FIRRMA Compliance

The core of FIRRMA Compliance lies in its broadened jurisdiction, which now encompasses non-controlling investments and certain real estate transactions that were previously exempt from CFIUS review. 

This expansion was designed to address evolving threats to the U.S. defense industrial base, particularly regarding the acquisition of critical technologies. Understanding these jurisdictional triggers is essential for identifying whether a transaction requires a mandatory declaration.

• Non-Controlling Investments: CFIUS now has the authority to review minority investments in a TID U.S. business if the investor gains access to material non-public technical information or board observer rights.
• Real Estate Proximity Risks: Acquisitions or leases of real estate located near sensitive military installations or strategic ports are now subject to independent review, regardless of whether a business is involved.
• Call-In Powers for Non-Notified Transactions: Perhaps the most significant change under FIRRMA is the government’s ability to unilaterally initiate a review of a transaction after it has closed if it was not previously filed.
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SJKP LLP acts as a professional safeguard during this phase, evaluating the total mix of information to determine if a transaction falls within these expanded regulatory boundaries.

Under the FIRRMA framework, mandatory declarations are required for transactions involving a TID U.S. business where a foreign government holds a substantial interest in the investor. 

TID businesses are those involved in Critical Technology, Critical Infrastructure, or the maintenance of Sensitive Personal Data. Failure to submit a mandatory filing can result in severe civil penalties and initiates an adversarial enforcement posture from the Treasury Department.

When a CFIUS review identifies a potential national security risk, the parties may be required to enter into a mitigation agreement as a condition for the transaction to proceed. 

These agreements are legally binding contracts with the government that impose specific operational and governance restrictions on the combined entity. Navigating the negotiation of these terms requires a sophisticated understanding of the government's enforcement priorities and the technical feasibility of the proposed restrictions.

• Operational Restrictions: Mandates that limit access to certain technologies or data to U.S. citizens only.
• Governance Requirements: The appointment of government-approved monitors or independent directors to the board of the combined firm.
• Periodic Audits and Compliance Reporting: Rigorous requirements for the company to report on its adherence to the mitigation terms.

We assist clients in evaluating the impact of potential mitigation measures on the deal's valuation, ensuring that the cost of compliance does not outweigh the strategic benefits of the acquisition.

One of the most volatile elements of FIRRMA Compliance is the threat of retroactive divestment for transactions that were not notified to CFIUS and were later called in for review. 

There is no statute of limitations on the government's ability to review a non-notified deal. If CFIUS determines years after the fact that a transaction poses a risk, the President has the authority to order the total unwind of the investment, often leading to terminal financial losses for the investor.

A clinical approach to FIRRMA Compliance involves a strategic choice between filing a short-form declaration or a full-form notice, depending on the complexity of the national security risk. 

While a declaration is faster and less expensive, it may result in a "no action" letter that does not provide the permanent safe harbor of a full-form notice. We evaluate the evidentiary weight of your transaction to determine which pathway provides the definitive resolution required for your business objectives.

• Declarations: Best suited for low-risk transactions or those involving "excepted investors" from allied nations.
• Full Notices: Mandatory for complex TID acquisitions or cases where the parties expect the government to require a mitigation agreement.
• Interim Decisions: CFIUS may respond to a declaration by requesting a full notice, which can delay the closing of a deal.

SJKP LLP manages the logistical challenges of these filings, ensuring that every submission is technically perfect and strategically aligned with the current federal enforcement posture.

Selecting SJKP LLP to manage your FIRRMA Compliance and CFIUS review ensures that your cross-border investment is protected by a firm that treats national security scrutiny as a high-stakes jurisdictional priority. We recognize that for our clients, the ability to close a deal depends on navigating a regulatory environment that is increasingly skeptical of foreign capital. Our firm provides a firm legal safeguard, integrating judicial advocacy with a deep understanding of the current regulatory and forensic environment surrounding TID U.S. businesses and mitigation protocols.

We do not simply offer general guidance; we build proactive strategies that identify potential national security risk, evaluate the strength of your jurisdictional defenses, and assess the validity of your filing strategy with clinical precision. Our senior partners take a hands-on approach to every engagement, ensuring that you have the most experienced minds at the table during every meeting with federal regulators and every high-stakes negotiation. At SJKP LLP, we believe that the legal system should provide a clear and fair path for global capital to support domestic innovation. By utilizing our advanced forensic capabilities and aggressive litigation tactics, we provide the definitive resolution required to finalize the record and stabilize your transactional posture.