Entry into force of the new national security and investment regime – Government, public sector
UK: Entry into force of the new national security and investment regime
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The National Security and Investment Act 2021, which introduces a new national security screening regime, came into force on January 4, 2022. It requires mandatory notification of corporate takeovers involved in 17 “areas economy” (including communications, hardware, data infrastructure, space and satellite technologies and quantum technologies). Transactions subject to a mandatory declaration must be cleared before closing or will be cancelled. Completion without approval can also result in a fine of up to 5% of an organization’s worldwide turnover or £10 million, whichever is greater. It is also a criminal offense punishable by imprisonment for up to 5 years.
Importantly, the NSIA also applies to transactions involving businesses outside the UK that supply goods and services to the UKas good as internal corporate restructuring. Asset acquisitions and lower levels of investment are also covered (although not subject to the mandatory scheme). The UK Government may review (call) transactions closed after November 12, 2020.
Voluntary notifications can be made for transactions not subject to the mandatory regime, and there is also the possibility of informal commitment. The standard review assessment, which applies to all notified transactions, lasts up to 30 working days. Transactions that raise security issues may be called for a further 30 business day review period (and an additional 45+ business days if required).
The National Security Review is separate from any competition/merger review notification which may be required for qualifying transactions under the Enterprise Act 2002 (as amended). Reference to ‘national security’ as one of the public interest considerations, under section 42 of the Enterprises Act (EA), has been removed, while defense mergers under Article 59 EA can no longer give rise to a specific merger situation.
Here is a link to our flowchart which provides a high level overview of the NSI scheme
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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