Answer ... The United States traditionally has maintained an open investment environment, with few limitations on foreign ownership. However, this is changing. At the US Federal level, the Corporate Transparency Act (CTA), which takes effect January 1, 2024, requires Beneficial Ownership Reporting to the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) by certain domestic and foreign entities. The CTA is expected to impact over thirty-two million pre-2024 entities and about 5 million entities per year formed in 2024 and over the next decade. Similar legislation is being considered at some state levels.
Several US states, such as Florida, have passed legislation limiting foreign ownership of real property. Florida’s legislation, which became effective July 1, 2023, restricts certain persons from ‘foreign countries of concern’ from directly or indirectly owning or having a controlling interest in Florida real property.
Additionally, in certain industry sectors, foreign ownership might be limited to a certain percentage (eg, aircraft or maritime vessels ownership, banking). Generally, however, foreign ownership is allowed in all sectors, but may require mitigation or be precluded on a case-by-case basis based on who the foreign investor is. As a general matter, persons or countries subject to economic sanctions may not invest in the United States (and in the case of arms embargoes, may not invest in the defence industry).
The Committee on Foreign Investment in the United States (CFIUS) may review foreign acquisitions and certain minority foreign investments on the basis of national security. CFIUS is particularly interested in transactions involving:
- defence;
- high tech;
- critical infrastructure; or
- government contractors.
Transactions involving critical technologies, certain enumerated critical infrastructure assets and companies that collect or maintain sensitive personal information of US nationals trigger a mandatory review requirement (in the case of infrastructure and data, the mandatory filing is predicated on substantial foreign government involvement). In parallel to the CFIUS review, other agencies may exercise review of foreign ownership or control in their respective areas – for example:
- the Department of Defense reviews foreign transactions involving a government contractor authorised to access classified information;
- the Department of Energy (DOE) reviews transactions of cleared contractors involved in DOE classified projects; and
- the Federal Communications Commission reviews foreign acquisitions of telecommunications companies.
Each transaction should be evaluated on its merits to determine:
- the applicable regulatory regime of review; and
- whether a mandatory filing or mitigation of foreign ownership is required or voluntary filing is warranted.
Countries of particular concern to date include China, Russia and Venezuela; but even such investments may clear the review, often with some form of mitigation of the foreign ownership risk.