The Matrix

On September 15, 2022, President Biden issued the first Presidential Directive to refine the scope of the Committee for Foreign Investment in the United States (“CFIUS”) following the 2018 Foreign Investment Risk Review Modernization Act of 2018.  CFIUS is empowered to review business transactions that result in a foreign person having ownership or control rights over U.S. companies.  While CFIUS review is a largely voluntary process, it is mandatory when foreign owners or investors may be tied to foreign governments or when a target business is involved with certain critical U.S. technologies.  CFIUS may, as a result of its review, take remedial steps to address national security concerns imposed by the transaction, such as imposing mitigation agreements or third-party monitors.  CFIUS may also refer the transaction for Presidential review. Ultimately, CFIUS can unwind a business transaction – even years after the closing. 

Business transactions, management changes or investments involving non-U.S. companies or individuals receiving control or information rights to U.S. companies are subject to review by the U.S. government for national security purposes. There is a particular concern if any sensitive individual or government data is held by the U.S. company.  U.S. companies holding sensitive data should consider whether their business may be subject to CFIUS review prior to entering any investment or engaging in M&A activities.