The Italian FDI regime is also known as the Golden Power Law or Golden Power regime in Italy, as it gives the Italian government "golden" or special powers to approve or veto FDIs.

Since 2012, the Italian government has reviewed all transactions relating to Italian companies that carry out strategic activities or hold assets with strategic relevance in certain sectors deemed critical for Italy.

In the past four years, FDI control has expanded to further protect Italian strategic assets against potentially predatory transactions.

Summary of major changes in 2023

• The year 2023 brought a few substantial changes to the Italian FDI screening regime in connection with the expansion of government powers over intra-group transactions
• Historically, transactions carried out within the same group have been subject solely to the notification requirement, while they were excluded from the exercise of the golden power by the government
• Since August 2023, this exception has been partially lifted, as the scope of the FDI review and exercise of the special powers has now been extended to intra-group transactions that involve non-EU investors and concern certain sectors identified as strategic. These sectors include artificial intelligence, cybersecurity, aerospace, machinery for the manufacture of semiconductors, quantum and nuclear energy storage technologies, as well as food production technologies

Who files?

The Golden Power filing must be made by any company adopting a resolution in connection with a strategic company transaction including, without limitation, asset sales, mergers, demergers, transfer of headquarters outside of Italian territory, or changes to the corporate purpose, which would result in a change of ownership, availability or use of strategic assets; or by each of the purchaser and the target company (jointly) in connection with the acquisition, direct or indirect, of an equity or debt interest or the voting rights in a target company holding strategic assets under the Golden Power Law.

In addition to applying to non-Italian and non-EU persons, the Golden Power Law and relevant filing obligation may also apply to Italian and EU persons depending on the relevant strategic business sector and the type of transaction subject to notification and review.

Types of deals reviewed

Under the Golden Power Law's permanent measures, Golden Power clearance is mandatory for any strategic company transaction carried out: in the defense and national security sectors by any investor; in the energy, transportation, communication, health, agri-food and financial (including credit and insurance) strategic sectors ("key other sectors"), by any EU (including Italian) investor; or in strategic sectors other than defense and security and 5G technology, but including the key other sectors, by any non-EU investor ("other sectors").

Clearance is also mandatory for a transaction resulting in the assignment by guarantee of the strategic assets in any strategic sector.

Clearance must also be sought for the strategic acquisition of: an equity interest exceeding certain thresholds (currently 3, 5, 10, 15, 20, 25 and 50 percent) by any investor, other than the Italian state or any Italian public or publicly controlled entity, for the defense and national security sectors; or a controlling interest by any EU (including Italian) investor, for any key other sector.

Strategic acquisitions involving a controlling interest, or at least 10 percent of the corporate capital or voting rights (and any subsequent acquisition exceeding 15, 20, 25 and 50 percent), so long as the investment value is equal to or exceeds €1 million, in each case by any non-EU investor, for any other sector; or agreements involving the acquisition of, or the provision of services in connection with, 5G technology, solely to the extent that non-EU investors are involved, must also be cleared.

Scope of the review

The implementing decrees of the Golden Power Law set out the strategic businesses and/or assets falling within the industrial sectors subject to FDI review. However, the scope of "industrial sectors" remains broadly defined.

In the defense and national security sector, all businesses operating in the sector or businesses producing dual-use products with revenues greater than €300 million are covered by the law.

In the energy sector, the law covers platforms for the supply of energy and gas; critical infrastructure and real estate connected to the nuclear and oil & gas sectors; and businesses operating in the energy sector with revenues greater than €300 million and employing more than 250 workers.

Transactions involving businesses providing essential infrastructure for the safekeeping of the state's well-being and vital functions in the critical infrastructure, transportation and telecommunications and aerospace sectors are also caught under the Golden Power Law.

Critical technologies in the financial, insurance and credit sectors, or businesses operating in the financial, insurance and credit sectors with revenues greater than €300 million and employing more than 250 workers, are covered, as are registered media companies.

Within the critical technologies sector, essential technologies for the safekeeping of the state's well-being, vital functions and economic progress are included, such as AI, MTM communication, cybersecurity, aerospace and robotics.

The healthcare and pharmaceuticals sector includes critical technologies in the healthcare sector ; businesses operating in the healthcare sector with revenues greater than €300 million and employing more than 250 workers; or strategic resources for the supply of medicines, medical devices and other medical equipment, and critical diagnostic technologies.

Other industries covered by the Golden Power Law include supply of critical inputs and agri-food, such as essential goods and services for the safekeeping of the state's well-being and vital functions (steel, semiconductors and so on); strategic supply chain activities; access to sensitive and essential information for the safekeeping of the state's well-being and vital functions; and all transactions involving 5G technologies.

Review process timeline

Filings shall occur within 10 days after the execution of a binding agreement or adoption of a relevant corporate resolution, as applicable.

The review period is 45 business days (30 days for filings relating to 5G technologies), during which the transaction cannot be completed and any voting rights with respect to the transaction are frozen until clearance is given. It may be extended only once, for a maximum of 10 or 20 additional business days, if the Italian government requests additional information from, respectively, the filing person or from a third party.

The review period may be extended twice for a maximum period of 20 additional business days per each extension, exclusively with reference to filings relating to 5G technologies.

The review period will be suspended for up to 35 days from receipt of the notification if an EU Member State or the EU Commission determines to review the transaction, until the observations or opinion of the relevant EU Member State or the EU Commission have been delivered, unless further extended to receive additional information.

The review period will start from the date the Italian government determines that a breach of the filing obligation has occurred, if the Italian government initiates a Golden Power review independently in the absence of a filing.

In addition, a pre-notification (pre-signing) procedure is available, pursuant to which any company is entitled to file a voluntary pre-notification based on the information available as of the date of the pre-filing. Within 30 days of the pre-filing, the government must complete an assessment with one of the following outcomes: out of scope, in which case no filing is due; in scope, in which case filing is due; or in scope but evident that no special powers will be exercised, in which case no filing is due.

How foreign investors can protect themselves

The first step for foreign investors interested in entering into a transaction in relation to any Italian company operating (or arguably operating) in any strategic sector should be an evaluation of whether a filing pursuant to the Golden Power Law is required. This analysis should be undertaken before entering into any such transaction, so as to limit unnecessary transaction costs.

The Golden Power Law operates on a principle of substance over form. It follows that when structuring a transaction, the creation of corporate, fiduciary or contractual investment structures will not limit the applicability of the Golden Power regime if the ultimate beneficial investor falls within its scope of application. Therefore, it is crucial for foreign investors to consider the risk that, in the event that a transaction ultimately falls within the scope of the Golden Power Law, the Italian government could veto, condition, or make material recommendations with respect to the transaction.

Given the broad and imprecise applicability of the Golden Power Law and its implementing decrees, investors should consider using the newly introduced pre-notification procedure to help reduce uncertainty.

Moreover, the extension of Golden Power Law to certain intra-group transactions and reorganizations requires investors to take a more cautious approach when assessing if any such internal transaction could be of strategic relevance.

Additionally, before entering into any acquisition agreement, it is key that foreign investors consider the filing (and pre-filing, as applicable) timeline. Filing obligation terms, long-stop dates, hell-or- high-water covenants and regulatory clearance closing conditions in acquisition documentation must take into account the latest timelines and conditions relating to the Golden Power Law, as amended from time to time by the Italian legislature.

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_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

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