The National Security and Investment Act 2021 came fully into force on 4 January 2022. 

With the intention of protecting the UK's national security, the Act creates a new regime to allow the Government to scrutinise the acquisition of UK-based entities and assets.

Although the Act has only recently come into full force, it was passed on 29 April 2021 and so has already impacted on corporate transactions for some time.

Unusually the Act also has retrospective effect as it includes "call-in" powers which can apply to any transaction completed between 12 November 2020 and 3 January 2022. This interim period has not been particularly satisfactory as transactions carried out in the relevant sectors have taken place in the knowledge that the Act could apply, but with a limited ability to assess or address the risk.

That position has improved over recent months as further guidance and delegated legislation has appeared. The Act coming fully into force may assist in removing some of the uncertainty which has surrounded its application to date.

Most significantly, parties must now comply with a new mandatory notification regime where the target entity or asset is centred on one of 17 sectors which have been identified as especially high risk. Further guidance is available on what is considered to fall within each of these sectors.

The 17 high risk sectors 

  • Advanced materials
  • Advanced robotics
  • Artificial intelligence
  • Civil nuclear
  • Communications
  • Computing hardware
  • Critical suppliers to the government
  • Cryptographic authentication
  • Data infrastructure
  • Defence
  • Energy
  • Military and dual use
  • Quantum technologies
  • Satellite and space technology
  • Suppliers to emergency services
  • Synthetic biology
  • Transport
  


Even where a mandatory notification is not required the parties to a transaction should consider whether to make a voluntary notification under the Act.

Key points to note

  • Parties can inform the Government about qualifying transactions by submitting an online notification via the NSI electronic portal.
  • There is prescribed information which each notification must contain.
  • If the Government decides to "call-in" the transaction for a full assessment but then clears the acquisition, it cannot assess it again unless false or misleading information was submitted.
  • Having assessed a transaction the Government can make a "final order" imposing remedies and restrictions on the proposed transaction to mitigate national security risks.
  • Failure to comply with a final order can lead to fines calculated as a percentage of turnover, or even imprisonment for individuals.
  • If a transaction falling within the mandatory reporting regime completes without the required Government consent it is likely to be void and will not be legally effective.

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.