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National Security and Investment Act set to come into force from January

The National Security and Investment Act 2021 is set to come into force in January 2022.

The National Security and Investment Act 2021 (NSIA) became law on 29 April 2021. It comes into force fully on 4 January 2022 with retrospective effect, applying to any transaction completed on or before 12 November 2020. It is the biggest piece of legislation to affect corporate transactions since the Companies Act 2006.

The NSIA establishes a new regime for the government to ‘call in’ acquisitions of control of entities or certain assets which could cause a national security risk in the UK. This ‘call in’ can be made within 6 months of the government becoming aware of the deal and has a 5-year longstop from completion.

Following a ‘call in’, the government can impose a wide range of remedies such as limiting the acquirer's control of, or access to, information.

The requirement to notify the government about notifiable acquisitions will come into force on 4 January 2022. From then, parties will be able to notify the government voluntarily in order to seek pre-deal confirmation that the government will not ‘call in’ the deal.

The NSIA also establishes a mandatory notification regime: anyone acquiring control of entities operating in one of the 17 specified high risk sectors in the UK must notify the government regardless of deal value. There is no minimum financial threshold, no reference to turnover or size of deal, no de minimis (so no proportionality). If the buyer fails to do so, it is prohibited from completing the transaction, any attempt to do so is void, and the government can impose significant sanctions. The sectors impacted are:  

  • 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

The NSIA will apply to various types of transactions, not just 100% share sales. So it could apply to a partial disposal, fundraising, private equity or venture capital investment, share buyback, asset transaction or joint venture. It is essential to take legal advice if you are unsure if your proposed deal will trigger a mandatory notification.

BEIS has, on 20 July 2021, published helpful guidance notes to help businesses prepare for the NSIA.

If the NSIA may impact your corporate strategy, please do get in touch with our corporate solicitors to discuss how best you can prepare.

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