By Nicholas P. Flint
Pursuant to a little-known requirement established by the U.S. Department of Commerce's Bureau of Economic Analysis (BEA), foreign investors in certain U.S. businesses must now report their investments by filing a Form BE-13 within 45 days after the investment. The BEA uses such BE-13 filings to collect information on the acquisition or establishment of U.S. business enterprises by foreign investors. Given that there are potential civil and criminal penalties for failing to file BE-13 forms, it is important to know when and what forms must be filed.
The rule defines "foreign direct investment in the United States" as the direct or indirect ownership or control by a foreign individual or parent company of 10% or more of the voting securities of an incorporated U.S. business enterprise, or an equivalent interest of a branch or division within an incorporated business. The filing is intended to cover a variety of business transactions with respect to foreign investments, such as the establishment, acquisition, or expansion of a U.S. business or division.
The target of the foreign parent's investment (i.e., the U.S. business or affiliate in which the investment is made) is subject to the BE-13 reporting requirements, not the foreign investor itself. The BE-13 filing must be made within 45 days after the effective date or completion of the reportable transaction (i.e., the closing of an acquisition, the commencement of an expansion, or the creation of a new affiliated entity). Even if the BEA does not contact the foreign investor or target of the investment, the BE-13 filing is required.
There are six versions of the form that the U.S. affiliate can file. The version of the form that is required is determined by the transaction type:
The U.S. affiliate or target of the foreign parent's investment can file the appropriate BE-13 form in a number of ways, though the BEA strongly recommends electronic filing through its portal at www.bea.gov/efile. The BEA website also provides a number of filing resources, including forms, filing instructions, FAQs, and video tutorials.
Failure to properly file the BE-13 (whether missing the deadline, using the wrong form or providing incomplete or inaccurate information) can result in civil and/or criminal penalties, ranging from $2,500 or more than $32,500 per violation, as well as injunctive relief compelling compliance, and imprisonment of up to one year and/or a fine of not more than $10,000 per violation (if it is found that such failure was willful).
Nick Flint is an associate attorney with Flint, Connolly & Walker, LLP who represents domestic and international clients on a variety of corporate and transactional matters, including mergers and acquisitions, joint ventures, private equity and venture capital transactions, financing and lending arrangements, and debt and equity offerings. In addition to his transactional work, Nick routinely serves as a general business and legal advisor to his clients, counseling on matters such as corporate governance, executive compensation, regulatory compliance, and commercial contracts.