You live in London, New York, Dubai or Singapore and you have found the right French target: a profitable SAS with strong know-how, a factory, a software team, or a portfolio of contracts with public-sector clients. The price is agreed, the letter of intent is signed, and your lawyer diaries the closing for next month. One question decides whether that calendar survives: does France require you to obtain the government’s prior authorization before you buy? Since the PACTE law reshaped the regime in 2019, the answer is yes for a wide range of deals, and closing without clearance exposes you to orders to unwind the transaction, daily penalties, and fines of up to twice the amount invested. This article explains the French foreign-investment screening procedure, known by its French initials IEF (investissements étrangers en France), exactly as a non-resident buyer needs it: who is caught, which targets trigger control, how the filing runs, and what sanctions follow a closing without authorization.

France starts from an open principle. The French Treasury, the Direction générale du Trésor, states that financial relations between France and foreign countries are open, and that Article L. 151-3 of the Monetary and Financial Code (Code monétaire et financier) creates an exception for a closed list of sectors touching national defence or capable of raising public-order concerns and activities essential to the country’s interests. The Treasury applies a three-part cumulative test, published on its official IEF page: the Türkçe test turns on where the money comes from, what the transaction does, and what the French target does. If any one of the three conditions is missing, the investment is not subject to authorization. The practical consequence for a foreign buyer is straightforward: run the three tests before you sign anything unconditional, because the procedure that follows is suspensive in effect and the sanctions for ignoring it bite the buyer, not the seller. Readers choosing between a French subsidiary, a branch, or an acquisition should also read our companion guide on choosing between a SAS, a SARL, a branch and a subsidiary when expanding into France, which covers the vehicles an authorized investor most often uses to hold the target afterwards.

I. Is your deal caught? The three cumulative tests for prior authorization

French screening is not a general approval of every foreign acquisition. It catches an investment only when three conditions coincide: a foreign investor, a qualifying transaction, and a sensitive activity. Each condition has a precise statutory definition, and each contains traps for buyers who assume that a minority stake, a European passport, or an off-market private deal keeps them outside the regime.

A. Are you a foreign investor acquiring control or crossing 25 percent, or 10 percent if the target is listed?

The first condition looks at you, the buyer. Article R. 151-1 of the Monetary and Financial Code provides that an investor within the meaning of the screening chapter includes “Toute personne physique de nationalité étrangère”, any individual of foreign nationality, and “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”, meaning that even a French passport does not exempt you if you are tax-resident abroad. The same article adds “Toute entité de droit étranger”, any foreign-law entity, and any French entity controlled by one of those persons or entities. Two features of this definition matter enormously in practice. First, the test follows nationality and residence, not the language you negotiate in or the country from which the funds are wired: a French national living in Dubai or Montreal who buys a sensitive French company is a foreign investor for IEF purposes. Second, the definition climbs chains of control: where the buyer sits inside a chain of controlled entities, every member of that chain counts as an investor, so inserting a holding company between yourself and the target changes nothing.

The second condition looks at what you are doing. Article R. 151-2 lists four qualifying transactions. The first is “D’acquérir le contrôle, au sens de l’ article L. 233-3 du code de commerce , d’une entité de droit français ou d’un établissement immatriculé au registre du commerce et des sociétés en France”, acquiring control, within the meaning of Article L. 233-3 of the Commercial Code, of a French-law entity or of a business establishment registered with the RCS, the Registre du commerce et des sociétés, which is the French Trade and Companies Register kept by the greffe, the registry office of the commercial court. Control under Article L. 233-3 covers three situations: “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”, holding directly or indirectly enough capital to command a majority of votes at shareholder meetings; “Lorsqu’elle dispose seule de la majorité des droits de vote dans cette société en vertu d’un accord conclu avec d’autres associés ou actionnaires et qui n’est pas contraire à l’intérêt de la société”, commanding a voting majority alone under an agreement with other shareholders that does not run against the company’s interest; and determining in fact, through the votes available, the outcome of shareholder decisions, which is de facto control without a majority stake. The second qualifying transaction is “D’acquérir tout ou partie d’une branche d’activité d’une entité de droit français”, acquiring all or part of a business branch of a French entity, which catches asset deals that buyers sometimes wrongly treat as lighter than share deals. The third and fourth are threshold crossings: “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”, crossing, directly or indirectly, alone or acting in concert, the 25 percent voting-rights threshold in a French entity, and “De franchir, directement ou indirectement, seul ou de concert, le seuil de 10 % de détention des droits de vote d’une société de droit français dont les actions sont admises aux négociations sur un marché réglementé”, crossing 10 percent of the votes in a French company whose shares trade on a regulated market. Acting in concert means that shares held by your allies count toward your threshold, and indirect means that stakes held through subsidiaries are aggregated.

Control is a legal characterization that judges review strictly, and buyers should not treat it as a commercial impression. In a ruling of 28 November 2025, pourvoi No. 25-14.362, the Commercial Chamber of the Cour de cassation, France’s supreme court for civil and commercial matters, stated “Vu l’article L. 233-3, I, 3°, du code de commerce” and then “CASSE ET ANNULE, mais seulement en ce qu’il dit que M. [Y] [V] contrôle la société Vivendi SE, au sens de l’article L. 233-3, I, 3°, du code de commerce”, quashing the lower court’s finding that a person controlled a company within the meaning of the de facto control limb. The case arose in stock-market litigation rather than in an IEF filing, but the lesson travels directly: whether your stake amounts to control within the meaning of Article L. 233-3 is a question of law that a court re-examines, and an aggressive reading that treats influence as control, or that assumes a 30 percent stake can never be control, can collapse on appeal. Document your analysis of control in the filing with the same rigour you apply to price.

One common misunderstanding concerns European buyers. The 25 percent and 10 percent thresholds, and only those thresholds, disapply where the investor is European: Article R. 151-2 provides that its third and fourth limbs do not apply to an individual holding the nationality of a European Union or European Economic Area State that has signed an administrative-assistance tax treaty with France and domiciled in such a State, nor to an entity whose entire control chain sits under the law, nationality and domicile of those States. Read that limitation carefully. A German fund taking a 30 percent non-controlling stake in a sensitive unlisted French company does not trigger screening on thresholds alone, but the same German fund acquiring control of the same target does, because the control limb has no European exemption. Non-European buyers get no threshold shelter at all: a US, British, Gulf or Asian investor crossing 25 percent of the votes of a sensitive French company needs authorization even without control, and needs it from 10 percent if the target is listed.

Investment funds receive specific attention. The Conseil d’État, France’s supreme administrative court, ruled on 3 April 2020, No. 422580, on a challenge to an authorization granted “en application de l’article L. 151-3 du code monétaire et financier”, in which the Minister had “autorisé 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”. The sellers’ heirs attacked the clearance; the Court rejected the appeal and, on disclosure, held that “il incombe au demandeur d’indiquer l’identité du gestionnaire du fonds et, lorsque ce gestionnaire est lui-même une personne morale, l’identité des personnes physiques ou des collectivités publiques qui la contrôlent”, while “aucune disposition n’impose que soit précisée l’identité de tous les investisseurs participant à ce fonds”. A fund-backed buyer must therefore identify the fund manager and, behind a corporate manager, the individuals or public bodies ultimately in control, but need not name every limited partner. Prepare that ownership chart before filing, because the administration will ask who stands at the end of the chain.

B. Is the French target active in a protected sector, and how do you remove doubt before signing?

The third condition looks at the target. Article L. 151-3 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 words in that sentence deserve emphasis. “Même à titre occasionnel”, even occasionally, means that a marginal or ancillary sensitive activity inside an otherwise ordinary company can drag the whole deal into screening: a software group whose clients include one defence ministry contract, or an industrial group with a small dual-use product line, is not safe merely because 95 percent of its revenue is civilian. And the reference to a decree for the detailed list sends you to Article R. 151-3, which is long precisely because the protected perimeter extends far beyond weapons.

Article R. 151-3 organizes the sensitive activities in three blocks. The first block covers defence, public authority and public order directly, including “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”, activities concerning military arms, munitions, powders and explosives and war materials; “Les activités relatives aux biens et technologies à double usage énumérés à l’annexe IV du règlement (UE) 2021/821”, dual-use goods and technologies listed in Annex IV of EU Regulation 2021/821 on export controls; “Les activités exercées par les entités dépositaires de secret de la défense nationale”, entities holding national-defence classified information; information-systems security work performed for designated vital operators, including as a subcontractor; contracts performed for the defence ministry covering those activities; cryptology equipment and services; interception and remote-surveillance technical devices defined by Article 226-3 of the Criminal Code; accredited IT-security evaluation centres; gambling except casinos; defences against pathogens and toxins; and the processing, transmission or storage of data whose compromise would endanger any of those activities. The second block covers essential infrastructure, goods and services: “L’intégrité, la sécurité ou la continuité de l’approvisionnement en énergie”, the integrity, security and continuity of energy supply; the same protection for water supply, for transport networks and services, for space operations, for electronic communications networks and services, for police, gendarmerie, civil security, prison and customs missions, for establishments and installations of vital importance within the meaning of Articles L. 1332-1 and L. 1332-2 of the Defence Code, for “La protection de la santé publique”, the protection of public health, for agricultural production contributing to national food-security objectives, for the press publishing and online political and general news services, and for the extraction, processing and recycling of critical raw materials. The third block extends screening to research and development on critical technologies designated by ministerial order and on dual-use goods listed in Annex I of the EU dual-use regulation, where that research serves the activities in the first two blocks. A buyer from abroad should therefore screen the target for energy, water, telecoms, transport, health, food, media, minerals, data hosting, cybersecurity and R and D exposure, not only for defence contracts: a nursing-home group, a water utility subcontractor, a press publisher, or a battery-metals recycler can each sit inside the perimeter.

Where doubt remains, French law offers a formal pre-filing ruling instead of guesswork. Article R. 151-4 allows the French target company, and likewise the investor acting in agreement with the target, to ask the Minister whether all or part of the entity’s activity falls within Article L. 151-3, and provides that “le ministre chargé de l’économie répond dans un délai de deux mois”. This written opinion, the rescrit in administrative practice, is the instrument to use when the target’s sensitive activity is debatable: a minority defence subcontract, a legacy clearance, a product line the seller describes as purely civilian. File the ruling request early, because its two-month clock runs in parallel with your negotiations, and never treat a seller’s assurance or a banker’s market practice as a substitute: only the Minister’s answer binds the administration, and only a clearance or a formal non-eligibility letter protects your closing. Keep the request consistent with the later authorization file, since contradictions between the ruling request and the filing undermine credibility.

II. How do you get cleared, and what happens if you close without clearance?

Once the three tests point to screening, the transaction becomes a regulated administrative procedure with its own timetable, its own possible outcomes, and sanctions that reach the closed deal. Foreign buyers who plan the filing the way they plan merger control, as a condition precedent with a realistic long-stop date, close calmly; buyers who discover IEF during signing week renegotiate from weakness.

A. How do you file with the Minister, and what can the answer be?

The filing is lodged by the investor. Article R. 151-5 states: “La demande d’autorisation d’un investissement étranger est déposée par l’investisseur.” Where several investors in the same control chain participate, the request may be filed by one chain member on behalf of all of them, which simplifies fund structures with parallel vehicles. A lighter track exists for listed-company stake-building under the fourth limb of Article R. 151-2: the investor is exempt from the full authorization request provided the project has first been notified to the Minister, and “Sauf opposition du ministre, la dispense de demande d’autorisation naît à l’issue d’un délai de dix jours ouvrés à compter de la notification”, meaning silence for ten working days after notification creates the exemption, while an objection pushes you back into the full procedure. The file itself must contain the information listed by the order of 31 December 2019 on foreign investment in France, covering the investor, the target entity and the planned transaction; the Treasury’s filing guidance confirms that the dossier must document all three, and its online pages provide the composition checklist and the filing channel operated by the CIEF, the foreign-investment control unit of the Treasury. Build the file as you would a merger notification: full ownership chart up to the ultimate individuals or public bodies, financing sources and amounts, description of the target’s sensitive activities, post-closing business plan, governance of the French entity, and any commitments you already offer on jobs, sites, R and D, data location and supply continuity.

The statute then imposes a two-stage timetable with a trap at each stage. Article R. 151-6 provides: “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.” Three outcomes are therefore possible within thirty working days of receipt of the request: a declaration of non-eligibility, an unconditional clearance, or a referral to deeper review. Then: “En l’absence de réponse dans ce délai, la demande d’autorisation est réputée rejetée.” Silence at stage one means deemed refusal, not deemed approval, which reverses the reflex buyers bring from other filings where silence clears. The deeper review closes within forty-five working days of the investor’s receipt of the referral decision, ending in refusal or in authorization, possibly conditional, addressed to the filing investor and to any investors designated as responsible for compliance with the conditions; here too, silence means deemed refusal. Diary both deadlines from receipt, chase written confirmation of completeness so the clock has visibly started, and never close on the assumption that an expired silence period equals consent: under this regime it equals rejection.

Conditional clearance is the normal outcome for sensitive deals, and the statute frames the conditions as proportionate safeguards rather than punishment. Article L. 151-3 states: “L’autorisation donnée peut être assortie le cas échéant de conditions visant à assurer que l’investissement projeté ne portera pas atteinte aux intérêts nationaux visés au I.” Article R. 151-8 details that these conditions aim principally, consistent 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, notamment en veillant à ce que ces activités ne soient pas soumises à la législation d’un Etat étranger susceptible d’y faire obstacle, ainsi que la protection des informations qui leur sont liées”, alongside preserving know-how and blocking its capture, adjusting internal organization, governance and the exercise of the acquired rights, and setting reporting duties to the supervising authority. To that end, “le ministre peut notamment conditionner son autorisation à la cession d’une partie des parts ou actions acquises au capital de l’entité objet de l’investissement ou de tout ou partie d’une branche d’activité énumérée à l’article R. 151-3 exercée par l’entité objet de l’investissement à une entité distincte de l’investisseur et agréée par le ministre”, meaning the Minister can require divestiture of part of the acquired stake or of a sensitive branch to an approved third party. Expect commitments on maintaining French sites, R and D spending, staffing of sensitive functions, ring-fencing classified or health data in France, continuity of supply to French public customers, prior notification of onward sales, and sometimes a French-government-approved trustee or observer. Negotiate these conditions as commercial terms: each one has a cost, a duration and a compliance owner, and the authorization designates among the investors those responsible for compliance.

Outright refusal is available where conditions cannot fix the risk. Article R. 151-10 provides: “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 .” The Minister may weigh the investor’s links with a foreign government or public body, and must refuse by reasoned decision where there is serious presumption of enumerated criminal exposure, from drug trafficking to corruption, money laundering, terrorism and tax fraud, or where the investor suffered a definitive criminal conviction for such offences, an IEF fine, or grave and persistent breach of IEF injunctions within the previous five years. Judicial review of these assessments is deferential but real. In the 3 April 2020 FII Co ruling, the Conseil d’État upheld the clearance after finding “que 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”, considering the fund manager’s regulated status, eleven years of industrial experience, turnaround record and commitments capable of sustaining the target. The standard that emerges is an error-of-assessment review: the judge does not substitute its own industrial policy, but it verifies that the Minister examined the file, stated reasons, and did not misjudge the facts. A refusal, like a clearance with heavy conditions, can therefore be challenged before the administrative courts, but the challenge tests reasoning and evidence, not business merit.

B. What sanctions follow an unauthorized closing or a breach of your commitments?

Closing without authorization, obtaining clearance by fraud, or disregarding the attached conditions triggers a graduated administrative-police arsenal that the PACTE law deliberately sharpened. Article L. 151-3-1 empowers the Minister, where a foreign investment was completed without prior authorization, to take one or more of the following measures: “Injonction à l’investisseur de déposer une demande d’autorisation”, an order to file a request after the fact; “Injonction à l’investisseur de rétablir à ses frais la situation antérieure”, an order to restore the previous situation at the investor’s expense, which in plain terms means unwinding the deal; and “Injonction à l’investisseur de modifier l’investissement”, an order to reshape it, for example by selling down the stake or the sensitive branch. These injunctions may carry a daily penalty payment, an astreinte whose amount and start date the order states, with the maximum daily amount set by decree in Conseil d’État. Where national interests are compromised or at risk, the Minister may add conservatory measures that bite immediately: “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”, suspending the votes on the shares that should have been cleared; “Interdire ou limiter la distribution des dividendes ou des rémunérations attachés aux actions ou aux parts sociales dont la détention par l’investisseur aurait dû faire l’objet d’une autorisation préalable”, blocking or capping dividends and remuneration on those shares; suspending the disposal of assets linked to the sensitive activities; and appointing a trustee inside the company to watch over the protected activities. Where the investor breaches the conditions of a granted authorization, the Minister may withdraw the clearance, order compliance within a fixed period, or substitute new prescriptions including restoration or divestiture of the sensitive activities. Procedure protects the investor minimally: measures require putting the investor in a position to submit observations within fifteen days, except in emergency or imminent threat, and the statute closes with a jurisdictional guarantee, “Ces décisions sont susceptibles d’un recours de plein contentieux”, meaning full judicial review where the administrative judge can annul and reform, not merely censure excess of power.

Fines sit on top of the police measures. Article L. 151-3-2 applies where the investment closed without authorization, where clearance was obtained by fraud, where the conditions of Article L. 151-3 were disregarded, or where injunctions or orders under Article L. 151-3-1 were not executed, and allows the Minister, after adversarial proceedings with at least fifteen days to comment, to impose “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”. The ceiling is therefore the highest of twice the irregular investment, 10 percent of the French operator’s annual pre-tax turnover, and five million euros for companies or one million for individuals, scaled to the gravity of the breach and recovered like state debts unrelated to tax. For a buyer, the arithmetic concentrates the mind: twice the deal value will usually exceed any plausible advisory saving from skipping the filing, and the turnover limb can dwarf the investment limb where the target is large and the stake is small, as with a 10 percent listed raid. Add the reputational cost with the administration that will examine your next French deal, and the contractual fallout where lenders, co-investors and sellers allocated IEF risk to you.

Translate this into deal mechanics managed from abroad. Make IEF clearance a condition precedent to closing in the share purchase agreement, with a long-stop date consistent with thirty plus forty-five working days measured from a complete file, not from signing, and allocate filing duties, information undertakings and the cost of conditions between buyer and seller. Require the seller to cooperate on the target-activity description and on the ruling request under Article R. 151-4, since the buyer cannot describe classified contracts or vital-operator designations it has never seen. Prohibit closing by side letter or by acquiring the economic risk before clearance, because the sanctions attach to the investment as realized, and voting or dividend flows taken early aggravate rather than mitigate exposure. If you already closed without clearance, perhaps in a deal signed before counsel flagged the issue, instruct counsel immediately: voluntary late filing under injunction limb one, suspension of voting and dividend flows on the uncleared shares, ring-fencing of sensitive data and contracts, and a disciplined fifteen-day observations file offer the only path to regularization, while continued distributions and integration steps compound the fine base. After clearance, diary every condition with an owner, a metric and a reporting date, because breach of conditions reopens the same arsenal, including withdrawal of the authorization you paid months to obtain.

Conclusion

France welcomes foreign capital and screens a defined slice of it. Before you buy control of a French company, buy part of its business, cross 25 percent of its votes or 10 percent if it is listed, test the three cumulative conditions: your foreign-investor status under Article R. 151-1, your transaction under Article R. 151-2 and the control definition of Article L. 233-3, and the target’s activity against Articles L. 151-3 and R. 151-3, using the two-month ruling procedure of Article R. 151-4 wherever the answer is debatable. File through Article R. 151-5 before closing, expect the thirty-day triage and the possible forty-five-day deeper review of Article R. 151-6 with silence counting as refusal, negotiate proportionate conditions under Articles L. 151-3 and R. 151-8 in good faith, and treat refusal under Article R. 151-10 as reviewable but rare where the file is serious. Above all, never close first and regularize later: Articles L. 151-3-1 and L. 151-3-2 give the Minister the power to order unwinding at your expense, suspend votes and dividends, appoint a trustee, and fine up to twice the investment or 10 percent of turnover. A clearance obtained in time is a closing protection; an investment completed without one is a liability that follows the buyer home.