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U.S. Companies Beware: Federal Reporting Requirements for Foreign Investment

Marcum's Private Investment Forum - Spring 2015

Spring 2015

This article was previously published in Marcum’s Private Investment Forum - Spring 2015

Late last year, the U.S. Commerce Department’s Bureau of Economic Analysis (“BEA”) published a final rule[1] to reinstate the reporting requirements of Form BE-13, which was discontinued in 2009. U.S. businesses which have been funded by a foreign entity (e.g., a Cayman Islands exempted limited partnership or exempted company) resulting in such entity acquiring at least 10 percent - direct or indirect - of the voting interest in the U.S. entity will be required to file a Form BE-13 with the BEA (the “Form”). Acquisition of such voting interest could be by direct investment in an existing U.S. business, establishment of a new U.S. business, acquisition of a U.S. business merged into an existing U.S. affiliate of a foreign entity or expansion of an existing U.S. affiliate of a foreign entity. The Form must be filed within 45 days of the completion of the transaction, the establishment of the new legal entity, the commencement of the expansion or the cost update is requested (such cost update relates to an entity that filed Forms BE-13B or BE-13D indicating it is still under construction).

The final rule was effective September 15, 2014. This article provides a brief description of the history and purpose of the Form. In addition, we examine the reporting requirements of the new Form, as well as advise on the amendments to the prior rule.

Finally, we provide some key points for filers to consider when preparing the Form. It is important to note that the Form must be filed by the U.S. entity receiving the foreign investment, NOT the foreign investor (although foreign funds that invest in the U.S. should be mindful of these requirements for their portfolio companies).

Read the rest of the article here.

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[1] Direct Investment Surveys: BE-13 Survey of New Foreign Direct Investment in the United States. http://www.gpo.gov/fdsys/pkg/FR-2014-08-14/pdf/2014-19256.pdf.

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