NSIA, what is it and does it affect your transaction?

On 4 January 2022, the National Security & Investment Act 2021 (NSIA) came into force. This introduced a statutory regime for governmental scrutiny of, and potential intervention in, certain business transactions.

In this note, we look at the rationale behind the introduction of the NSIA and assess how it may affect certain transactions.

Rationale

The NSIA is designed to protect UK national security by preventing hostile actors from acquiring significant influence or control over UK entities and assets.

All acquisitions that may affect UK national security are within the scope of the NSIA. It also applies to any cross-border transactions that involve the indirect acquisition of a UK subsidiary or entities with other connections to the UK, such as the supply of products or services to UK persons.

The NSIA has created two separate, but related, regimes:

• a mandatory notification regime; and
• a voluntary notification regime.

A mandatory notification needs to be made before a notifiable acquisition takes place in 17 ‘sensitive’ sectors of the UK economy (click here to see the ‘sensitive’ sectors), whereas a voluntary notification relates to circumstances that do not involve a notifiable acquisition, but where there is or may be a ‘trigger event’ that could raise national security concerns.

Does your transaction fall within the scope of the NSIA? 

In broad terms, your transaction could be caught by the NSIA and deemed to be a ‘trigger event’ if all of the following apply:

• You acquire a right or interest in a ‘qualifying entity’ or ‘qualifying asset’ which has a connection to the UK;
• You completed the acquisition after 12 November 2020; and
• You acquire a certain level of control over the relevant qualifying entity or asset in-line with thresholds set out by the NSIA. For example, enhanced voting rights or a new level of material influence over strategic direction at the entity or in respect of the asset.

What should we be doing if our transaction falls within the scope of the NSIA?

If your transaction is deemed to be a ‘trigger event’ and falls within one of the following 17 ‘sensitive’ sectors of the economy, you must make an online mandatory notification to the new Investment Security Unit (ISU) prior to completion.

Even if your transaction does not fall within one of the ‘sensitive’ sectors, the SoS could intervene if it has a reasonable suspicion that the transaction has or could give rise to a national security risk (call-in power).

The call-in power gives the SoS the power to scrutinise transactions which weren’t notified to it, but which may raise national security concerns. Generally, once the SoS becomes aware of a trigger event it will have six months to call in the transaction, subject to an overall five-year limitation period from the date of the trigger.

What can you expect to happen once a notification has been received by the SoS?

The SoS has a maximum of 30 working days to confirm whether:

• Your transaction is cleared and can proceed;
• Your transaction is blocked or unwound; or
• The assessment period needs to be extended for another 45 working days in exceptional circumstances.

The Department for Business, Energy and Industrial Strategy advise that in most cases a decision will be reached within 30 working days, however in instances where the threat to national security is considered significantly higher, this period could be as long as five months.

Should you require any support or advice to help determine if your transaction falls within the realms of the NSIA, please get in touch with our Corporate Team who would be happy to help.