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FOREIGN INVESTMENT DISCLOSURE AND FOREIGN AGENT REGISTRATION REQUIREMENTS
Kersi B. Shroff American-British Law Division Law Library of Congress
October 1989 LL 89-0076
TABLE OF CONTENTS
Summary 1 Kersi Shroff
Belgium 5 George E. Glos
Canada 6 Stephen F. Clarke
Denmark 10 Fariborz Nozari
France 11 M. Tahar Ahmedouarnar
Germany, Federal Republic of 12 Edith Palmer
Greece 15 Theresa Papademetriou
Israel 18 Ruth Levush
Italy 19 Giovanni Salvo
Japan 20 Sung Yoon Cho
Luxembourg 25 George E. Glos
Mexico 26 Pithens Medina and Glenn Reitze
The Netherlands 29 Karel Wennink
Portugal 30 Rubens Medina
Republic of Ireland 32 Kersi B. Shroff
Spain 14 Rubcns Medina
United Kingdom Kersi B. Sh-off
36
I
SUMMARY
I. It is a truism that international investment has assumed increased importance in the world
economy. In order to encourage the positive contributions made by such investment, the
Organization for Economic Co-operation and Development (OECD) has declared:
That Member countries should, consistent with their needs to maintain public order, to protect their essential security interests..., accord to enterprises operating in their territories and owned or controlled directly or indirectly by nationals of another Member country... treatment under their laws, regulations and administrative practices, consistent with international law and no less favourable than that accorded in like situations to domestic enterprises...3
The main issue examined in the attached country reports constitutes one aspect of the stated
"no less favourable" treatment of foreign investments, i.e. disclosure requirements applicable to
such investments. The countries surveyed may be grouped in the following manner.
Canada, Mexico, and Japan have distinct and well defined structures backed by
specific regulations for the investigation and monitoring of foreign investments. Thus, the
Canadian Investment Agency reviews the acquisition or establishment of businesses in Canada
above a stated value ($5m. for direct investments). Acquisitions below that level are also
reviewable if the businesses can be said to constitute Canadian cultural heritage or be part of
its national identity. And, even notification of non-reviewable acquisitions must be sent to the
Agency. i ht- ieL.ent Canadian-US Free Trade Agreement, however, has relaxed the rules for US
investors.
Mexico has set up a Registry of Foreign Investments within its Ministry of industry
The OECD Declaration on International Investment and Multinational Enterprises II 1 (June 21st 1976). Except for Israel and Mexico, all the countries surveyed are members of the OECD.
2
and Commerce. The Registry is directed by the National Commission of Foreign investment. In
keeping with this elaborate structure, the governing regulations, too, are multifaceted. Separate
provisions for registration ("inscription") are made, inter alia, for foreiln persons or enterprises;
Mexican companies having foreign investors; trusteeships; titles representing shares of capital of
ownership; companies listed on the Mexican stock exchanges; and shares of stock at credit
institutions. Non-compliance uith the registration requirements may lead to the imposition of
fines in line with the seriousness of the case."
In Japan, acquisitions of shares in unlisted companies dealing in agriculture, forestry,
and marine products; petroleum; mining; and leather and leather products manufacturing are
allowed only after verification by the government on a case-by-case basis. Investments in
eighteen other types of businesses related to public security are placed in a restricted category
and also require validation by the government on a case-by-case basis. Previously, all direct and
portfolio investments required prior approval, but under recent changes, such investments only
continue to require prior notification.
Many of the EEC countries may be placed in the opposite category in which generally
formal disclosures are no different from those applicable to domestic investors. No requirements
specific to foreign investors have been found in Belgium, Greece, Luxembourg, the Netherlands
and Portugal. Denmark prohibits the acquisition of certain industries, such as defence, and
other acquisitions are automatiLally matte' tit. public record. Since all stock in Italian
corporations are nominative, an automatic disclosure occurs.
Other EEC members do require disclosures, but for varying reasons. In Ireland
approval is required, and is normally forthcoming, from the state bank for all foreign capital
brought into the country. This allows the bank to monitor the flow of such capital so that it
3
does not impact on the exchange rate of the Irish currency.
The Federal Republic of Germany seeks disclosures of foreign acquisitions of more
than 25 percent of the shares of a German enterprise and of large loans made to them.
Monetary statistics are compiled from the information received in order to evaluate the
country's trade policy, but the confidentiality of the data is ensured.
Various sectors of the Spanish economy are restricted from receiving foreign
investments. In other areas, foreign ownership may even reach 100 percent, but in investments
of over 50 percent of the capital of a Spanish concern, prior notification and verification is
required. Below that level, a simple notification is called for after the investment has been
finalized.
For its newly de-nationalized industries, the United Kingdom imposes a limit on
foreign ownership in the initial years after privatization. Subscribers to the stock are therefore
required to make a nationality declaration. The government also has legislation on the books
authorizing it to stop an important manufacturing undertaking from falling under foreign
control. Securities regulations, devised to thwart quick takeovers and mergers and to ensure
fairness to and protection of all stockholders, require disclosures of stock acquisitions over
specified percentages in Ireland and the United Kingdom. In both countries, the antitrust
implications of a merger or takover are examined prior to allowing a transaction to proceed and
therefore require disclosures. Israeli law requires the registration of foreign companies which
have a place of business in Israel, the violation of which requirement will result in a fine.
The U.S. Foreign Agents Registration Act has a counterpart only in Canada among
the legal systems studied. The Canadian statute calls for registration by professional and other
loblvists. The former must niu annual returns and when a new lobbying contract is ntcr
into; other lobbvi.q.s need orly file an annual return.
Mexico place-s a constitutional ban on foreiLners who meddle in the political affairs of
the country and on :i'ilexican citizens who volunteer SerViCC to a foreign goverr.ment. The
acceptance by Me can nationals of functions on behalf of a foreign government may not be
undertaken without prior license from the Federal Congress. The other Hispanic countries,
Spain and Portugal, do not statutorily ban foreign azents, but the general expectation is that
activity by foreign political agents will be confined to the diplomatic corps.
HI. The Greek law on political contributions, applicable to citizens and foreigners alike, calls
for disclosure by recipients. individuals or entities contributing more than a specified amount
must be identified in such returr.s. Spain and Portugal completely bar the receipt of plitical
donations from forei7ners, and the Me:dcan provision on meddling by foreigners has a similar
effect. Japan, too, prohibits the receipt of Folitical c-oafributions from foreifners.
The rederal Re,..-uolic of Germany, while largely rirohibiting foreig-n
contributions, allows contributions below 1,00 Deutsche Marks and those made by foreign
political parties represente:.-3 in the European Parliament. Non-resic.!ent business entities are only
allowed to make political contributions if they are owned 50 percent by German citizens.
Kerr-,i B. Shroff tenior Eal Specialist American-Dritit.:. Division Law Library of Congress October 1939
5
BELGIUM
Belgium does not have a requirement similar to the U.S. Foreign Agents Registration
Act. It does not require registration of agents for foreign businesses.
There are no disclosure requirements applicable to foreigners for the acquisition of stock
in domestic corporations or of capital of any kind.
There are no disclosure requirements applicable to political contributions made by
foreigners.
There are no provisions in Belgian law on the above topics.
Prepared by George E. Glos Assistant Chief European Law Division Law Library of Congress October 23, 1989
6
CANADA
I. Registration of Lobbyists
Canada's new Lobbyists Registration Act' requires both "professional" lobbyists (or "tier
one" lobbyists) and "other" lobbyists (or "tier two" lobbyists) to file returns with a registrar of
lobbyists.' The latter classification is defined to include employees who devote a significant amount
of their time trying to influence public office holders on behalf of their employers.' The former
classification is defined to include individuals "who, for payment, on behalf of any person or
organization ... undertake to arrange [meetings with public office holders or to communicate with
public officer holders) in an attempt to influence, among other things: 1) the development of
legislation; or 2) the awarding of any monetary grant or contract."'
The returns required of "professional" lobbyists each time they enter into a new contact
must include the names of their clients, the subsidiaries or parent corporations of their clients, and
the proposed subject matter of the meetings or communications.' "Other" lobbyists are only obliged
to file annual returns and to identify their "employers."' It would thus appear that it will be easier
to identify which "tier one" lobbyists are working indirectly for foreign clients than to identify which
Ch. 53, 1988 Can. Stat. 1359 (photocopy enclosed). This statute was proclaimed in force on September 30, 1989.
3 Id. §§ 5-6.
Id. § 6.
5 Id. §5.
6 Id.
Id. § 6.
7
"tier two lobbyists are working indirectly for foreign employers.
The Lobbyists Registration Act does not apply to "diplomatic agents, consular officers
or official representatives in Canada of a foreign government."'
II. Monitoring of Foreign Investment
Under the Investment Canada Act, foreign individuals and foreign-owned corporations
are required to notify the Investment Canada Agency whenever they make a non-reviewable
investment for the purpose of establishing a new Canadian business or acquiring an extant
Canadian business.' This requirement enables the Agency to fulfill its second major function of
monitoring foreign investment in Canada.
Investments to acquire an existing Canadian business are generally reviewable whenever:
1) the acquisition is direct and the Canadian business has assets of Can$5 million or
more;
2) the acquisition is indirect and the Canadian business has assets of Can$50 million
or more; or
3) the acquisition is indirect and the Canadian business has assets of more than Can$5
million, but less than Can$50 million and the Canadian assets represent more than half
of all assets being acquired."
Acquisitions of Canadian businesses and establishments of new Canadian businesses are also
id. § 4(e).
9 Investment Canada Act, R.S.C. ch. 28, § 11 (1st Supp. 1985).
3° Id. § 14.
8
generally reviewable when they relate to Canada's "cultural heritage or national identity" and the
investment Canada Agency notifies the investor within twenty-one days that the cabinet has decided
his or her investment is one that should require special approval."
As a result of the conclusion of the Canada-United States Free Trade Agreement, the
above rules respecting what types of foreign investments are reviewable have been relaxed for
individuals and corporations from the United States. Beginning in 1992, direct acquisitions of
Canadian businesses by "Americans" will only be reviewable when the Canadian business has assets
in 1992 dollars of U.S.$150 million or more.' Indirect acquisitions will not be reviewable after
1991 except in the case of acquisitions of "cultural businesses." This term is defined by the Free
Trade Agreement to mean a Canadian business that carries on any of the folloAing activities:
(a) the publication, distribution or sale of books, magazines, periodicals or newspapers in print or machine readable form, other than the sole activity of printing or typesetting of books, magazines, periodicals or newspapers,
the production, distribution, sale or exhibition of film or video recordings, (b)
(c) the production, distribution, sale or exhibition of audio or video music recordings,
(d) the publication, distribution, sale of music in print or machine readable form, or
(e) radio communication in which the transmissions are intended for direct reception by the general public, any radio, television and cable television
-- broadcasting undertakings and any satellite programming and broadcast net worl, services;"
The Investment Canada Agency monitors all reviewable foreign investments as well
11 id. § 15.
12 Canada-United States Free Trade Agreement, Annex 1607.3 (Jan. 2, 1988).
13 Id. art. 2012.
9
as nonreviewable foreign investments. Monitoring of investments made by persons and corporations
from the United States is specifically permitted under the Free Trade Agreement."
III. Political Contributions
Canada's Elections Act does not prohibit candidates or registered political parties
from accepting contributions from foreigners."
Prepared by Stephen F. Clarke Senior Legal Specialist American-British Law Division Law Library of Congress October 25, 1989
" Id. art. 1604.
" R.S.C. ch. E-2 (1985).
10
DENMARK
Foreign Agents Registration Act
The answer to this question is in the negative. However, nothing would prevent a
Danish citizen or a foreign resident, physical or juridical, from representing the commercial interests
of a foreign entity. In such a case, the provisions of the general law of obligations and relevant
rules of commercial laws will govern.
Disclosure in Connection with Acquiring Stock in Domestic Corporations
Except for certain industries, such as the defense industry, a foreign person, physical
or juridical, may acquire stocks in Danish domestic corporations. Since the transaction is a matter
of public record, the purchaser is automatically disclosed.'
Disclosure of Political Contribution
There are no specific laws in this respect. Hence, the answer is in the negative.
Prepared by Fariborz Nozari Senior Legal Specialist European Law Division Law Library of Congress October 18, 1989
Aktieselskabslov (Joint Stock Company), No. 433, 7.18.1988; Karnov 7, 1988, p. 6852ff.
FRANCE
France recently passed a law that forbids campaign contributions in national
elections from foreign entities and states. Article L 52-8 of Law No. 90-55 of January 15, 1990,
states: "No candidate shall receive directly or indirectly, for any expenses whatsoever,
contributions or material support from a foreign state or a foreign entity." ' Article 11-4 adds:
"No association of financing or financial agent of a political party shall receive, directly or
indirectly, contributions or material support from a foreign state or a foreign entity." 2
Prepared by M. Tahar Ahmedouamar Senior Legal Specialist European Law Division Law Library of Congress July 1990
' Journal officiel de la Republique francaise, Lois et decrets January 16, 1990, page 639.
2 Id.
12
FEDERAL REPUBLIC OF GERMANIC
I. Registration of foreign agents
The Federal Republic of Germany has no laws similar to the U.S. Foreign Agents
Registration Act. Likewise, there are no registration requirements for foreign agents advancing
commercial or economic interests.
2. Disclosure of foreign stock acquisitions
Although certain foreign investments are subject to disclosure requirements, this
information is not made public and is only used for statistical and related purposes.
Disclosure is required for the acquisition by a non-resident of a German enterprise
or of a substantial participation in a German enterprise (25% of the shares or voting rights).
Disclosure is also required for the granting of substantial loans to a German enterprise. These
transactions must be reported by the German participant to the German Central Bank (Deutsche
Bundesbank). However, the use of information gathered in this manner is restricted to the
compiling of monetary statistics and to the evaluation of the German foreign trade policy.' The
confidentiality of these tiql•- ;c nnlranteed b) the pfoi,iJAI. of the Statistics Law.'
3. Disclosure of foreign political contributions
Secs. 58a through 58c, Aussenwirtschaftsverordnung vom 18. Dezember 1986, Bundesgesetzblatt [BGB1., official law gazette of the Federal Republic of Germany] I, p. 2671.
2 Sec. 26, Aussenwirtschaftsgesetz vom 28. April 1961, BGB1. I, p. 481, as amended.
3 Sec. 11, Bundesstatistikgesetz vom 14. Marz 1980, BGB1. I, p. 289.
13
Political contributions which exceed 40,000 Deutsche Mark (DM) must be disclosed
in the annual financial statement of the political party.' This provision applies equally to foreign
and domestic contributors. However, foreign contributions are largely prohibited.
The German Law on Political Parties disallows contributions from abroad with only
a few exceptions. Permitted are contributions of aliens not exceeding 1,000 DM, and these do not
fall under the disclosure requirement. Also permitted are contributions made by foreign political
parties represented in the European Parliament or made by fractions in the European Parliament
or foreign members thereof. Business enterprises located outside of Germany are allowed to make
contributions to German political parties, only if they are owned by German citizens to more than
50%.5
The Federal Republic has experienced massive scandals involving political
contributions, and these have led to changes in the Law on Political Parties in 1984 and 1988'
and also caused changes in the Income Tax Law and the Corporation Tax Law on the deductibility
of political contributions.' Political parties in Germany are the recipients of contributions instead
of individual representatives.' Indirect contributions that flow to the political parties
Sec. 25, para. 2, Parteiengesetz [ParteiG] in der Fassung vom 15. Februar 1984, BGB1. I, p. 242, as amended by Gesetz vom 22. Dezember 1988, BGB1. I, p. 2615.
5 Sec. 25, para. 1, no. 3, ParteiG.
6 Supra note 4.
Article 4, Gesetz vom 22. Dezember 198.8, BGB1. I, p. 2615.
F. Geerds, "Annotation to Decision of Bundesgerichtshof of October 21, 1985," Juristische Rundschau 265 (1986).
14
through foundations, professional interest groups, etc., are prohibited by the Law on Political
Parties and discouraged by the tax laws.
Prepared by Edith Palmer Senior Legal Specialist European Law Division Law Library of Congress October 23, 1989
15
GREECE
1. Foreign Aeents Registration Act
No law could be found in Greek legislation that contains provisions similar to the
Foreign Agents Registration Act. However, under Commercial law, agents of foreign corporations,
foreign insurance companies and banks before establishing a branch or an agency in Greece are
required to submit a power of attorney for their representative or agent to the Ministry of
Commerce. The power of attorney must be notarized by the Greek counselor and must include
the name of the company's legal representative and the location of the company's principal place
of business. Any change of the representative or agent in Greece must also be reported.
2. Disclosure Requirements 211 Foreigners Acquiring Stock in Domestic Corporations
No specific information could be found.
3. Political Contributions Made la Foreigners
In 1984 the Greek Parliament enacted Law 1443 on Financial Assistance to Political
Parties' in order to provide state subsidies to the parties and minimize influences from private
funding.
According to article 4, every political party entitled to a state subsidy must keep a
balance sheet where all the revenue and expenses are reported. Memberships, casual contributions
to the party, and financial assistance provided by the friends of the party are reported anonymously.
' Art. 50, Law 2190/1920 on Corporations, as amended.
P. Raptarchis, 1A Diarkes Kodix Nornothesias [Continuous Compilation of Laws] 194,21 (Athens, loose-leaf).
16
However, individuals or legal entities which contribute more than 200,000 drachmae on a yearly
basis must be specified by name. In addition, the Law prohibits any financial assistance from
entities of public law and organizations of local self-governing irrespective of the amount of
contribution.
The above Law and two ministerial decisions' that regulate revenues and expenses
of political parties do not contain a specific prohibition against funding from foreigners. In
particular, the Law 1443 states, "financial contributions from friends of the party," and no distinction
is made between domestic or foreign friends of the party. Since the balance must be published
and the names of persons who contributed more than a certain amount must be specifically
mentioned, one may assume that foreign funding of a political party may have a negative impact
in the course of any political campaign.
In addition, Law 178/19874 deals with political contributions and the disclosure
requirements of the recipients of contributions. According to article 6, the Prime Minister, heads
of political parties, ministers, vice-ministers, members of Parliament and the highest ranking
employees are obliged to declare their financial status and that of their spouses and minor children.
The declaration of financial status must include a detailed analysis of the acquisition of the
following.
a) immovable property including location, size and any real rights;
b) property rights in ships or any other means of transportation;
c) participation in corporations;
Decision No. 92479/1985 of the Ministers of Interior and Finance, Decision No. 35509/1985 of the Minister of Interior.
Id. at 116,51(a).
17
d) bank accounts; and
e) any revenue accrued from any source of the previous fiscal year, as well as any financial
contributions granted to the individual by clearly identified third persons.
Again, this law does not make a distinction between contribution from domestic or foreign sources.
It places a burden on the recipient of these contributions to declare them by clearly identifying
the sources.
The above-named persons are obliged to submit such a declaration every April
during their service and for three consecutive years upon termination of their duties.
Prepared by Theresa Papademetriou Senior Legal Specialist European Law Division Law Library of Congress October 23, 1989
18
ISRAEL
The Companies Ordinance (New Version) 5743-1983 ' provides for the registration of
foreign companies which establish a place of business in Israel.
The registration application must be submitted to the Registrar within one month following
the establishment of a place of business, accompanied by the following documents:
(a) a copy and a certified Hebrew translation of foreign documents;
(b) nominal list of the directors;
(c) name and address of the persons residing in Israel and authorized to receive for the
company court documents and announcements;
(d) a certified copy authorizing the persons regularly residing in Israel to act in the name
of the company in Israel.
The Minister of Justice at his discretion may or may not grant an authorization to register the
foreign company.
Court or other announcements will be regarded as delivered to the foreign company
registered in Israel if addressed to the authorized person in accordance with the above
requirements.
Violation of the registratinn relriremeni and payment 01 registration and publication fees
will result in a fine.
Prepared by Ruth Levush, Senior Legal Specialist Near Eastern and African Law Division Law Library of Congress October 13, 1989
Section 383-4, Hatechika [The Legislation] Supplement Volume p 8263 (updated to Nov. 1986) [in Hebrew].
19
ITALY
In the absence of specific legislation similar to the U.S. Foreign Agent Registration Act,
it seems that the representation of foreign interests may be provided through the provisions of
commercial law when applicable.
All stock in Italian corporations are nominative which means that they have to bear the
name of the buyer; therefore, the disclosure may be considered automatic.
Legislation in Italy concerning public financing of political parties and contributions to the
same and to members of the national and the European Parliament or to local representatives,
imposes the obligation to declare said contributions to the President of the Chamber of Deputies
in a document signed jointly by the contributor and the recipient, when the amount of the
contribution exceeds 5 million lire during a year. Contributions coming from abroad must be
declared by the recipient only.
Prepared by Giovanni Salvo Senior Legal Specialist EurripeRn Law Divisiou Law Library of Congress October 24, 1989
20
JAPAN
1. Japan has no legislation similar to the Foreign Agent Registration Act of the United States.
2. Political contributions are prohibited under Article 22-5 of the Law Concerning the Regulation
of Political Contributions and Expenditures,' which provides that no one shall receive political
contributions from a foreigner, a foreign corporation, or a group or an organization whose major
component consists of foreigners or foreign corporations.
3. Disclosure requirements applicable to foreigners acquiring stocks in Japanese corporations are
governed by the Foreign Exchange and Foreign Trade Control Law.
Introduction. A major change in the Japanese regulations on foreign investment became effective
December 1, 1980, when the Law Partially Amending the Foreign Exchange and Foreign Trade
Control Law (hereafter referred to as the 1979 Law), enacted December 18, 1979, came into
force? Under present policy, acquisition of shares in unlisted companies is generally permitted in
all business categories with the exceptions of: 1) agriculture, forestry, and marine products; 2)
petroleum industries; 3) mining; and 4) leather and leather products manufacturing.' Proposed
investments in these business categories are subject to government validation after a case-by-case
review. There are also 18 so-called "restricted" lines of business, which are security related and
tightly regulated through a process of validation on a case-by-case basis.'
Law No. 194, July 29, 1948, as last amended by Law No. 81, Aug. 24, 1982.
2 Law No. 228, Dec. 1, 1949, as last amended by Law No. 65, Dec. 18, 1979. By this amendment the old Foreign Investment Law of 1950 was abolished.
Cabinet Decision, Dec. 26, 1980.
See specific laws for each industry, as cited by Business Operations in Japan, Tax Management Al (Washington, D.C., The Bureau of National Affairs, 1984. Foreign Income Portfolios 51-7th). See also D. Birenbaum and S. Zackua, "Foreign Investment in Japan: Current Limits and Restrictions," 10 East Asian Executive Reports 16 (Oct. 15, 1988). The 18
21
Two types of investment arc covered by the new legislation, portfolio investment and
inward direct investment (cases where the investment is likely to involve participation in
management decisions). Previously, all foreign investments had to have prior approval, under the
provisions of the Foreign Investment Law of 1950. Now, foreigners are required only to provide
notification.
Inward direct investment. The new law is supplemented by the Cabinet Order Concerning Direct
Investment in Japan (Cabinet Order No. 261 of October 11, 1980). Under the new Law and the
Cabinet Order, certain parties taking specified actions are considered to be foreign investors who
must give advance notice of those actions.' The parties include: 1) non-resident individuals; 2)
juridical persons, such as corporations or partnerships, which are established in foreign countries
or for which the majority of the officers are non-resident; and 3) Japanese corporations with
majority ownership (50 percent or more) directly or indirectly held by non-resident individuals or
foreign juridical persons. Since "resident" is defined as any individual with his domicile in Japan,
non-Japanese permanent residents of Japan, who in the past faced the same restrictions as other
foreigners, are no longer considered foreign investors.
The kinds of actions that must be reported by these foreign investors include:
1) Amuisition of shares in corporations, unless those shares had already been owned by a
non-resident individual or a foreign juridical person. (This provision applies only to corporations
restricted industries are: water supply, electric power, gas, railroads, light rail, road transport, freight express, marine transportation, harbor transportation, air transportation, banking, mutual loan and savings banking, long-term credit banking, foreign exchange banking, trust, broadcasting, fisheries, and mining. These industries are commonly excluded in international investment relations. See U.S.-Japan Treaty of Friendship, Commerce and Navigation, art. VII(2), T.I.A.S. 2863.
5 Art. 26, para. 1 & 2, of the 1979 Law; art. 2, para. 1 & 2, of Cabinet Order No. 261.
22
not listed on a stock exchange, as acquisitions of shares in listed corporations fall under the
provisions of the Securities Exchange Law.)
2) Assignment of shares held by non-resident individuals to any of the parties specified above, in
cases where the shares had been owned before the seller became a non-resident.
3) Acquisition of shares in corporations that are listed on a stock exchange, if the shares acquired
amount to 10 percent or more of the total issued shares of the corporation. (Notice is also
required when the acquisition is less than 10 percent, if that acquisition, taken together with the
holdings of another juridical person who has a special relationship with the acquirer, such as a
continuous economic relationship or family relationship, would amount to 10 percent. "Special
relationships" include such circumstances as one corporation holding more than half the shares of
the other.)
4) Agreements to change the business objectives of a corporation, when the agreement is made
by a party that holds more than one-third of the shares in the corporation.
5) Establishment of a branch in Japan, except in the industries already subject to prior approval
requirements under other laws: banking, insurance, long-term credit, gas, electricity, and securities
companies.
6) In some cases, loans of over 100,0(J0,0(Y
7) Certain acquisitions of corporate debentures, other than those that are both issued and payable
abroad.
8) Any acquisition of shares of a juridical person established by special law.
Certain transactions are exempted by the Cabinet Order from the requirement of advance
notice. The exemptions include a merger with or consolidation under a company that holds stock
issued by a company not listed on the stock exchange, divisions or conversions of existing shares,
23
acquisition of shares floated abroad, and acquisition of shares through inheritance or bequest.
Furthermore, whenever portfolio investments are made through a designated securities company,
no prior notice is necessary.6
Notification procedures. The prior notice, when it is required, should be given to the Minister of
Finance and the minister ‘vith jurisdiction over the enterprise concerned. Notice must be not more
than three months in advance of the action and must be given by means of a resident proxy. The
notice should state the name, address, nationality, and occupation of the investor and should
describe the purpose of the business, the reason for the investment, the amount of money involved,
and the date of the action. The ministers then have 30 days in which to investigate the investment.
if they find that it might interfere with Japanese security, public order, public safety, the smooth
operation of the economy, or international reciprocity on the subject of foreign investment, they
may either extend the waiting period to four or five months or recommend canceling or changing
the planned investment. The foreign investor will be notified and has 10 days to reply. If the
investor does not agree to comply with any recommended change, the ministers may order
cancellation or modification of the plan.'
Wholly-Owned Subsidiaries. Before 1973, the establishment of a subsidiary in Japan by a foreign
was subject to very close government scrutiny. Under th- 1 t,cralizAtion policy of 1973, the
fifth step in a series of six,8 the Japanese government granted "automatic approval" of investments
of up to 100 percent in new companies (direct investment) and existing companies (investment for
6 Art. 2, para. 13, of Cabinet Order No. 261.
Art. 26, para. 3 & 4, of the 1979 Law.
The liberalization programs were launched in 1945-1955, 1955-1963, 1963-1967, 1967-1973, 1973-1978, and 1978-1982.
24
participation in management and portfolio investment) for all but five industries. This 1973 policy
was considerably less restrictive than that of 1971, which, ‘vith certain exceptions, had limited
foreign investment to 50 percent in new companies and under 25 percent in existing companies (a
maximum of 10 percent per individual foreign investor).
Under the 1979 Law, in principle, there are no restrictions on the establishment of
a wholly-owned subsidiary, unless the subsidiary is established by a non-Japanese corporation acting
as a holding company in violation of the Antimonopoly Law.' Notification of the acquisition of
stock or shares must be filed with the Minister of Finance; a standard printed form is used.
Notification procedures are similar to those described above for direct investment. In addition, the
foreign investor is required to file various reports, including, among others, tax reports, reports for
tax treaty privileges, and employee welfare reports.
Prepared by Sung Yoon Cho Assistant Chief Far Eastern Law Division Law Library, Library of Congress October 24, 198Q
Law No. 54, Apr. 14, 1947, as last amended by Law No. 25, Apr. 18, 1986.
25
LUXEMBOURG
Luxembourg does not have a requirement similar to the U.S. Foreign Agents Registration
Act. It does not require registration of agents for foreign businesses.
There are no disclosure requirements applicable to foreigners for the acquisition of stock
in domestic corporations or of capital of any kind.
There are no disclosure requirements applicable to political contributions made by
foreigners.
There are no provisions in Luxembourg law on the above topics.
Prepared by George E. Glos Assistant Chief European Law Division Law Library of Congress October 23, 1989
26
MEXICO
In regard to potential non-diplomatic agents of foreign governments who might seek
to affect Mexican legislation or other aspects of the nation's political life, several provisions of the
national Constitution' appear to be highly relevant. The final paragraph of Article 33 of the
national Constitution states that:
Foreigners may not in any way meddle [inmiscuirse] in the political affairs of the nation.
A penalty for violation of this Constitutional provision is provided by Article 246
of the Federal Law of Political Organizations and Electoral Processes, which states:
The foreigner who meddles [se inmiscuya] in the political affairs of the nation shall be expelled from the national territory.'
Foreigners without diplomatic status would thus appear to be banned from the usual
work of lobbyists in directly seeking to influence legislation.
As to Mexican nationals who might seek to perform similcr services in behalf of a
foreign government, the following provisions of the national Constitution could be applicable:
Art. 37-B) Mexican citizenship is lost:
Constitucidn Politica de los Estados Unidos Mexicanos ("Constitution of 1917" as amended) in Constitucian Politica de los Estados Unidos Mexicanos, 81st ed. (Mexico, Editorial Pornia, 1986).
2 Ley Federal de Organizaciones Politicas y Processos Electorales (Diario Oficial de la Federacion [D.01, Dec. 30, 1977) in Ley Federal de Organizaciones Politicas y Processos Electorales y su Reglamento (Mexico, Editorial Porrtia, 1981).
27
By voluntarily rendering official service to a foreign government without permission from the Federal Congress or from its Permanent Commission;
IV. By accepting positions' Ititu/os] or functions [funciones] from the government of another nation without prior license from the Federal Congress or from its Permanent Commission, except literary, scientific or humanitarian titles', which can be freely accepted.
Thus it appears reasonable to state that Mexico bans unlicensed political lobbying
in behalf of foreign governments by both its citizens and foreigners without diplomatic status.
Foreign business agents and foreign investors
Foreign investors in Mexican commercial or business ventures or stocks are required
to submit an application for registration in the National Registry of Foreign Investments, and pay
the required fee.'
According to the Regulation of the National Registry of Foreign Investment, all
persons, corporations, trustees, documents, and resolutions within the purview of the law must be
entered into the records of this Registry. Applications for such registration, must be submitted
within 30 days following-s;lbscririon or thc purchase of shares or str.y.-.ks iss,,ed by a MexiL:ai-1
The word funciones which is translated here as "positions" could reasonably also be translated as "titles." However, titles of nobility tutulos nobiliarios] are treated separately under Art. 37-A(II), which provides that their acceptance by a Mexican national results in their loss of Mexican nationality.
The word titu/os as used here would include honorary degrees.
s Decree of Oct. 12, 1981 (D.O., Dec. 8, 1981); Decree of June 6, 1979; (D.O., June 6, 1979), and Regulation of May 15, 1989, (D.O. May 16, 1989).
28
firm. Changes must also be registered. Agencies of foreign enterprises, as well as their branches,
are specifically required to be entered in the Registry. Sec the enclosed copies from Foreign
Investment: Legal Framework and Its Application (Mexico, National Commission of Foreign
Investment 1986), pp. 49-75.
Political contributions by foreigners
The ban against foreigners "meddling" in Mexico political affairs which is imposed
by Article 33 of the national Constitution (and quoted above) can reasonably be read to bar
political contributions by foreigners, although specific confirmation of this interpretation through
judicial decisions is lacking. Note may be made, however, that The Federal Law on Political
Organizations and Electoral Processes of October 24, 1978, barred Mexican political organizations
from accepting any pact or agreement which may subordinate them to any international organi-
zation, or which may make them dependent on any foreign political party or entity.'
Prepared by Rubens Medina Chief, and Glenn L. Reitze Hispanic Law Division Law Library of Congress October 26, 1989
Reglament° del Registro Nacional de Inversiones Extranjeras, Dec. 28, 1973, arts. 2, 3, and 12 to 16.
' Id. art. 23 (III).
29
THE NETHERLANDS
In the Netherlands there is no law similar to the United States Foreign Agents
Registration Act. However, every commercial agent who maintains a business organization in the
Netherlands must register with the appropriate local Chamber of Commerce. If a commercial agent
acts for a principal who has no business organizations in the Netherlands and the agent is
authorized to conclude contracts for the account of and in the name of the principal, he must also
register the principal with the local Chamber of Commerce. This registration must include details
about his authority to act on behalf of the principal, as well as the principal's trade name.'
No specific law on disclosure requirements applicable to foreigners acquiring stock
in corporations in the Netherlands could be found.
There is no specific legislation in the Netherlands dealing with the disclosure of
political contributions made by foreigners.
Prepared by Karel Wennink Senior Legal Specialist European Law Divi:ion Law Libitiry of Congress October 23, 1989
Commercial Register Law, Law of July 26, 1919, Staatsblad [official law gazette of the Netherlands] 493, as amended, arts. 3 and 5.
30
PORTUGAL
A search for statutory provisions governing registration of agents of foreign
governments did not indicate that any specific statute has been enacted. It is questionable,
however, that a Portuguese national may indiscriminately accept employment by a foreign
government, especially if political interests are at stake. In general, it is the expectation in Hispanic
countries that activity by foreign political agents will be limited to members of the diplomatic corps.
Foreign business agents
Decree Law No. 42,645 of November 14, 1959, as amended assigns competence to the
"conservatorias" of the Portuguese Commercial Registry to register foreign corporations in Portugal
as well as their subsidiaries, agencies and representatives that conduct business in the country.'
Foreign corporations or business organizations are required to provide the following
information for registration:3
a) the name or designation of the firm or corporation;
b) the purpose, kind of trade or commerce practiced or intended;
c) date of the initiation of activities or operations;
d) the seat of business and its full addik.....„
e) name of the parent organization and its full address;
Regulamento do Registo Comercial [R.R.C.], in Legislactro Comercial, compiled by A. Silva Neto, Libraria Petrony, Lisbon, 1981, at 470-492.
R.R.C., Chapter I, Title 1, Section II, arts. 3-5.
Id., Chapter II, sub-section I, arts. 42 and 48.
31
f) certification authenticated by the corresponding Portuguese consular agent attesting to
the fact that thc foreign parent organization has full legal standing in its home country.
Political contributions by foreigners
As far as political contributions by foreign persons or corporations, Law No. 14/79
of May 16, 1979, as amended, specifically provides that: "political parties, candidates and/or their
proxies may not accept contributions of monetary value destined to electoral campaigns from either
national enterprises or foreign persons or associations thereof."'
Penalties prescribed for those who accept such contributions are: a fine of 20,000
to 100,000 escudos and imprisonment of up to two years.. There are distinctions in the application
of penalties in cases of corporate liability such as those of the political parties and individuals such
as their legally responsible officiaLs or the candidates themselves.'
Prepared by Rubens Medina Chief, Hispanic Law Division Law Library of Congress 0:tober 26, 1989
Lei Editorial para a Assembleia da Repablica, Assemblia da Repiblica, Lisbon, 1979, at 11-90, art. 76.
s Id. art. 144.
32
REPUBLIC OF IRELAND
I. There are no statutory requirements for the registration of agents working for foreign interests.
II. For the issue or transfer of any shares in an Irish company to a person to an individual or
corporation resident outside Ireland, the consent of the Central Bank of Ireland is required.'
Thus disclosure of the foreign buyer is entailed. The consent of the Bank is normally forthcoming
if the shares are subscribed for in non-Irish currency or in Irish Pounds from an external account.'
Prior exchange control permission is also required for direct investments by non-
residents wishing to establish industrial or commercial projects in Ireland.3 Applications are made
to the Central Bank on which the names and addresses of the foreign investors and the amount
and type of the capital to be provided by them must be stated. Again, the consent of the Bank
is normally readily given.'
The rational for these disclosure requirements is the regulation of the effect of
capital movements on the exchange rate of the Irish Pound.
Under the companies legislation, a register of all members of the company must be
maintained.' However. nn tiotic,c of any trust can be entered on the register and the namr of a
nominee shareholder, rather than the beneficial or real owner, is entered.
The Exchange Control Acts 1954-1986 and notices issued thereunder.
2 P. Ussher and B. O'Connor, Doing Business in Ireland 3.02[9] (1987).
3 Exchange Control Notice EX13.
4 Supra note 2, at 2.01[4].
5 Companies Act 1963, §§ 116-122.
33
Disclosures are also required under the Mergers, Take-overs and Monopolies (Control) Act
1978,6 which authorizes the anti-trust aspects of a proposed merger involving a transaction above
a threshold value. The non-statutory controls exercised under the Take-over Code and the Rules
Governing Substantial Acquisition of Shares in the United Kingdom are also extended to Irish
companies listed on the amalgamated Stock Exchange of the United Kingdom and the Repubnc
of Ireland.'
No regulations governing political contributions have been located.
Prepared by Kersi B. Shroff Senior Legal Specialist American-British Law Division Law Library of Congress October 25, 1989
No. 17.
For further details, see United Kingdom report.
34
SPAIN
A search for statutory provisions governing registration of agents of foreign
governments did not indicate that any specific such statute has been enacted. It is questionable,
however, that a Spanish national may indiscriminately accept employment by a foreign government,
especially if political interests are at stake. In general, it is the expectation in Hispanic countries
that activity by foreign political agents will be limited to members of the diplomatic corps.
Foreign business agents
As far as foreign commercial or business agents are concerned, they are governed
by the Statute on Foreign Investment in Spain as approved by Decree No. 3022 of 1974. A
selection of pertinent passages, taken from Doing Business in Spain, edited by Fernando Pombo
(Matthew Bender, New York [loose-learn, §§ 4.0311] through 4.05[8] has been copied and is
attached to this report.
Political contributions by foreigners
Royal Decree Law No. 20/1977, of March 18, 1977,8 implementing Article 68.1 of
the Constitution of Spain established the electoral standards for that country.
Political parties are subsidized by the government to meet the expenditures required
to participate in the electoral process accor.!:-1; !c. a schedule, based on the number of seats
obtained for the legislature and number of favorable votes supporting each candidate elected to
the House (Congreso de Diputados) and to the Senate.9
Boletin Oficial des Estado [B.O.E.], of March 23, 1977.
9 Id. art. 44.
35
The funds destined for political campaigns are required to be controlled through
special deposit accounts with an accredited bank. Foreign persons or associations are absolutely
barred from contributing to these accounts."
Prepared by Rubens Medina Chief, Hispanic Law Division Law Library of Congress October 26, 1989
" Id. arts. 46, 5.
36
UNITED KINGDOM
I. There are no provisions requiring the registration of agents who lobby on behalf of foreign
interests.
II. Disclosure requirements concerning foreign investments in the United Kingdom are the same,
except in stated cases, as those applicable to domestic investors. The main exception is found in
the sale of corporations which have been denationalized in recent years under the policy of
privatization. Thus, in the case of Jaguar and British Airways, for a stated initial period, a limit
on foreign ownership of the corporations has been set.' The articles of association of the
corporations thus require a disclosure of the nationality of those acquiring shares in them. A
separate register of foreign shareholders is also maintained.
The government also retains reserve powers allowing it to prohibit the foreign takeover of
an important manufacturing concern, if it determines that the transfer of the enterprise would be
contrary to the national interest.' There are no specific disclosure requirements in the statute and,
presumably, such takeovers are monitored through the requirements of the legislation and
regulations on corporations and securities.
Other disclosures are required as follows:
A.. The Companies Act, 1985, requires that the names and addresses of all the members of a
corporation must appear in a register showing the number of shares held by each member?
In the case of Jaguar, the period expires in March 1990 and the Ford Co. has already announced its intention of acquiring a substantial holding in the company.
2 The Industry Act, 1975, ch. 68. The authority given under the Act has not as yet been used.
Ch. 6, § 352.
37
However, where shares are held under a trust agreement, it is provided that no notice of the trust
need be entered on the register.' This could enable persons who are in real control of a
corporation to conceal that position from the shareholders.
In recent years a greater disclosure of beneficial interests has nonetheless been required.
Since 1981, the accounts of both private and public companies, are required to include the
following:
(1) particulars regarding any subsidiaries and other share-
holders;
(2) financial information relating to subsidiaries;
(3) if the company is itself a subsidiary, the name of the ultimate holding company,
including a foreign company.'
There is also an obligation to disclose the share interests of the spouses and infant children of
directors.'
In the case of public companies, there are broader provisions obliging any person who
acquires or disposes of a five percent interest in the shares of a company, to notify the company.'
In this case, the interest held by a beneficiary under a trust is considered to be a notifiable
interest.' A public compan- lce !'-'c the authority to investigate the ownership of its share.- 9
Id. § 330.
s Id. § 231, Sched. 5.
6 Id. § 203.
▪ Id. §§ 198-220.
• Id. § 208(3).
9 Id. § 212.
38
A direct requirement for the disclosure of thc nationality of a person is in the case of the
directors of a company.' if the directorship is held by another corporation, the name of the
company and its address must be given.
B. Disclosure requirements are included in the City Code on Take-overs and Mergers issued by
the Stock Exchange's Panel on Take-overs and Mergers. The Code does not have the force of
law, but a breach of its provisions can lead to sanctions including the withholding of the facilities
of the market. The Code is designed to ensure fair and equal treatment of all shareholders in
relation to mergers and takeovers.
Disclosure requirements are made throughout the Code in order to ensure that the
shareholders of a company targeted for takeover or merger are treated similarly. For example,
under Rule 8.3, a person who owns or controls (directly or indirectly) one percent or more of the
securities of the offeror/or offeree company must publicly disclose any dealings in the securities
of the companies. The disclosure must include the identity of any associate dealing with the
securities.
C. The Rules Governing Substantial Acquisition of Shares, another code issued by the Panel on
Take-overs and Mergers, restricts the speed with which a person may increase his holdings of
shares and rights over shares to pn prre!7,ate of betv'een fifte,-_-n percent and thirty percent of the
voting rights of corporations listed on the Stock Exchange. To this end, several disclosure
requirements have been made in these rules. Thus, under Rule 3, if an acquisition will result in
a person holding fifteen percent or more of the voting shares of a company, the person must notify
the Stock Exchange of the acquisition by 12:00 noon of the following day. The name of the
person acquiring the shares and that of the beneficial owner, if different, must be disclosed.
Id. § 289.
39
For consideration of anti-trust implications, an acquisition may be referred to the
Monopolies and Mergers Commission." The threshold at which a reference may be made is the
acquisition of twenty percent of a corporation's shares.
III. Disclosures concerning political contributions made by corporations are required under the
Companies Act 1985, Schedule 7. The requirements, however, generally do not apply to foreign
corporations. There are no disclosures required from non-corporate entities.
Prepared by kersi B. Shroff Senior Legal Specialist American-British Law Division Law Library of Congress October 25, 1989
" Fair Trading Act 1973, ch.41.
