On 11th November 2020, the UK Government introduced the long-awaited National Security and Investment Bill in the House of Commons. The Bill provides the government with new powers to screen investments, and aims at tightening the rules governing foreign investment across Britain’s critical infrastructure and parts of its defence industries.
Overview
The National Security and Investment Bill will enable the Secretary of State to ‘call in’ statutorily defined acquisitions of control over qualifying entities and assets (trigger events) to undertake a national security assessment.
Additionally, the new Bill establishes a requirement for proposed acquirers of shares or voting rights in companies and other entities operating in sensitive sectors of the economy, to seek authorisation and obtain approval from the Secretary of State before completing their acquisition
The Bill also creates, where there is no requirement to notify, a voluntary notification system to encourage notifications from parties who consider that their trigger event may raise national security concerns.
What are the thresholds?
The new regime will apply to “trigger events”:
- The acquisition of more than 15%, 25%, 50% and 75% of the votes or shares in a qualifying entity;
- The acquisition of voting rights that enable or prevent the passage of any class of resolution governing the affairs of the qualifying entity;
- The acquisition of material influence over a qualifying entity’s policy.
- The acquisition of a right or interest in, or in relation to, a qualifying asset;
The UK Government have also published a guide on how the regime functions.
Which sectors are in scope?
Mandatory notifications apply to entities in specific “Key Sectors”, established through regulation. The Bill does not specify which sectors, and which parts of each sector, should be included within scope of the mandatory notification. This is something that is currently under consultation.
It is expected that transactions in the following sectors will face mandatory notification:
- Civil Nuclear
- Communications
- Data Infrastructure
- Defence
- Energy
- Transport
- Artificial Intelligence
- Autonomous Robotics
- Computing Hardware
- Cryptographic Authentication
- Advanced Materials
- Quantum Technologies
- Engineering Biology
- Critical Suppliers to Government
- Critical Suppliers to the Emergency Services
- Military or Dual-Use Technologies
- Satellite and Space Technologies
Are there sanctions for non-compliance?
There are sanctions for non-compliance with the regime, which include fines of up to 5% of worldwide turnover or £10 million – whichever is the greater – and imprisonment of up to 5 years.
Transactions covered by mandatory notification which take place without clearance will be legally void.
Nest steps
The Bill has begun its passage through Parliament. Yesterday, the Bill was introduced to the House of Commons and given its First Reading. This stage is formal and takes place without any debate. MPs will next consider the Bill at Second Reading on Tuesday 17 November 2020.
The new UK legislation represents an increasingly common trend across the globe of stricter foreign investment regimes. Earlier in the year, we published our blog Foreign Investment Restrictions on the Rise – this increasing trend of national protectionism emphasises the need for position monitoring and review of foreign investment transactions.
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