Toggle search bar LATEST UPDATES CAREERS ALUMNI ABOUT US NEWS CONTACT US UPDATED: UK NATIONAL SECURITY ACT 2021 - WHAT INVESTORS NEED TO KNOW 21 October 2021 | Insight A significant new execution risk is coming to UK acquisitions from January. This is an updated version of our briefing published on 30 April 2021 On 29 April 2021 the UK National Security and Investment (NSI) Bill received Royal Assent. The NSI Act 2021 introduces significant legislative reforms which will overhaul the review of transactions and investments on national security grounds in the UK, against a backdrop of tightening of foreign direct investment (FDI) regimes globally. The new regime represents an important new execution risk factor, with a similar risk profile to merger control rules. We have been very closely involved in the passage of this legislation through Parliament, including giving evidence before the Bill Select Committee and Foreign Affairs Select Committee, suggesting amendments to the Bill, and successfully assisting members of the House of Lords in arguing for specific changes to the proposed regime. Broadly speaking, the new regime will apply to any acquisition of “material influence” in a company (which may be deemed to exist in relation to a low shareholding, potentially even below 15%), as well as the acquisition of control over assets (including land and intellectual property), which potentially gives rise to national security concerns in the UK. It is worth noting that qualifying acquisitions that are part of a corporate restructure or reorganisation may also be covered. The regime will apply equally to both UK and non-UK investors (although the Government has acknowledged that UK investors will be less likely to give rise to national security concerns in practice), and may capture acquisitions of non-UK entities or assets in certain circumstances. A mandatory notification obligation (and a corresponding prohibition on completion prior to clearance) will apply to certain transactions involving target entities which carry out specified activities in the UK in 17 sectors (including energy, transport, communications, defence, artificial intelligence and other tech-related sectors). Such transactions include the acquisition of a shareholding/voting rights of more than 25% (increased from 15% or more in the original NSI Bill – see further below). This mandatory notification obligation will be combined with an extensive call-in power enabling the Government to call-in qualifying transactions for review, which extends to any sector and is not subject to any materiality thresholds in terms of target turnover or transaction value. Acquirers will also have a corresponding option to voluntarily notify a qualifying transaction to obtain clearance, which may be advisable in the interests of legal certainty where potential national security concerns arise. The substantive provisions of the Act will enter into force on 4 January 2022. However, the Government will have retroactive powers to call in for review as of that date (or potentially up to five years thereafter) any qualifying transaction completed between 12 November 2020 and the commencement date. This means that it is critical for investors to consider the potential application of the new regime for all transactions completed from 12 November 2020 onwards which could potentially raise national security concerns (broadly defined). Further to our earlier briefing issued when the NSI Bill was originally tabled in November 2020, in this briefing we set out: our updated key practical takeaways for investors; a summary of the key amendments made to the NSI Bill as originally tabled; our updated detailed analysis of the key elements of the NSI regime; and a summary of the next steps between now and formal entry into force of the NSI regime. KEY PRACTICAL TAKEAWAYS FOR INVESTORS KEY AMENDMENTS MADE TO THE NSI BILL DETAILED ANALYSIS OF THE KEY ELEMENTS OF THE NEW REGIME NEXT STEPS Share to Facebook Share to Twitter Share to LinkedIn Email Print PDF Download RELATED TOPICS Transactions & Dealmaking FEATURED INSIGHTS TECH, DIGITAL & DATA GEOPOLITICS AND BUSINESS NEW BUSINESS LANDSCAPE RELATED ARTICLES Foreign investment: Rising tides of politics in regulation Cartel Intel – updates from our EMEA network A very British energy crisis – Keep calm and transition faster KEY CONTACTS If you have any questions, or would like to know how this might affect your business, phone, or email these key contacts. VERONICA ROBERTS PARTNER, LONDON +44 20 7466 2009 Email Read more TIM BRIGGS PARTNER, LONDON +44 20 7466 2806 Email Read more KRISTIEN GEEURICKX PROFESSIONAL SUPPORT CONSULTANT, LONDON +44 20 7466 2544 Email Read more ABOUT US NEWS CAREERS SUBSCRIBE TO LATEST THINKING BLOGS COVID-19 – MEETINGS AND EVENTS DIVERSITY AND INCLUSION PRO BONO AND RESPONSIBLE BUSINESS ALUMNI ALUMNI NETWORK TERMS DATA ROOMS CONTACT US STAY CONNECTED Twitter LinkedIn YouTube © HERBERT SMITH FREEHILLS LLP 2021 Modern Slavery and Human Trafficking Statement Site Map Accessibility Legal and Regulatory Privacy Policy Report Fraud Whistleblowing Cookie Control