Key takeaways

The UK National Security and Investment Act 2021 (the "Act") entered into force on 4 January 2022:

  • The Act enables the UK Government to screen, block and potentially unwind transactions giving rise to national security concerns in the United Kingdom through a new authority: the Investment Security Unit ("ISU"). These powers are distinct from merger control.

  • Acquisitions of both entities and assets may fall within the scope of the Act. Additionally, acquisitions of control of entities operating within any of 17 specified sensitive sectors will be subject to mandatory notification and will be void unless approved. The Act may apply outside the customary scope of M&A.

  • Acquisitions may be retrospectively called-in for review for up to five years after the acquisition trigger event (and for an unlimited period for a non-notified transaction within the sensitive sectors). Parties may voluntarily notify transactions and/or consult with the ISU for greater certainty.

  • The mandatory notification regime is suspensory: severe penalties are applicable for non-compliance with the notification obligation. Parties may face criminal sanctions (up to five years' imprisonment) and civil penalties (up to 5% of worldwide turnover or £10 million – whichever is greater) for completing acquisitions without approval.

Qualifying entities and assets

The scope of the Act is broad (and largely reflects earlier legislative proposals; see our previous legal update for further detailed analysis, here).

The Act applies to acquisitions of control of any qualifying entity or asset which carries on activities in the United Kingdom or supplies goods/services to persons in the United Kingdom (or which is used in connection with such activities or goods/services).

  • Qualifying entities:
    • Any entity (legal or non-legal person) that is not an individual, including a company, a limited liability partnership, any other "body corporate", a partnership, an unincorporated association and a trust.

    • An entity formed or recognised outside the United Kingdom if it carries on activities in the United Kingdom or supplies goods or services to persons in the United Kingdom.

  • Qualifying assets:

    • Land.

    • Tangible moveable property.

    • Ideas, information or techniques which have industrial, commercial or other economic value.

    • Assets situated outside the United Kingdom if they are used in connection with activities carried on in the United Kingdom or the supply of goods or services to persons in the United Kingdom.

To read the full article, please click here.

Originally published 7 January, 2022

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