The UK Government announced on 20 July 2021 that the National Security and Investment Act 2021 (the NSIA) will come into force fully on 4 January 2022. The announcement was accompanied by guidance notes to help businesses prepare for the new rules (here).
The NSIA establishes a stronger and wider-ranging regime for screening foreign investment. Further detail on the scope of the NSIA is set out in our November briefing (here). This briefing covers key points to note about the new regime, in particular highlighting the transactions to which the NSIA will apply – more than one might expect, because there are no de-minimis thresholds, minority acquisitions can be caught, as can asset transfers and even intra-group reorganisations.
The NSIA will apply to relevant transactions in one of three ways:
- Mandatory notification for transactions involving targets that carry on specified activities in one of 17 key sectors (see below). These transactions must be notified and approved by the Secretary of State before they can proceed. Transactions that are not notified and cleared will be void. It will be a criminal offence to complete such a transaction without clearance.
- Voluntary notification for transactions that do not fall within the mandatory regime, but where the parties require confirmation that the deal will not be called in for review (see below for "call-in" powers). The parties will have to assess whether their transaction may give rise to national security issues and could, therefore, be at risk of being called in for review.
- "Call-in" powers granted to the Secretary of State will enable transactions to be called in for review on the basis of national security and for the Secretary of State to block (or unwind) transactions on the basis of national security. From 4 January 2022, the Secretary of State will also have retrospective call-in powers for any relevant transactions completed on or after 12 November 2020. So even if a transaction completes before 4 January 2022, it could be reviewed under the NSIA.
The NSIA is wide-ranging and will apply to the following transactions:
- Acquisitions of outright control (i.e. acquiring 50% or more, or 75% or more, of shares or voting rights in a qualifying entity).
- Minority acquisitions where a 25% or higher shareholding or share of voting rights is acquired, together with rights that amount to "material influence" (this is an increase from the originally proposed 15% threshold as reported in our November update).
- Acquisitions of assets (land, tangible moveable property and/or intellectual property) although asset acquisitions are subject only to voluntary notification.
- Acquisitions by domestic buyers, including individuals as well as companies or other entities, not just foreign buyers.
- Acquisitions of non-UK entities or assets, where the entity or assets acquired have (or are involved in) activities in the UK, or provide goods or services to customers in the UK.
- Intra-group transactions – perhaps particularly surprising, but depending on the activities of the target, an intra-group reorganisation could give rise to a notifiable acquisition (and therefore will be void if not notified and approved).
- Transactions involving qualifying entities or assets regardless of the transaction value, or the parties' market share, turnover or assets – there are no "de minimis" thresholds.
- Loans and options may also be subject to the NSIA, depending on the rights and powers granted under them and when they arise or can be exercised – e.g. when security is enforced.