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 five years, FDI control has expanded to further protect Italian strategic assets against potentially predatory transactions.

Summary of major changes in 2024

• The year 2024 brought a further expansion of the scrutiny of pledge transactions, including indirect pledges over the shares of foreign companies controlling (directly or indirectly) Italian strategic companies.
• There has been increased attention over the financial stability of the strategic company granting pledges over strategic assets, with potential imposition of conditions, in particular, in case of dividend recapitalization transactions—restrictions on the distribution of dividends and imposition of condition to use the proceeds to implement the strategic company business plan.
• 2024 also saw a continued focus on intra-group transactions, even though this may result in a mere streamlining of chain of ownership.

Who files?

The Golden Power filing must be made by any company adopting a resolution or taking any action in connection with a strategic company transaction including: asset sales; mergers and demergers; transfer of headquarters outside of Italian territory; creation of securities or assignment by way of security of the strategic assets or changes to the corporate purpose, which would result in a change of ownership, availability or use of strategic assets; or by the purchaser, jointly with the target company, in connection with the direct or indirect acquisition 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, FDI clearance is mandatory for any strategic company transaction carried out in the defense and national security sectors by any investor. It is also mandatory in the energy, transportation, communication, health, agri-food and financial (including credit and insurance) sectors—referred to as "key other sectors" —by any EU (including Italian) investor; and in strategic sectors other than defense and security and 5G technology, but including the key other sectors, by any non-EU investor. Each case is subject to defined thresholds.

Clearance is also mandatory for a transaction resulting in the assignment by guarantee of the strategic assets in any strategic sector, as well as for the incorporation of a new entity operating in defense or national security. It is also mandatory in any other strategic sector if a non-EU investor holds at least 10 percent of the share capital of the new entity.

Clearance must 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—as long as the investment value is equal to or exceeds €1 million, 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 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 sectors, all businesses operating in the sector or businesses producing dual-use products with revenues of at least €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 of at least €300 million and employing at least 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 of at least €300 million and employing at least 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, module-to-module communication, cybersecurity, nanotechnologies, biotechnologies, aerospace and robotics.

The healthcare and pharmaceuticals sector includes critical healthcare technologies; businesses operating in this sector with revenues of at least €300 million and employing at least 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 the supply of critical inputs (including critical raw materials); agri-food; essential goods and services for the safekeeping of the state's wel-lbeing and vital functions, including steel, semiconductors and so on; strategic supply chain activities; access to sensitive data 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 the adoption of a relevant corporate resolution.

The review period is 45 business days, or 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 days if the Italian government requests additional information from the filing person or from a third party. If the review period expires without any response from the Italian government, the notification is deemed tacitly cleared (silenzio assenso).

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 is suspended for up to 35 days from receipt of the notification if an EU Member State or the European Commission decides to review the transaction, until the observations or opinion of the relevant EU Member State or the Commission have been delivered—unless further extended to receive additional information.

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

In addition, a pre-notification or pre-signing procedure is available, enabling any company 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 a case filing is due; or in scope but evident that no special powers will be exercised, in which case no filing is due. If there is no response by the Italian government within the 30-day review period, no tacit clearance mechanism applies, and a full formal notification will have to be filed.

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 under the Golden Power Law is required. This analysis should be undertaken as soon as possible and in any event before entering into the transaction, to limit unnecessary 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, including potential passive investors, to consider the risk that, if a transaction falls within the scope of the Golden Power Law, the Italian government could veto, condition, or make material recommendations with respect to the transaction.

Similar considerations apply in the structuring of secured financing transactions involving the creation of a direct or indirect pledge or security over any Italian entity or asset that is deemed strategic and falls within the scope of application of the Italian Golden Power Law and regulations.

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

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

Before entering into any acquisition agreements, it is key that foreign investors consider the filing—and pre-filing, if 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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