Are you ready for the new Dutch and EU transactional hurdles?
Companies beware: new Dutch and EU transactional hurdles are coming closer. In the Netherlands, new national security investment screening rules are imminent. At the same time, the adoption of the EU regulation on foreign subsidies will only be a matter of time. Time for companies to put these extra hurdles on their M&A radar.
New national security investment screening regime in the Netherlands
The new national security investment screening regime (Wet veiligheidstoets investeringen, fusies en overnames, Vifo) is complementary to the existing sector-specific FDI regulation (for telecom, gas and electricity). It introduces an ex ante and ex post screening mechanism for investment activities related to vital providers, business campuses or companies active in sensitive technology in the Netherlands. See our February 2022 (in Dutch) and August 2021 updates for a more detailed description of the envisaged regime.
On 17 May 2022, the Dutch Senate adopted the amended proposal for the new national security investment screening regime. The most important changes or clarifications in the adopted legislation compared to the original proposal are as follows:
1. Materiality thresholds – In the adopted wording, only the acquisition of control and not every change of control is notifiable. With respect to significant influence, both the obtaining and increase of significant influence must be notified – like under the original proposal. The threshold for “significant influence” has been clarified: significant influence exists if the acquirer has 10% of the voting rights, unless otherwise specified in a separate decree.
2. Business campuses – The adopted legislation also covers investments in business campuses. Business campuses are defined as companies that operate premises on which cooperation between public and private actors takes place with regard to technologies and applications that are of economic and strategic importance to the Netherlands. Parliamentarians proposed this amendment after the recent takeover by a Singaporean state-owned company of a high tech campus in Eindhoven.
3. Review periods – the maximum review period has been clarified. The maximum review period is eight weeks (Phase I) + eight weeks (Phase II) + six months (excluding stop-the-clock and a potential additional three months period in case of a notification to the European Commission)
During the legislative process it also became clear that the regime does not apply to suppliers of companies that are covered by the regime. The Minister also noted that she will consider adding companies active in the agricultural sector to the category of vital providers.
The implementation date of the new regime has yet to be set by royal decree and separate governmental decrees on technical matters and on the scope of the category “sensitive technology” are still in preparation (and expected before the Summer). The government expects the regime to enter into force by the end of the year. Once entered into force, the regime will have retroactive effect until 8 September 2020.
Proposed EU Regulation on Foreign Subsidies
In May 2021, the European Commission proposed a Regulation on foreign subsidies to safeguard a level playing field between European and foreign-backed companies active on the EU’s internal market. Companies need to factor in the increased administrative burden, an additional standstill and notification obligation and potential ex officio investigations into transaction documentation and timetables. See our June 2021 update for a more detailed description of the Commission’s original proposal, which seems to be somewhat of a mix between merger control, FDI and state aid procedures.
Both the Parliament and the Council of the EU have set their negotiating positions and the value of the notification thresholds is likely to be one of the main discussion points in the ongoing negotiations. The new regulation still seems to be on track for entry into force in 2023.
