Changes to the National Security and Investments Act (NSI Act)

As of 4^th January 2022, the Government will be able to scrutinise, intervene and impose conditions in certain acquisitions. In some instances, the Government may be able to unwind or block an acquisition altogether under the National Security and Investments Act (NSI Act); they may also call in any acquisition prior to the NSI Act coming in to force if it completed after 12 November 2020.  Stacey Browne, Solicitor within our Company Commercial team, explains more here about the expansion of the NSI Act, the actions that business owners need to take and the penalties should these not be observed.

What are the changes to the National Security and Investments Act?

The NSI Act has expanded; it now includes deals regarding investments, acquisitions where voting rights are affected and asset acquisitions including land and intellectual property.

The expansion of the NSI Act will provide the Government with the ability to review deals that completed on or after 12 November 2020 that fall within the thresholds set out within the NSI Act; however, as of 4 January, if your transaction falls within the thresholds set out within the NSI Act, you may be required to gain prior approval before completing the deal.

Failure to comply with the NSI Act could risk transactions being void and lead to heavy sanctions including, but not limited to, fines and criminal liability. If you fall within one of the 17 areas that the Government have identified as sensitive, you will be legally required to tell the Government about your transaction. This is referred to as a ’mandatory notification’. If you do not fall within one of the 17 sensitive areas but are captured within the test thresholds that are set out under the NSI Act, then your transaction will be referred to as a ‘voluntary notification’, meaning you are not legally required to submit a notification.

Process and timing of notifying under the NSI Act

Once a notification has been submitted, the initial review will take approximately 30 working days unless they require an extension which provides a company with 45 working days. If further information is required, the clock can be paused on the review until it is in receipt of the information it needs. After such period, the Government will either call in the transaction or give it the all clear.

If your transaction falls within a mandatory notification, you will need to obtain clearance before the transaction takes place. This timing will need to be factored in to a transaction, especially if there are any deadlines involved with other institutions.

If your transaction falls within a voluntary notification, the Government will still be able to call in the deal up to six months after it becomes aware of it; for up to five years after the deal has taken place. If you did not opt for a voluntary assessment prior to your transaction taking place and the Government decide to call the transaction in, it will proceed to a full assessment and face full scrutiny and remedies.

Failing to notify under the NSI Act

If you fail to notify the Government of your transaction and it falls within the threshold of a mandatory transaction, it will be legally void and there are criminal penalties, imprisonment for up to 5 years, as well as fines up to 5% of the group turnover or £10million (whichever is higher).

Remedies under the NSI Act

If the Government call in a transaction, they may seek to impose conditions to restrict access to sites, information, and intellectual property as part of the transaction. However, the Government will also have the power to block transactions or to have them wound up or divested.

If you require legal advice regarding a transaction that is currently underway, in the pipeline or completed post November 12^th 2020, please do not hesitate to contact us as the impact of the new NSI Act will be significant in terms of deal timeline and certainty.  You can contact Stacey or a member of the Company Commercial team on 023 8071 7411 or email staceybrowne@warnergoodman.co.uk.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.