at all, so the disclosure in the application must match the disclosure in the data room, and any change in the holding chain, financing or business plan between filing and closing should be notified to the examiner rather than discovered later.
For transactions run from Paris and the Île-de-France, two local points matter. First, the entire procedure is centralised in Paris: the Treasury teams, the consulted ministries and, in case of litigation, the Paris administrative court (tribunal administratif de Paris) and then the Paris administrative court of appeal, so a buyer with French counsel in Paris can handle filings, follow-up meetings and any urgent interim application without leaving the region. Second, Paris closings concentrate the usual friction points: notaries (notaires) and banks disbursing acquisition finance will ask for the authorisation before releasing funds, the commercial court registry (greffe du tribunal de commerce de Paris) records the resulting share transfers and updated beneficial-owner information in the RCS, and the published Kbis extract, the company’s official identity card, will then show the new shareholder landscape to every counterparty that checks it. Align the signing protocol with these gatekeepers: no funds released and no RCS filing before clearance, with the purchase agreement’s conditions precedent mirroring exactly that sequence.
Conclusion
Related reading on this site: for a companion guide focused on buying control and fixing a closing made without clearance, see Buying Control of a French Company From Abroad: France’s Foreign-Investment (IEF) Clearance, Delays, Sanctions and How to Fix It.
France welcomes foreign buyers but screens what they buy in protected sectors, and the screen bites before closing, not after. Test every acquisition against the three cumulative conditions: your status as a foreign investor including non-resident French nationals and French entities controlled from abroad, one of the four covered acts from control to the 25 and 10 percent thresholds, and a target activity touching public authority, public order, national defence, arms or the wider sensitive list. Where the test is positive, file on the Treasury platform and diary the thirty-working-day response and the forty-five-working-day extended review, remembering that silence means deemed refusal. Negotiate conditions you can live with for years, because withdrawal of the authorisation and penalty-backed orders punish breach as severely as the absence of clearance. And where the test is doubtful, use the two-month prior examination request to obtain a written ministerial position rather than gambling the deal on your own reading. A six-week closing timetable survives IEF review only if the filing starts at the letter-of-intent stage; discover the procedure at the signing meeting and the timetable belongs to the administration, not to you.
Need a quick opinion on your case
About to sign for a French company, unsure whether your deal needs IEF clearance, or facing conditions you cannot accept? Our firm offers a phone consultation within 48 hours with a lawyer of the firm to review your holding chain, your target’s activities and your filing timetable. Call +33 6 46 60 58 22 or write through our contact page. Our office in Paris advises foreign buyers across Paris and Île-de-France and from abroad in English.