Designing Hell or High Water Clauses for Foreign Investment Clearances
Hell or high water clauses for foreign investment clearances must bound divestiture obligations with strict asset schedules and reverse termination fees.
Mandatory Notification Trigger
Meaning
Specific thresholds based on revenue, asset value, or market share require parties in a merger to inform competition authorities of their intent to combine before the deal is finalized. The mandatory notification trigger acts as a gatekeeper in antitrust law, ensuring that potentially harmful monopolies are reviewed by the government. If the combined entities exceed these limits, the transaction cannot proceed until a formal investigation is complete.
Threshold Metric
Regulators often set different levels for domestic and international sales to capture various types of economic impact. A mandatory notification trigger is usually hit when the target company has a high turnover in a specific jurisdiction. These numbers are updated periodically to account for inflation and economic growth.
The calculation must include the sales of all subsidiaries and parent companies involved in the transaction.
Compliance Timing
Firms must file their papers within a set number of days after signing the letter of intent or the purchase agreement. Waiting until the last minute can lead to long delays or heavy fines for failing to meet the mandatory notification trigger. The clock for the government’s review period only starts once the filing is deemed complete.
Regulatory Power
Authorities have the right to block the deal or demand the sale of certain business units to maintain competition. The mandatory notification trigger ensures that the public interest is considered alongside the private interests of the shareholders. It prevents the quiet consolidation of industries that might lead to higher prices for consumers.