United States: Recent Changes To The BEA Foreign Direct Investment Reporting

The U.S. Department of Commerce, through the Bureau of Economic Analysis (the "BEA"), requires certain U.S. entities (such as investment funds or their portfolio companies) to file annual reports of foreign direct investments with the BEA (the "BE-13" filing). Previously, a BE-13 filing had only been required of entities specifically contacted by the BEA. In a recent, largely unpublicized, notice published on the BEA website on November 26, 2014, the BEA announced that any entity that crosses certain reporting thresholds (a "reportable transaction") will be required to file, regardless of whether the BEA has contacted such entity. In addition to requiring prospective filing after a "reportable transaction", the BEA is requiring retroactive reporting by January 12, 2015 by any entity that crossed a reporting threshold between January 1, 2014 and November 26, 2014.

Reporting Thresholds

A U.S. entity is required to make a BE-13 filing if a non-U.S. person acquires direct or indirect ownership or control of 10% or more of the "voting securities" of such U.S. entity. An entity that crosses this 10% threshold must file a Form BE-13 if the cost of acquiring (or establishing) such interest exceeds $3 million. Depending on the triggering event (e.g., formation, acquisition, merger or expansion), the U.S. entity is required to file one of the five BE-13 forms. If such cost does not exceed $3 million (but the 10% threshold was crossed), an entity must file a BE-13 Claim for Exemption. Note that the retroactive January 12, 2015 deadline only applies if the 10% threshold was first exceeded during the January 1 to November 26, 2014 period.

Reporting Deadline

While reports for reportable transactions between January 1, 2014 and November 26, 2014 are due by January 12, 2015, the BEA has orally confirmed that it will grant extensions routinely, particularly those that are requested prior to the due date. Such requests should be submitted to BE-13@bea.gov, and should include the name of the prospective filer, the date of the reportable transaction, and the date the filer reasonably expects to be able to make the filing. Reports for reportable transactions after November 26, 2014 are required within 45 days of a reportable transaction. After an initial BE-13 filing is made, the BEA requires quarterly, annual, and five-year benchmark filings.

Content of the Form BE-13

The forms require U.S. entities to provide information regarding, among other things, the reportable transaction, the name and ownership percentage of underlying U.S. entities owned by the filing entity, information on ownership percentages and ultimate beneficial owners, and certain financial and operating information. The BEA reports are kept confidential and used for statistical analysis. 

Practical Implications for Asset Managers

As investor interests in funds with a general partner or managing member are generally not considered "voting securities,"1 most funds would not need to report a 10% investment by a non-U.S. investor. However, if a non-U.S. entity (or an entity owned 10% or more by a non-U.S. entity) became the general partner or managing member of a U.S. fund in or after 2014, such U.S. fund may be required to file Form BE-13. 

In addition, a U.S. portfolio company of a non-U.S. fund may be required to file Form BE-13 if such non-U.S. Fund acquired an interest of 10% or more in such portfolio company's voting securities in or after 2014 (e.g., a Cayman Islands fund acquires a U.S. portfolio company). As a result, U.S. portfolio companies acquired by non-U.S. funds in 2014 may need to make a Form BE-13 filing by the January 12, 2015 deadline (or request an extension).

Consequences for Failure to File

While the BEA has stated informally that it does not intend to penalize an entity that fails to file, despite now having an obligation to do so, persistent failure to file may ultimately result in civil and criminal penalties.  The BEA may pursue civil penalties up to $25,000 and seek injunctive relief, and willful violations may result in criminal penalties of up to $10,000 and imprisonment for up to one year. 

Changes to Other BEA Forms

In addition to BE-13, the BEA, in a separate late November release, also changed the requirement for U.S. entities to file form BE-10 (Form BE-10A and Form(s) BE-10B, BE-10C, and/or BE-10D) to report U.S. direct investment abroad (along similar reporting criteria as the BE-13 used for foreign direct investment in the U.S.). Form BE-10 is a survey conducted every five years, with the last survey covering through the year 2009. Entities are now required to file form BE-10 if the reporting criteria are met irrespective of whether they have been contacted by the BEA.2 The BE-10 reports are due in May 29, 2015 for those U.S. reporters filing fewer than 50 foreign affiliates, and June 30, 2015 for those U.S. reporters filing 50 or more foreign affiliates. The BEA has indicated that it will offer additional guidance to investment fund filers, possibly in the form of Frequently Asked Questions (FAQs).

Footnotes

1. While there are no instructions on BE-13 regarding the treatment of limited partnership and LLC interests as voting securities, other BEA forms provide the following guidance. The determination of percentage of voting securities in a limited partnership is based on who controls the partnership—not based on the percentage of ownership in the limited partnership's equity. Therefore, the general partner of a limited partnership typically holds 100 percent of the voting securities in the limited partnership and, unless a clause to the contrary is contained in the limited partnership agreement, limited partners are presumed to have zero voting securities in the limited partnership. A similar analysis applies to LLCs and their members and managing members, so long as the managing member is responsible for the day-to-day operations of the LLC and does not need to obtain approval for annual operating budgets and for decisions relating to other significant management issues from the other members.

2. Generally, a BE-10 report is required of any U.S. person that had direct or indirect ownership or control of 10 percent or more of the voting stock of a foreign entity (a "foreign affiliate") at any time during the U.S. person's 2014 fiscal year.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions