Are you thinking of selling your tech company? If so, don’t just focus on the buyer and the sale price—also consider the Vifo Act. This law may require you to first report a takeover to the government.
Effective January 1, 2027, the scope of the Act will be expanded to include more technologies. For you as a seller, the most important questions are whether you’re required to file a report and what that means for the planning and marketability of your company.
What is the Vifo Act?
The Vifo Act gives the government the authority to assess certain investments, mergers, and acquisitions for risks to national security. The law focuses, among other things, on companies operating in critical sectors or possessing sensitive technology. Under certain circumstances, the government may authorize such transactions, impose conditions, or prohibit them.
Specific technologies within 6 new areas
The expansion covers specific technologies within six areas: biotechnology, artificial intelligence (AI), advanced materials, nanotechnology, sensor and navigation technology, and nuclear technology for medical use.
As a result of the expansion, even businesses that are currently exempt from the law may be subject to a reporting requirement. This does not mean that every business that uses AI for planning or administration automatically falls under the law. It depends on the specifically designated technologies and your business’s activities. So don’t just look at the label “AI” or “biotechnology”; focus primarily on the specific technology and your company’s business activities.
The amendment has now been adopted and will take effect on January 1, 2027. The newly designated technologies are classified as highly sensitive. As a result, even a minority investment may be subject to reporting requirements if the investor gains or increases significant influence.
What does this mean for the sale of your business?
Suppose you’re sell a business that develops technology within a newly designated area. The price has been agreed upon and the transfer is scheduled. If it subsequently turns out that a notification to the Investment Assessment Bureau is required, that schedule cannot simply be maintained. That’s why the question of whether you need to file a notification should be addressed during the preparation phase, not during the final steps leading up to the transfer.
Note that filing a notification does not automatically mean the government will block the sale. The transaction may only be completed once the minister has indicated that no review decision is required. If such a decision is required, the minister must first authorize the transaction. The review will therefore affect the timing of when the parties can finalize the sale. The minister may ultimately approve the transaction, attach conditions to it, or prohibit it entirely.
For the seller, this is primarily a matter of preparation. A buyer wants to know in advance whether a notification is required and how much time the process might take. Uncertainty on this point can affect the timeline, negotiations, and agreements regarding the closing. Therefore, specify in the purchase agreement who will prepare and file the notification, what information the parties must provide, and the latest date by which the transfer must take place. Also agree on what will happen in the event of a delay, certain conditions, or a prohibition.
Avoid surprises during the sales process
When preparing for the sale, write a brief description of your technology and its applications. Next, determine whether the business activities—as well as the control or significant influence that the buyer will acquire or increase—trigger a reporting requirement. It’s best to do this before you agree on a closing date. That way, you can incorporate the outcome into the due diligence process and the purchase agreement.
The practical lesson, therefore, is that a potential Vifo notification should be addressed as part of your sales preparation so that you can agree on a feasible timeline with the buyer and minimize the risks.
