Three foreign-owned defense companies that built US cleared subsidiaries. What the structure looks like, how long it takes, and what SmartOne would actually face. This is context for a decision you have not yet made.
A firewall structure refers to legal and governance arrangements that allow a foreign-owned parent company to operate a US subsidiary that can access classified or sensitive defense contracts. The governing framework is Foreign Ownership, Control, or Influence (FOCI) mitigation, administered by the Defense Counterintelligence and Security Agency (DCSA).
The core concern: can a foreign parent access classified information or direct corporate strategy in ways that compromise US national security? FOCI mitigation places governance control over the cleared subsidiary in the hands of vetted, cleared US citizens, independent of the foreign parent.
There are four principal mitigation instruments, ranked least to most restrictive:
| Instrument | When used | Key condition |
|---|---|---|
| FOCI Board Resolution | Minority foreign investor without board seat rights | Foreign investor signs a resolution committing to keep classified governance separate |
| Security Control Agreement (SCA) | Minority foreign investor with board seat rights at the cleared company | Investor representative subject to security rules |
| Special Security Agreement (SSA) | Majority foreign-owned companies | Classified governance controlled by vetted US citizens. The BAE Systems model. |
| Proxy Agreement | Majority ownership when SSA insufficient | Foreign parent transfers voting rights to US-citizen proxy holders with government-approved clearances |
For SmartOne: with a Canadian parent and Malagasy operating presence, the realistic path is an SSA or Proxy Agreement. The non-FVEY element is harder to clear than the Canadian element. Canada benefits from partial ITAR exemptions and FVEY (Five Eyes) intelligence-sharing alignment. Madagascar has no comparable status.
BAE Systems plc is a British multinational defense company. BAE Systems Inc. is its US subsidiary, incorporated in Delaware. The subsidiary operates under a Special Security Agreement (SSA) that allows it to work on some of the most sensitive US defense programs despite UK ownership. American executives govern the cleared subsidiary with decision-making authority independent of the British parent.
BAE Systems Inc. is one of the six largest US DoD suppliers. Approximately 35,000 employees within US borders. Works on some of the most sensitive programs in the DoD portfolio, including nuclear programs and classified electronics.
This is the closest public precedent to the structure Amyn described on the call. A British company, majority foreign-owned, running a US subsidiary that wins the most sensitive US defense work through FOCI mitigation. SmartOne's ownership is more complex (Canadian parent with Malagasy operating presence) but the structural pattern is the same. The difference: BAE Systems plc is a publicly traded company with clear British ownership and a decades-long US defense track record. SmartOne would start from zero with no US defense track record and a more complex ownership structure to clear.
DroneShield is an Australian counter-drone company listed on the ASX. Its US subsidiary, DroneShield LLC, is headquartered in Virginia. The subsidiary facilitates local sales and compliance with US Buy American provisions. Manufacturing remains in Sydney; the US entity handles contracting, compliance, and customer relationships.
Won a $33M contract with an unnamed US government agency for counter-UAS technology. Multiple additional US government contract wins in 2024-2025. The Australian parent retains strategic control; the Virginia entity handles the cleared work.
Australia is a Five Eyes nation, like Canada. Australia-to-US subsidiary structures face similar but not identical FOCI review as Canada-to-US structures. The Virginia HQ pattern is worth noting: proximity to Pentagon procurement decision-makers matters more than most companies acknowledge in early-stage defense planning. DroneShield's experience shows the structural path is real for Southern Hemisphere companies; Canada's FVEY status provides even more favorable initial conditions.
Anduril is a US-founded defense technology company that established significant Australian presence through the AUKUS defense technology framework. For SmartOne, the relevant observation is the inverse: Australian defense firms pursuing US work must stand up a distinct US legal entity and accept FOCI oversight by DCSA. The same applies to Canadian firms. The AUKUS framework also demonstrates that Five Eyes nations are increasingly comfortable with cross-border defense technology structures, which is favorable context for a Canadian company seeking a US cleared entity.
The AUKUS framework signals that the US DoD is moving toward more formalized tech-sharing structures with Five Eyes partners. A Canadian company with a US subsidiary in 2026 operates in a more favorable FOCI review environment than a comparable company from a non-FVEY nation. The Mauritian element of SmartOne's structure does not benefit from this.
| Step | Realistic duration |
|---|---|
| Decision to proceed + legal structure design | 3-6 months |
| US subsidiary formation + banking + office | 1-3 months |
| FOCI mitigation negotiation with DCSA (complex multi-jurisdictional ownership) | 12-24 months |
| Facility Security Clearance approval | 6-12 months after FOCI |
| Key personnel clearances at Secret level | 6-12 months per person |
| First cleared annotation workforce operational | 12-18 months after FCL |
| Total: decision to first cleared contract delivery | 3 to 5 years |
On May 7, 2026, the US DoD issued a proposed rule extending FOCI requirements to defense contracts and subcontracts involving no classified work, at a threshold of $5M or more. Previously FOCI applied primarily to classified work. When finalized, this rule would mean that a foreign-owned data annotation company bidding on non-classified US defense data work above $5M would still need FOCI mitigation.
Three factors deserve direct acknowledgment before any activation decision:
None of these factors is a reason not to pursue the defense channel eventually. They are reasons to make the decision with clear eyes about what activation actually costs, and to ensure the decision is made when the company has the runway and the alignment to resource it properly.