If you're advising on UK corporate acquisitions, the National Security and Investment Act 2021 (NSIA) should be front of mind.
Too many purchasers assume the regime only applies to defence deals or critical infrastructure.
In reality, the NSIA casts a much wider net, capturing transactions in 17 notifiable acquisition sectors. These include, by way of examples, artificial intelligence, communications, computing hardware, data infrastructure, critical suppliers to government, suppliers to the emergency services, military and dual use, energy, synthetic biology, and transport.
Key Points for Buyers and Their Advisors:
- Mandatory Notifications: If your target operates in a "notifiable sector" and your acquisition results in a holding of more than 25%, 50% or 75% of voting rights or shares in the target, or results in control of relevant assets, you must notify and obtain clearance before completion.
- Voluntary Notifications: Even outside mandatory notification sectors, the government can call in transactions that may pose national security risks, for investigation.
- Serious Consequences: Completing a notifiable acquisition without approval renders the transaction void. It is a criminal offence to complete such a transaction without prior notification and authorisation. Where such an offence is committed by a company with the consent or connivance, or due to neglect by, of an officer of the company, the individual officer will also be guilty of the offence. Possible penalties include imprisonment. Civil penalties may also apply.
When you're scoping due diligence, assess early whether the NSIA is triggered. Build sufficient time into your timetable for the Investment Security Unit to review and clear the deal. Following a mandatory notification, there is a review period of 30 working days, for the Secretary of State to decide whether to call in the transaction for investigation or not to proceed further. Where a call-in notice is issued, there is then a period of 30 working days which can be extended by 45 working days (and/or by agreement) for the Secretary of State to reach a decision on the case. Where a national security risk is found, the Secretary of State prohibit the transaction or impose conditions.
This regime isn't just for the obvious high-profile defence takeovers, it's become a routine part of M&A risk management in the UK.
Be prepared. Be proactive. And don't get caught out.
A copy of the NSIA Annual Report for 2023/24 is can be seen here: https://www.gov.uk/government/publications/national-security-and-investment-act-2021-annual-report-2023-24
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
