In the European Union in recent years, there has been a rapid increase in investment related to critical EU assets. Earlier last year, the EU adopted a new FDI valuation regime, which is necessary to protect strategically important industries.
If you were planning to start a business in the European Union in 2021, then it is worthwhile to study in more detail the key provisions of these changes and their impact on M&A transactions in the EU.
The updated regulation took effect from the end of 2020 and is now directly applicable in all member states. Urgent measures are already being taken to renew the FDI regime at national levels.
For example, Malta has already established a National Bureau of FDI Valuation. Today, we will take a closer look at the main changes in the foreign investment regulation in Malta.
The new regulation provides for the strengthening of the cooperation mechanism, including the exchange of information between the EU countries and allowing them to comment on investment projects in other countries. In turn, the European Commission will be able to request information, as well as inform the state in which the corresponding investments are planned about its opinion. At the same time, the final decision will remain with the respective state.
Entrepreneurs who intend to start investment activities in the EU should note that the EU regulatory authorities approach seriously to assessing the FDI impact on security.
These aspects include, among others, the following:
- critical sectors of economy;
- the latest technologies like AI, cybersecurity etc.;
- data protection;
- freedom of speech and media.
Updated FDI Regime in Malta
The newly established Maltese Bureau is responsible for checking:
- JVs with a foreign element.
- Share or controlling stakes transfer in existing companies in which the owner/UBO comes from third countries.
The Bureau’s activities are aimed at ensuring the identification of any FDI that could affect the security or public order of the country, as well as to protect the intelligence, knowledge, technology and security interests of the European Union.
Now, those who have decided to conclude an M&A deal in Malta should keep in mind that the new EU rules impose an obligation on member states to submit an annual report to the European Commission with information on FDI in their territory during the reporting period. It will also need to regularly report on the mechanisms for assessing direct investment.
The EU Council has officially stressed that it wants to maintain the EU's position as the main target of foreign direct investment.
It also pointed out that the new rules will benefit foreign investors, as they will provide more legal certainty for investors who are faced with different assessment mechanisms in the EU countries, and better coordination of investment assessment.
In fact, the new EU rules are designed to help Europe protect its strategic interests. They regulate the introduction of a new procedure for obtaining an FDI permit in Malta (as well as in other EU countries) before registering a Maltese company or transferring shares.
Should you need more information on EU investment regulation, you can contact IQ Decision UK for advice. The experts of our company are ready to advise you and provide comprehensive assistance in M&A deals in Malta or any other EU country.