Page 68 - The CFIUS Book

THE CFIUS BOOK
4.1.5. The Five Mitigation Measures
A company’s plan for mitigating FOCI
must follow one of the five prescribed
measures identified in the NISPOM:
(1) a board resolution, (2 and 3) a
voting trust or proxy agreement, (4) a
Security Control Agreement, (5) or a
Special Security Agreement. Under all of the mitigation options, with the exception of the Board Resolution, the cleared company must establish a Government Security Committee (GSC), which is a permanent committee comprised of all of the company’s directors, proxy holders, and trustees. The GSC members are required to ensure that the contractor maintains policies and procedures to safeguard classified and export- controlled information entrusted to it, and that violations of those policies and procedures are promptly investigated and reported to the appropriate authority when it has been determined that a violation has occurred.77 In addition, the GSC must establish a Technology Control Plan (TCP) for the cleared company that prescribes “all security measures determined necessary to reasonably foreclose the possibility of inadvertent access by non-U.S. citizen employees and visitors to information for which they are not authorized.”78 In all other respects, the mitigation measures necessary for a company under FOCI to preserve its FCL vary depending on the degree of FOCI over the company.
4.1.5.1. Board Resolution
In nEarly EvEry FOCI CaSE, a ClEarEd COmpany WIll nEEd TO ESTaBlISH a gOvErnmEnT SECUrITy COmmITTEE and a TECHnOlOgy COnTrOl plan.
A Board Resolution is a type of
mitigation instrument generally
deemed adequate to mitigate the
national security risk of passive stock
or equity ownership by a foreign
person or entity. A Board Resolution
may be used to negate FOCI only
where “a foreign interest does not
own voting interests sufficient to elect,
or otherwise is not entitled to representation on the company’s governing board.”79 To implement a Board Resolution, the governing board of the company holding an FCL must take the following steps:
WHErE a FOrEIgn InvESTOr IS WIllIng TO aCqUIrE Only a paSSIvE, mInOrITy InTErEST In a ClEarEd U.S. COmpany, THE BOard rESOlUTIOn OpTIOn OFFErS a STrEamlInEd and UnCOmplICaTEd apprOaCH TO mITIgaTIng FOCI.
l Identify the foreign shareholder and describe the type and number of foreign- owned shares;
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