The National Security and Investment (NSI) Regime and when to notify the Government about a change in ownership of your business

From 4 January 2022 certain transactions within high-risk sectors which present a national security concern must be notified to the Government.

Those transactions must be cleared by the relevant Government department before the transaction can complete. This is called a notifiable transaction.

The Government also has retrospective powers to call-in for review on national security grounds any relevant transaction that completes between 12 November 2020 (the date after publication of the Bill) and start of the NSI Regime. Therefore, it is important to get to grips with the regime and how it may apply to you or your business.

Which types of transactions will be covered?

The regime applies to mergers and acquisitions, including minority investments. If you are buying or selling more than 25 percent of the shares or votes in a company which carries out activities in the UK, then you may be required to notify the Government and obtain approval.

Various other transactions which are not subject to the mandatory regime but present a national security concern can be notified voluntarily. This could, for example, apply to asset rather than share purchases.

Which sectors are considered high-risk?

17 high-risk sectors will be set out in The Notifiable Acquisition Regulations and will be subject to mandatory notification. The sectors include Artificial Intelligence, Advanced Robotics, Quantum Technologies, Computing Hardware and Energy. Detailed definitions for each sector can be found in the draft Regulations. Failure to seek clearance for a relevant transaction could lead to civil action, fines based on your company’s turnover and even criminal liability. There is also risk that the transaction will be automatically void.

The notification process

The notification is submitted to The Investment Security Unit (ISU) via  email. The Secretary of State will decide within an initial 30 working day screening period to either:

1.    Clear the notifiable acquisition, meaning that no further action will be taken under the NSI Regime and the transaction can complete; or

2.    Require a detailed review of the acquisition if the Government decides the transaction may be a national security concern. This detailed review may take 30 working days, and this can be extended by a further 45 working days. Clearance must be obtained before completion of the transaction.

Therefore, if your transaction involves the sale or purchase of more than 25 percent of the company and the company operates within one of the 17 high-risk sectors, then this will be a notifiable acquisition. Factoring the notification regime into your transaction planning now is essential to avoid possible delays or challenges further down the line.  

If you are unsure whether your transaction will be subject to the new regime or would like more information to help with business planning, then please contact James Conduit, Head of our Corporate & Commercial Team.