14 minute read | October.27.2026
New Thresholds for Review: Separate Rules for Listed Companies for the First Time
Expanded Scope of Application to Previously Unaffected Acquirers
Under Discussion: Screening of EU Investors in Critical Assets
Procedural Aspects: Reliefs and an Accelerated Prohibition Process
Outstanding Issues: Sector Definition and Greenfield Investments
Foreign direct investment (FDI) controls in Germany are poised for their most significant overhaul since the introduction of the regulations previously scattered across the Foreign Trade Act (Außenwirtschaftsgesetz, AWG) and the Foreign Trade Ordinance (Außenwirtschaftsverordnung, AWV). These are now to be consolidated into a separate Investment Review Act (Investitionsprüfungsgesetz, IPG).
The draft bill (Referentenentwurf) now available (as of September 28, 2026, including the Investment Review Regulation (Investitionsprüfungsverordnung, IPV); collectively, the "Draft") from the Federal Ministry for Economic Affairs and Energy (Bundesministerium für Wirtschaft und Energie, BMWE) justifies this move by citing the changed geopolitical security situation and practical experience.
European requirements are added: The revised EU Screening Regulation (Regulation (EU) 2026/1386) on the screening of foreign direct investments will apply to all Member States beginning January 17, 2028, and will result in a minimum level of harmonization among Member States' FDI regimes.
In practice, the draft goes beyond a reorganization of the existing provisions. It shifts the ownership thresholds, expands the pool of foreign investors and places greater emphasis on an investor's actual influence — in addition to the voting rights threshold. We analyze the impact of these changes on the transaction practice — with a view to what they specifically mean for financing rounds, minority investments and exits.
The draft reorganizes the ownership thresholds (trigger thresholds). For the first time, it differentiates between listed and unlisted target companies. This distinction is the most notable conceptual change within the ownership thresholds.
The rationale behind this planned change is the often divergent balance of influence in listed companies, particularly due to low attendance rates at annual shareholder meetings. At the same time, the draft reduces the previous three review trigger thresholds of 10%, 20% and 25% to two thresholds of 10% and 25%. The 20% threshold under Sec. 56 (1) No. 2 AWV will not be transferred into the IPG.
For sector-specific proceedings (e.g. weapons of war, defense and IT security equipment) and targets active in certain security-relevant sectors (particularly in critical facilities), the triggering threshold remains at 10% of the voting rights.
For investors, this means that even the acquisition of a small minority stake in these critical sectors remains subject to review.
The threshold for triggering a review for listed targets in a security-relevant sector with a 25% threshold will be lowered from currently 20% to 15% of the voting rights. The reduction rationale is the frequently low attendance of shareholders at annual shareholder meetings of listed companies. Because a significant portion of the capital is not regularly represented at these meetings, even a share of voting rights below 25% can, in practice, constitute a blocking minority and thus enable influence that extends beyond the nominal voting rights position.
For unlisted companies, the draft takes the opposite approach. For these targets, the threshold for initiating a review in the remaining security-relevant sectors (except for sectors with a 10% threshold) will be raised from 20% to 25%. The proceeding initiated ex officio or upon request, which involves neither a filing requirement nor a prohibition on closing, is now referred to as "cross-sectoral" and the threshold remains at 25%.
The practical implications of this increase are likely to remain limited. According to the explanatory memorandum (Gesetzesbegründung) to the draft, the previous reduction from 25% to 20% had no impact on the imposition of measures restricting acquisitions. In such cases, the authority to review existed regardless of the 20% threshold. This will primarily relieve involved parties of proceedings that yield no substantive results.
In addition to initial acquisitions, increases in shareholdings are also subject to a new review (thresholds for additional acquisitions). Under the 10% review threshold, this is required when the share of voting rights reaches or exceeds 25%, 50% and 75%. Under the 25% review threshold, it is required at 50% and 75%. This system remains in place but is supplemented and modified in two respects.
For publicly-traded companies, an additional 40% threshold for subsequent acquisitions has applied to date. This will be replaced by a threshold of 30%. Aligning with the control threshold under Sec. 29 (2), first sentence, of the Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz, WpÜG) creates systematic consistency between investment reviews and the acquisition of control under takeover law. However, it triggers a new review requirement even for smaller additional acquisitions.
A new threshold for additional acquisitions of 100% of the voting rights has been introduced. Increasing a stake from 75% to a total of 100% is now subject to review and must be reported accordingly in the case-specific procedures. The rationale is understandable from a corporate law perspective: In the event of a complete takeover, any veto rights and minority protection measures held by the remaining shareholders — previously de facto checks and balances — cease to exist. The rights of influence and control are perpetuated.
The frequency of additional acquisition thresholds has drawn criticism. Critics argue that a chain of reviews extending all the way to a full takeover increases administrative burden and uncertainty, and may be met with incomprehension by international investors. By international standards, the German thresholds for initial acquisitions are very low to begin with, and those for subsequent increases are comparatively strict. Even if European law provides for a minimum level of harmonization in the future, individual thresholds will continue to vary among Member States.
The draft not only shifts the ownership thresholds but also alters the scope of application of investment controls, under which foreign investors are subject to investment review. Both changes in this area affect acquirers that were previously largely exempt from review.
Investors from Switzerland, Norway, Liechtenstein and Iceland will be subject to the same screening rules as acquirers from third countries. These countries are not EU Member States but belong to the European Free Trade Association (EFTA) and were previously treated under the cross-sectoral proceeding of the German AWV as equivalent to EU residents.
Such preferential treatment is no longer compatible with the amended EU Screening Regulation, under which any company headquartered outside the EU is considered a foreign investor. EFTA investors have already been treated as foreign investors in the sector-specific procedure.
Until now, whether a natural person was classified as a resident of Germany or the EU was determined solely by domicile or habitual residence. Even persons without German citizenship were considered residents of Germany provided they had their domicile or habitual residence in Germany./p>
Going forward, a natural person must exclusively hold German citizenship (domestic resident) or exclusively the citizenship of one or more EU Member States (EU resident). This will also cover individuals who live and work in Germany but additionally hold the citizenship of a third country.
There is currently a discussion as to whether the investment review for targets active in the critical facilities sector should also apply to investors from EU Member States in the future. This would be a first if so, and, at the same time, the most far-reaching tightening of the entire act.
This point is explicitly not part of the draft act at this time and is likely being called for by the Federal Ministry of the Interior (Bundesministerium des Innern).
Another relevant change in the draft is the criteria for applying the thresholds. In the future, an atypical acquisition of influence without the acquisition of voting rights will be subject to an independent review. Under current law, special rights — such as guaranteed seats or majorities on supervisory boards or in executive management, veto rights regarding strategic business or personnel decisions, and rights to information — were subject to review only in conjunction with the acquisition of voting rights. The granting of such rights alone was not subject to review, even if they conferred very significant influence.
With the amendments in the draft, the shift from "atypical acquisition of control" to "atypical acquisition of influence" and the elimination of the requirement for a concurrent acquisition of voting rights — the assessment standard shifts even more strongly from a formal to a functional approach. The decisive factor is whether the special rights, either on their own or in combination with a voting interest, confer influence equivalent to a voting interest above the relevant thresholds for triggering the review. Thus, what matters is not merely how many voting rights an investor holds, but the actual influence the investor can exert on the target. This is likely to have particularly far-reaching consequences for structured minority investments and co-investments.
This affects typical elements of governance packages that are common in venture capital, growth and infrastructure transactions: seats on the supervisory board or advisory board, (pure) observer rights, veto lists and approval reservations, expanded information and reporting rights, and access to technology, research results or operational data. Such rights have primarily been evaluated under corporate and tax law to date. In the future, they are likely to be examined even more closely from the perspective of investment review law.
The draft does not only introduce stricter requirements. The duration of the investment review process represents a significant bureaucratic burden for many investment projects, especially since most proceedings get approved. In light of EU law requirements, the draft will provide relief in these areas:
In the future, the BMWE will have only 45 days (instead of the previous two months) to decide whether to conduct an in-depth review of a transaction (Review Phase 1). An extension will no longer be possible.
The in-depth review (Review Phase 2) may then last 120 days and, in individual cases involving significant effort or complexity, may be extended by up to 90 days with the consent of the direct acquirer. Circumstances that suspend the time limits remain in effect.
In the future, time limits will not begin until the day after receipt of the complete review documents. For transaction scheduling, this shortens the time required for approval and closing of transactions, even though the overall timeframe for in-depth proceedings remains substantial.
Equally significant in practice is the reduction of the review period from five years to three years from the signing of the contract, within which the BMWE may, ex officio, start an in-depth review of an acquisition that has already been closed. This noticeably reduces the risk of retroactive review for completed transactions and creates greater legal certainty for investors.
The exception for intragroup restructurings — so far applied only in cross-sectoral proceedings — is to be expanded to all types of proceedings and other non-critical scenarios. The regulation is now being aligned with the BMWE's existing practice, which stipulates that no group company from a new third country may join the group. For internationally structured groups, this codifies a significant simplification: reorganizations that do not involve a change in the beneficial owner at the end of the acquisition chain will no longer trigger a review, provided that no group company from a jurisdiction not previously represented in the chain joins the group.
In the future, a prohibition will be possible in all types of proceedings without a resolution by the Federal Cabinet (Bundeskabinett). Instead, agreement with the Federal Chancellery (Bundeskanzleramt), the Federal Foreign Office (Auswärtiges Amt), the Federal Ministry of the Interior, the Federal Ministry of Defense (Bundesministerium der Verteidigung) and the Federal Ministry of Finance (Bundesministerium der Finanzen) will be required.
This aligns the formal requirements of the case-specific and cross-sectoral procedures with those of the sector-specific procedure. The draft considers this a significant simplification of the procedure and a reduction in the workload for the Federal Cabinet, as well as for ministries not directly involved in the matter.
In practice, prohibitions are the absolute exception. From an investor's perspective, this point is also ambivalent. It speeds up procedures but potentially lowers the political threshold for a prohibition. Until now, the Cabinet's prerogative served to underscore the exceptional nature of a prohibition.
In several places, the draft indicates that there is still a need for comprehensive discussion in the ongoing legislative process. This is particularly evident in the definition of the sectors subject to reporting requirements, which contains numerous open-ended provisions.
The fundamental goal of classifying additional industries as critical is clear. The specific details still need to be clarified through further coordination among the ministries.
Among other things, there is discussion as to whether companies that maintain or transport equipment of the German Armed Forces (Bundeswehr) should be subject to the stricter review, while ensuring that mere freight forwarding companies are not included.
It must be clarified which software applications of particular security relevance are covered, such as control software for power plants or information systems in hospitals. The ministries have also criticized the scope of the category for cloud computing services as being too broad.
For semiconductors, manufacturing is already classified as a critical sector. Research and development could be added in the future. The software and cloud sectors deserve attention because they involve business models that often do not consider themselves security-relevant — such as SaaS and deep tech startups, whose next round of financing could unexpectedly become subject to review.
Greenfield investments, i.e., the establishment of a new company by foreign investors, remain excluded under the draft. The investment review applies only to the acquisition of an existing German company. The rationale is convincing: New startups lack the risks of a corporate acquisition. For startups in critical sectors such as new critical facilities, specialized laws with specific approval requirements already exist. However, this point is not yet final. The inclusion of new startups is still under discussion in the ongoing consultation process.
The draft cannot be reduced to a single specific objective. It is a mix of consolidation, targeted tightening of regulations and selective relief measures. The tightening of regulations focuses on listed targets, increases in minority stakes, the acquisition of voting rights and an expanded scope of application. The relief measures pertain to procedural law and intragroup transactions.
The rationale behind the proposal is clear. Cases in the energy, logistics and semiconductor sectors demonstrate that investment screening has become a central instrument of economic and security policy. At the same time, Germany remains dependent on foreign investment.
For companies and investors, this results in a clear but phased need for action. Ongoing and planned transactions should be reviewed to determine whether they would be subject to review under the new thresholds, particularly for listed targets and multi-tiered equity investments.
Planned minority and co-investment structures should be evaluated to determine whether they confer influence that would trigger a review. For startups and VC investors, this means: board seats, veto rights and information rights must be assessed for FDI compliance as early as the term sheet stage — not just shortly before closing. Investment structures involving EFTA countries, as well as shareholder and management structures involving individuals with dual citizenship, require re-evaluation.
It should be noted that several provisions of the draft are (explicitly) accompanied by a note stating that they are subject to the results of interministerial coordination. Changes are to be expected during this process. According to the transitional provision, the IPG will apply to legal transactions under the law of obligations concluded on or after a yet-to-be-determined effective date in 2027. Until then, the existing regulations continue to apply. The German Federal Parliament (Deutscher Bundestag) is expected to take up and pass the bill by the end of December 2026.