On January 13, 2020, the U.S. Department of Treasury, on behalf of the Committee on Foreign Investment in the United States (CFIUS), issued final rules expanding CFIUS's authority to review foreign investments in U.S. businesses for national security concerns as mandated by the Foreign Investment Risk Review Modernization Act (FIRRMA). These regulations, which went into effect February 13, 2020, have immediate and acute implications for U.S. and foreign private equity firms and the companies in which they invest. Whereas CFIUS jurisdiction was previously limited to foreign acquisitions of controlling interests in U.S. companies, FIRRMA now gives CFIUS the ability to review acquisitions even of non-controlling interests. These regulations also now require parties to obtain clearance from CFIUS before consummating certain deals or face the risk of civil penalties. The elaborate regulations make it essential for private equity firms to have a comprehensive understanding of potential buyers' ownership structures and to structure funds to mitigate potential CFIUS risk in the future.
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