How to Navigate CFIUS When Investing in National Security Tech

The Committee on Foreign Investment in the United States (CFIUS) review process has become increasingly complex for family offices investing in national security technology companies. Understanding this regulatory framework is essential for successful deal execution and portfolio management.

CFIUS jurisdiction extends beyond traditional foreign investment to include any transaction that could result in foreign control of a US business involved in critical technology, infrastructure, or sensitive personal data. Family offices with any foreign limited partners, advisory board members, or beneficial ownership structures must carefully evaluate CFIUS implications.

The mandatory filing requirements under FIRRMA (Foreign Investment Risk Review Modernization Act) apply to transactions involving “critical technologies” as defined by export control regulations. This
includes many dual-use technologies common in government contracting, such as advanced computing, artificial intelligence, and cybersecurity solutions.

Pre-transaction planning should include CFIUS counsel engagement during due diligence phases. Early identification of potential issues allows for structure modifications that can avoid lengthy review
processes or transaction prohibitions. Many deals fail due to late-stage CFIUS complications that could have been addressed earlier.

Foreign investor participation requires careful documentation and potential mitigation measures. Family offices should maintain detailed records of all foreign relationships, including passive investors, to demonstrate compliance with CFIUS requirements.

Timing considerations significantly impact deal execution. CFIUS reviews can extend 45-90 days, requiring coordination with financing deadlines and other transaction milestones. Voluntary filings often proceed
faster than mandatory reviews but still require substantial preparation.

Mitigation agreements may be required to address national security concerns while allowing transactions to proceed. These agreements can include governance restrictions, security protocols, and operational
limitations that impact investment returns.

Post-closing compliance obligations continue throughout the investment period. Family offices must maintain compliance with any mitigation measures and report material changes that could affect CFIUS
determinations.

Working with experienced CFIUS counsel and developing standardized procedures for evaluating transactions creates efficiencies while ensuring compliance with evolving regulatory requirements.