SPAIN: Spanish Government Modifies the Mechanism of Foreign Investment Control

Tuesday November 24 2020

The Spanish government has modified the mechanism of foreign investment control in Spain. The fourth final provision of Royal Decree-Law 8/2020 of 17 March introduced an amendment to Law 19/2003 of 4 July, establishing a better national mechanism for the control of foreign direct investment in the secondary capital market in relation to the situation caused by the COVID-19 health crisis.

The new Royal Decree-Law 34/2020 of 17 November has amended the above to extend the authorisation regime until 30 June 2021, affecting foreign direct investments in companies listed in Spain (those whose shares are, in whole or in part, admitted to trading on an official Spanish secondary market and are registered in Spain) and/or in unlisted companies if the value of the investment exceeds €500 million, made by residents of other countries of the EU or the European Free Trade Association (EFTA).

In this regard, foreign direct investment means investments made by an investor who becomes the owner of a quota of shares equal to or above 10% of the share capital of the Spanish company. In addition, it is considered a foreign direct investment when, through a corporate transaction, the investor acquires the control of that company, and if the above two scenarios are carried out by residents of state members of the EU or the European Free Trade Association other than Spain, together with if they are made by residents of Spain whose actual ownership corresponds to residents of other state members of the EU or the European Free Trade Association.

Highlights of New Foreign Investment Control:

• Amendment to the definition of foreign direct investment – acquisition of a stake equal to or greater than 10% of the share capital of the Spanish company.
• Transitional regime for investments by EU and EFTA residents until 30 June 2021 – The RDL (Royal Decree Law) provides that the Investment Control Mechanism will also be applied to foreign investments in companies listed in Spain or unlisted in the latter case, provided that the value of the investment exceeds 500 million euros
• Extension of some of the sectors subject to the authorisation scheme
• Changes in the case of investments subject to administrative authorisation

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