Laws Passed Allowing UK Government to Scrutinise Acquisition Deals

The new legislation falls under the National Security and Investment (NSI) Act, which came into force on 4th January 2022. The Act is seen as the biggest shake-up of the UK’s national security regime in 20 years. Following its introduction, the government can now impose certain conditions on acquisitions or, if necessary, block them entirely.

Qualifying Entities and Assets

As part of the new ruling, the government must be notified of acquisitions where:

• A UK-based ‘qualifying entity’ or ‘qualifying asset’ is present
• The entity or asset operates in one of 17 affected sectors
• The acquisition will result in the investor acquiring a stake in the company that exceeds 25 per cent

A qualifying entity is any entity other than an individual, including:

• A company
• A limited liability partnership
• A partnership
• An unincorporated association
• A trust
• Any other body corporate

Qualifying assets include:

• Land
• Tangible, moveable property
• Intellectual property—ideas, information or techniques that have industrial, commercial or other economic value

Entities and assets that aren’t within the UK but have a connection to it may also be subject to the new regulations.

Affected Sectors

Seventeen areas of the economy are affected by the new ruling, including advanced robotics, artificial intelligence, communications, data infrastructure and transport. Acquisitions within these sectors must check if they need approval from the government before completion.

Failure to correctly notify the government of a qualifying acquisition could deem it void or result in the acquirer receiving civil or criminal penalties.

A Streamlined Process

According to the government, the new regime is designed to be clear and transparent about the types of acquisitions that could be examined. It’s expected that most acquisitions will require no intervention and will be able to proceed quickly.

In response to the changes, Business Secretary Kwasi Kwarteng said, ‘The new investment screening process in place from today is simple and quick, giving investors and firms the certainty they need to do business, and giving everyone in the UK the peace of mind that their security remains our number one priority’.

Further Information

The government has published comprehensive guidance to help businesses and investors understand their obligations under the new rules.

For more information, contact us today.