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# Washington Is Buying Equity Abroad. It Should Ask What Good Governance Looks Like First.
- URL: https://rileysentinel.com/washington-is-buying-equity-abroad-it-should-ask-what-good-governance-looks-like-first/
- Published: 2026-09-04T21:59:29.000Z
- Updated: 2026-09-04T21:59:29.000Z
- Description: Any funder would ask who controls the company before disbursing. Washington has committed $27.7 billion without a common answer.
- Author: Nathan Ackerman
- Tags: SpecialREPORT, Global

#### Report Details

****Initial Publish Date**   
Last Updated: 4 SEP 2026  
Report Focus Location: Global: US Foreign Investments   
Authors: NA  
GSAT Lead: SZ

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### Executive Summary

Since January 2025 the United States government has committed $27.7 billion in equity and quasi-equity across thirty-nine transactions in critical minerals, semiconductors, and defense industrial capacity. The strategic case is sound. The structure is not.

Federal capital buys a defined set of governance protections when it goes into a US-listed company, a narrower set when it goes into a foreign company listed on a US exchange, and none at all when it goes into a foreign company that has never listed here. No federal statute, regulation, or standing agency policy fills that gap. Where protections have been secured, they were negotiated transaction by transaction under closing pressure, and they exist as exceptions rather than as practice.

> **Assessment.** Absent a standard package applied as a default, it is likely that variance in governance protections across the federal equity portfolio will widen as transaction volume increases, and highly likely that terms in at least some closed transactions will not become publicly known until an audit, a restructuring, or litigation forces disclosure. Six governance terms already drawn from US listing standards, foreign ownership mitigation practice, and ordinary investor protections would close it.

### Research 

Before an institutional funder disburses to a foreign partner, it will ask who controls the entity, who sits on the audit committee, and what happens if those answers change. Since January 2025 the United States government has committed [$27.7 billion in equity and quasi-equity across thirty-nine transactions](https://www.cfr.org/articles/washingtons-growing-portfolio-tracking-u-s-government-investments?ref=rileysentinel.com) in critical minerals, semiconductors, and defense industrial capacity. In most of them, there is no public record that anyone asked.

The strategic case for that is sound and should not be up for debate here. China controls the processing chokepoints. Private capital has not (yet) built parallel supply chains at the speed security requires. Federal equity closes in weeks where a grant program takes years, and speed is a needed feature. 

All that said, any capital deployed into a foreign company will carry governance risk, and the degree of that risk will depend on multiple variables, with only a starting list that includes where the company is incorporated, where it is listed, who actually controls it, and what the investor negotiated before the money moved. Private investors will generally out of practice, price this. Development finance institutions build it into their agreements. Institutional funders ask about it before the first disbursement occurs. The federal government, it would appear, has been pricing it transaction by transaction, with no common standard and, in most cases, no public disclosure of what was negotiated. Speed and structure are separate questions, and the latter has now gone unanswered long enough to produce outcomes that veer towards vulnerabilities and outcomes that will be difficult to unwind.

For a US-listed recipient, the question largely answers itself. When Commerce acquired [433,323,000 Intel shares](https://www.sec.gov/Archives/edgar/data/50863/000005086325000129/intc-20250822.htm?ref=rileysentinel.com), close to ten percent of the company, it bought into an architecture it did not have to negotiate: a majority independent board, an independent audit committee with authority over its own auditor, independent review of related-party transactions, and shareholder approval thresholds for material dilutive issuances. Those obligations are expensive, and American firms carry them because our exchanges require it. Whatever else one thinks of the Intel transaction, the taxpayer's position sits behind directors who owe duties to every shareholder.

A foreign company listed on a US exchange gets partial accommodation. It may substitute home-country practice for the majority independent board, the compensation committee, and the director nominations requirements. The audit committee is carved out of that substitution, and its members must still satisfy the federal independence standard in Exchange Act Rule 10A-3, which bars consulting or advisory fees from the company and bars affiliated persons, regardless of what home-country law permits. That floor has held since 2003\. It reaches companies with no other legal tie to the United States, and it has stood through more than two decades of foreign listings without amendment, which demonstrates that a US governance requirement can bind a foreign firm durably once someone decides that it should.

A foreign company that has never listed on a US exchange, however, sits outside all of it. No independence definition, no audit committee requirement, no related-party review, no disclosure obligation, and no visibility into who ultimately controls the counterparty. Very little requirements appear in federal law to adequately fill that gap. No statute, regulation, or standing agency policy apparently imposes a single corporate governance condition, or control on a company that accepts a federal equity investment.

Consequently, because protection levels are tied to a company's listing status rather than the actual merits of the transaction, the exact same taxpayer dollars yield vastly unequal degrees of safeguard. And the foreign recipient acquires American capital and American market access without carrying the compliance burden its US-listed competitors carry, which is a competitive advantage the federal government is funding against its own firms. 

The disclosure record shows how little has been settled. Most transactions under the CHIPS program identify only a minority, non-controlling government interest, with no board, voting, consent, information, related-party, or anti-dilution protections disclosed at all. Where the recipient is a US-listed company, continuous disclosure will eventually fill some of that in. Where the recipient is foreign and unlisted, nothing will, and the position can move before anyone establishes what the terms should have been. 

In January 2026 the Development Finance Corporation closed a [$565 million financing package](https://www.serraverde.com/2026/02/serra-verde-secures-us565-million-financing-from-us-international-development-finance-corporation/?ref=rileysentinel.com) for Serra Verde's rare-earth mine in Brazil, including a convertible tranche carrying an equity-linked position in a privately held Brazilian company. No ownership percentage, exercise price, or governance term attached to that position was ever made public. Three months later Serra Verde agreed to be acquired by a Nasdaq-listed company. Shareholders approved the deal in August, and on closing the government's warrants convert automatically into consideration in the acquirer. 

The taxpayer's exposure will end up inside a US-listed issuer with full disclosure obligations, which is a better outcome than the one that was actually negotiated, and it arrived by acquisition rather than by design. Other positions will not resolve themselves that way. The Defense Department holds 40 percent of Crucible Metals, a joint venture that in turn holds roughly 10 percent of Korea Zinc, behind a $7.4 billion Tennessee smelter. Nothing public says what protects the taxpayer inside the foreign operating company.

There is a further problem that will surprise anyone who assumes an equity stake buys oversight by default. In several allied jurisdictions, statutory voting caps limit what any single shareholder can do on precisely the questions that matter most. Under Article 542-12(4) of Korea's Commercial Act, the largest shareholder in a large listed company, together with its related parties, may exercise no more than three percent of total voting rights when electing or removing audit committee members, and a 2025 amendment extended that aggregated cap to independent director seats. The rule exists for sound reasons. It prevents a controlling family from installing the people assigned to oversee it. But it also applies to every large holder, including a foreign government. A ten percent federal position in a Korean-listed company can exercise three percent on the one agenda item where independent oversight is actually determined. The remaining seven points are sterilized. Ownership, in that structure, does not convert into oversight, and no amount of it will. Which is the argument for attaching the condition when the capital is committed rather than attempting to exercise it later as a shareholder.

For anyone who has spent time running integrity due diligence on an overseas partner, the questions a governance standard answers are the familiar ones. Who actually controls the company, as opposed to who appears on the register. Whether the directors reviewing a related-party transaction have a relationship with the counterparty on the other side of it. Whether the audit committee has the standing to obtain a number that management would prefer not to produce. Institutional funders and commercial investors will nearly always ask these questions before money moves and write the answers into the agreement, because the alternative is discovering the structure after something has already gone wrong. Federal agencies deploying billions into foreign entities are currently asking less than a mid-sized foundation asks of a downstream grantee.

Some agencies do negotiate. In [MP Materials](https://www.sec.gov/Archives/edgar/data/1801368/000119312525157310/d43796d8k.htm?ref=rileysentinel.com), the Pentagon secured consent rights over non-US-citizen board nominees, consent over sales of fifteen percent or more of voting stock to non-permitted jurisdictions, a standstill, and restrictions on sales to designated buyers. [Trilogy Metals](https://trilogymetals.com/news-and-media/news/trilogy-metals-announces-execution-of-definitive-agreements-for-strategic-equity-investment-by-the-us-department-of-war/?ref=rileysentinel.com) yielded a director designation right, a board observer seat, and a covenant limiting new borrowing. Those negotiators knew what to ask for. The difference between the transactions that secured protections and the transactions that secured none is not policy, and it is not risk assessment. It is which lawyer happened to be in which room in which week. That is not structure that protects. 

That improvisation carries a cost, and it lands on readiness as much as on the balance sheet. A defense supply chain running through a foreign processing facility with opaque governance is exposed to decisions the United States cannot see and cannot contest: a related-party transaction that moves output to a different buyer, a dilutive issuance that changes who controls the asset, an audit that never asks the question. Those are operational risks to a program of record, not only accounting risks. And they are the risks that governance requirements exist to catch.

None of this needs to be invented. A majority independent board using a US-style definition of independence that excludes directors with a material relationship to management or to a controlling shareholder is the Nasdaq standard. An independent audit committee composed solely of independent members, with authority to hire and oversee the external auditor, is the federal standard under Exchange Act Rule 10A-3\. Independent director review of related-party transactions above a set threshold, independent director approval of material dilutive share issuances, an annual governance certification to the investing agency by a senior officer with carve-outs for classified and confidential business information, and a designation or consent right available to the agency if the company falls out of compliance are all drawn from requirements American issuers already meet, from conditions the government already imposes under foreign ownership mitigation, or from protective provisions any private investor would negotiate as a matter of course.

Six terms. The federal government has already secured versions of several of them, in several transactions, when someone thought to ask. That is the problem. They exist as exceptions, obtained by the negotiators who knew to reach for them, in deals that happened to allow the time. Making them the default is the entire reform, and it is the difference between a portfolio the taxpayer can account for and one the taxpayer will have to reconstruct later.

Applied that way, the package will make agencies faster rather than slower. Negotiating protections one transaction at a time under closing pressure is what produces variance, delay, and positions that cannot be defended later. A standard package agreed in advance lets each agency price risk accurately, close deliberately, and build positions that survive a change of administration, an inspector general, or a court.

It is also useful to be precise about what this is not, because Congress is working on the adjacent question right now. The Senate Armed Services Committee's FY2027 defense authorization would require the Pentagon to certify that it holds no board seat and no voting representation in any company where it holds equity. That instinct is correct. When the same government regulates a firm, permits its projects, buys its output, and owns its shares, keeping it out of the boardroom limits a genuine conflict. What is proposed here runs in the opposite direction from a government board seat. It requires the company to seat independent directors who owe duties to all shareholders, which is exactly what stands between a conflicted investor and a captured company.

Nor would it be original. The government already imposes board-level conditions on foreign-owned firms participating in defense programs. Under [32 CFR 117.11](https://www.ecfr.gov/current/title-32/subtitle-A/chapter-I/subchapter-D/part-117/section-117.11?ref=rileysentinel.com), foreign ownership mitigation can require outside directors, a government security committee, and voting arrangements held by cleared US citizens. Trilogy cleared a foreign ownership assessment before its agreements were signed. Congress has authorized conditioned minority equity investment in foreign companies since the [BUILD Act of 2018](https://www.congress.gov/crs-product/R47006?ref=rileysentinel.com) and expanded that authority again last year. Conditioning American capital abroad is settled practice. Doing it the same way twice is not.

There is a strategic argument as well, and it is the one allied capitals will hear. Canberra, Ottawa screen or block Chinese state investment in critical minerals while accepting American state investment on far lighter terms. That distinction is defensible, but only if the American state capital actually behaves differently. Governance standards are what makes the difference in conduct rather than nationality. A United States that conditions its equity on independent boards and independent audit committees is making an argument no Chinese state investor can match. A United States that takes the same stakes on undisclosed terms is making an argument about flags.

The agencies writing these transactions have room to attach conditions under existing authority, and none of this waits on new legislation. The alternative is the arrangement currently in place: finding out what the taxpayer bought, and what the supply chain depends on, several years from now, from an audit or a courtroom.

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