Investment Screening: When a Sale to a Buyer from Outside the EU Needs Approval

Anyone who sells a company to a buyer from a non-EU state needs prior government clearance, depending on the sector and the size of the stake. The new EU Screening Regulation (EU) 2026/1386 requires every member state from 17 January 2028 to run a review procedure and sets an approval duty for sensitive sectors. Germany and Austria already have their own rules, which apply today. Completion of the purchase is prohibited until clearance is given.

For everyone who wants to go about selling your company and also hears bidders from outside the EU, this is a timetable issue: a review can take months and belongs in the contract. As of 19.10.2026; an overview, not legal advice.

What does the new EU regulation provide?

Regulation (EU) 2026/1386 of 17.06.2026 requires every member state to have a review procedure for foreign direct investment. It was published in the Official Journal on 26.06.2026, entered into force on 16.07.2026 and applies from 17.01.2028. The details rest on specialist publications; we have not checked the reference in the Official Journal itself.

Point	Rule
Duty of the states	every member state sets up a screening procedure (Art. 3)
Mandatory sectors	dual-use goods and military, semiconductors, quantum and artificial intelligence, critical entities, strategic raw materials, financial market infrastructure, electoral systems (Art. 4(15))
Procedure	prior authorisation; initial review within 45 days
Call-in after completion	at least 15 months up to 5 years; at least 24 months for unnotified acquisitions
Indirect acquisitions	acquisitions through EU subsidiaries of third-country investors are covered

Important for sellers: for acquisitions in mandatory sectors the buyer must be approved in advance. Whether your company falls into a mandatory sector depends on products, customers and technologies; the industry label alone is not enough.

What applies in Germany?

The Foreign Trade and Payments Act and Ordinance have governed screening for years. When a company is acquired in a sensitive area, a standstill obligation applies until clearance (§ 15(4) AWG). The Federal Ministry for Economic Affairs has two months for the preliminary review and four months for the main review. According to the trade press the call-in thresholds are 10, 20 or 25 per cent of voting rights, depending on the sector.

The Federal Ministry for Economic Affairs circulated a draft bill for a standalone Investment Screening Act (Investitionsprüfungsgesetz, IPG) in early October 2026; as of 13.10.2026 it is in interministerial coordination. The act is meant to implement the regulation and to move the screening regime out of the AWG and AWV. According to law firm commentary the draft provides, among other things, for 45 days instead of two months for the first phase, 120 days instead of four months for the in-depth review, a rise of the 20 per cent threshold to 25 per cent, and a clock that starts only once complete documents are filed. The new rules are to apply to contracts concluded from a cut-off date in 2027 that is still open; until then the AWG and AWV continue to apply. It is a draft, and content and timetable may change.

What applies in Austria?

The Investment Control Act requires approval for acquisitions by investors from third countries. Third country means outside the EU, the EEA and Switzerland. The thresholds are 10, 25 and 50 per cent in sensitive sectors, 25 and 50 per cent in the other approval-bound areas. A prohibition on implementation applies until approval (§ 27 InvKG).

Micro-enterprises with fewer than 10 employees and less than 2 million euros of revenue or balance sheet total are exempt. The details on thresholds rest on advisers' articles; check them in the individual case.

What does that mean for the sale process?

The review is a condition precedent, and the timetable depends on it. In practice law firms (Freshfields, CMS, Baker McKenzie, Ashurst, Cleary) treat clearance as a condition to closing. Three points usually appear in the contract:

• Long-stop date. The deadline by which closing must occur. For reviews with a third-country element, 12 to 18 months are mentioned.
• Reverse break fee. The buyer pays a fee if clearance fails and it carries the risk. It protects the seller against lost time.
• Clean team. Sensitive data goes only to a defined group of people when a competitor or a regulatory-relevant buyer is reviewing.

For sellers it follows: check early whether your company falls into a sensitive area, and admit buyers from third countries to the process only if you factor in the delay. More on the bidder side is in the article selling to foreign buyers.

What should sellers prepare now?

A short self-assessment before the first bidder asks for it. Four questions are enough:

First: Does the company make or supply goods with civil-military dual use, or software, data or components for critical infrastructure?

Second: Do customers or supply chains depend on sectors such as semiconductors, raw materials or energy?

Third: Which buyers are conceivable, at what stake and from which country?

Fourth: How long can a closing take without price or employees suffering?

For the structure of such clauses in the purchase agreement, see the article on purchase price mechanics; which documents the buyer review can clarify in advance is shown in the article on vendor due diligence. Further changes for 2027 are summarised in the overview tax changes in 2027 for business sellers.

FAQ

When does the EU Screening Regulation apply?

From 17.01.2028. According to specialist sources it entered into force on 16.07.2026.

Do I need approval if I sell to a buyer from the US or Asia?

That depends on the sector, the size of the stake and the industry. In mandatory sectors prior approval is required; otherwise national thresholds can apply. A blanket answer is not possible.

What is a standstill obligation?

The purchase may be completed only once the authority has cleared it. In Germany this follows from § 15(4) AWG, in Austria from § 27 InvKG.

How long does the review take?

In Germany the statutory periods are up to two months for the preliminary review and four months for the main review. The EU regulation names an initial review of 45 days; the draft of the German Investment Screening Act provides for 45 days for the first phase and 120 days for the in-depth review. In practice long-stop periods of 12 to 18 months are agreed.

Does the review also apply to small companies?

In Austria, micro-enterprises with fewer than 10 employees and less than 2 million euros of revenue or balance sheet total are exempt. For Germany we found no corresponding exemption.

What is a reverse break fee?

A payment by the buyer to the seller if completion fails because of a regulatory clearance for which the buyer has assumed the risk.

Sources: Regulation (EU) 2026/1386 of 17.06.2026, OJ of 26.06.2026, as presented in specialist publications; § 15 AWG; Investment Control Act (InvKG), § 27 (ris.bka.gv.at); articles by Freshfields, CMS, Baker McKenzie, Ashurst and Cleary Gottlieb on practice. Draft of an Investment Screening Act (October 2026) as presented by Linklaters and Gleiss Lutz; the draft has not been enacted. As of 19.10.2026. Overview, not legal advice.

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