The National Security Investment Act 2021 (“NSIA”) gives the UK government power to scrutinise and intervene in – and potentially block – transactions in certain sectors which may impact national security. It came into force on 4 January 2022 and applies to transactions completing on or after 12 November 2020.

Our NSIA guide takes a closer look at the Act, how to know if your transaction is caught and what to do if it is. In part 1, Senior Associate, Suzanne Whiteman, explores qualifying acquisitions and notification procedures stipulated by the Act. 

The scope of the legislation is broad and is not restricted to high-value and high-profile transactions: there is no minimum threshold for an entity’s turnover or an asset’s value, and the regime can apply to UK and overseas acquirers or investors.

Qualifying acquisitions

For the legislation to apply, there needs to be a “qualifying acquisition”, where control is acquired over a qualifying entity (any entity other than an individual, including a partnership or trust) or a qualifying asset (including land, tangible moveable property and intellectual property) that has a connection with the UK.

Control over an entity is deemed to be acquired where someone:

• meets or crosses certain thresholds of shares or voting rights in the entity (25%, 50% or 75%);
• acquires voting rights allowing them to pass or prevent the passage of a resolution governing the affairs of the entity; or
• acquires a right or interest affording them “material influence” over the entity’s policy.
  

Notification procedure

There are two notification regimes, mandatory and voluntary.

A mandatory notification is required where the acquisition is in one of 17 sensitive sectors of the UK economy, such as communications, computing hardware or data infrastructure. (A full list of the sectors can be found here).

A voluntary notification can be submitted when there is a qualifying acquisition (either proposed or completed) that does not fall within the mandatory notification regime, but the parties would like to ascertain whether the government will call it in for review.

Where a qualifying acquisition falls under the voluntary notification regime, it can be completed without approval. The government can, however, still call in the acquisition for assessment up to five years after completion, within six months of the government becoming aware of it. 

If you would like to discuss any of the points raised in this note, or you would like assistance with the notification process, please reach out to Suzanne Whiteman in our Corporate Team.