The National Security and Investment (NSI) Act 2021 is now applicable
The National Security and Investment (NSI) Act 2021 came into effect on 4 January 2022 and the government has published various pieces of guidance on its requirements. This guidance includes: ‘Check if you need to tell the government about an acquisition that could harm the UK's national security’.
The Act modernises the government’s powers to investigate and intervene in mergers, acquisitions and other deals that could threaten the UK’s national security. While the vast majority of acquisitions will be unaffected by this legislation, acquisitions of ‘qualifying entities’ that meet certain criteria, in 17 sensitive areas of the economy (called ‘notifiable acquisitions’) must be notified to government prior to completion. These areas are as follows:
- Advanced Materials
- Advanced Robotics
- Artificial Intelligence
- Civil Nuclear
- Communications
- Computing Hardware
- Critical Suppliers to government
- Cryptographic Authentication
- Data Infrastructure
- Defence
- Energy
- Military and Dual-Use
- Quantum Technologies
- Satellite and Space Technologies
- Suppliers to the Emergency Services
- Synthetic Biology
- Transport
Guidance on notifiable acquisitions produced by the government contains more detail on what is deemed to fall within the above categories.
Businesses, investors and advisers should check the respective sets of guidance to understand:
- What types of acquisitions are covered by the new rules.
- Which areas of the economy require mandatory notification.
- Whether you need to tell the government about an acquisition.
- How to submit a notification form and what to expect when you have submitted a notification.
The Act gives the government powers to scrutinise and intervene in acquisitions that may pose national security risks. It also provides businesses and investors with predictable, legally defined timelines and processes for decisions on acquisitions. The Act requires particularly sensitive acquisitions to be approved by the government before they are completed. The government will be able to impose certain conditions on an acquisition and, in rare instances, the government may unwind or block an acquisition completely.
The government has also produced a flowchart to assist in determining whether you must or may wish to notify the government of an acquisition from 4 Jan 2022. Such notifications should be made via the online portal. Guidance on completing and registering a notification form is also available.
The Section 3 Statement sets out how the Secretary of State expects to exercise the power to give a call-in notice, as set out in Section 3 of the NSI Act. It was laid in the UK Parliament and published on 2 November 2021 to help businesses and investors understand whether their acquisitions are likely to be called in. The statement also includes the areas of the economy in which the government believes qualifying acquisitions are most likely to be called in, particularly the areas of the economy defined by regulations under Section 6 of the Act and the risk factors that the government will consider when assessing an acquisition. These risk factors are the ‘target risk,’ the ‘acquirer risk’ and the ‘control risk’.