UK National Security and Investment Act to come into force in January 2022
23 July 2021
23 July 2021
On 20 July 2021, the UK Government announced that the substantive provisions of the National Security and Investment Act 2021 ("Act") will come into force on 4 January 2022 and published new guidance on the scope and application of the Act. The Act will significantly strengthen the UK Government's powers to scrutinise and intervene in acquisitions, that could harm the UK's national security.
The new UK regime will have potentially significant impacts on deal timetables and deal certainty, and is relevant to transactions currently being negotiated. The Act will be administered by the Investment Security Unit ("ISU") within the Department for Business, Energy and Industrial Strategy ("BEIS"), and the decision maker will be the Secretary of State for BEIS. The ISU is operational and able to provide guidance on the regime and specific transactions.
Key Features of the new regime
Notification and enforcement: The Act establishes a new statutory regime for Government scrutiny of, and intervention in, investments and acquisitions for the purpose of protecting national security. Key features include:
For a more detailed description of the Act and the concepts in this update, please refer to our May 2021 publication.
July 2021 guidance from the UK government
The Government has confirmed that the Act will come fully into force on 4 January 2022. From that date:
The government also published several documents clarifying the scope of the new regime.
This draft statutory instrument defines the 17 sectors that will be subject to the mandatory notification requirements set out in the Act. The Government previously consulted on the mandatory notification sectors and published a response in March 2021. The draft sector definitions have now been refined in response to stakeholder feedback. The Government expects to lay the final notifiable acquisition statutory instrument later this year, and the sector definitions remain subject to change.
The draft statement sets out how the Secretary of State expects to exercise the power to give a call-in transactions under the Act. During the Parliamentary passage of the Act, the Government committed to consult on this statement - the consultation is open until 30 August 2021. The draft statement explains that:
This guidance explains that, for the purposes of the Act, an entity formed outside the UK is a qualifying entity if it either carries on activities in the UK or supplies goods or services to people in the UK, and an asset situated outside the UK is a qualifying asset if it is either used in connection with activities carried on in the UK or used in connection with the supply of goods or services to people in the UK. The guidance explains the Government's ability to require information from, and take action in respect of, people or entities outside the UK.
This guidance explains how the Act interacts with other regulatory requirements, noting that the Takeover Panel has no current plans to amend the Takeover Code as a result of the Act, and that the ISU will work closely with the CMA to manage cases that are being considered under both the Act and UK merger control.
Sector-specific guidance has been published to assist higher education institutions, other research organisations and investors in this area. It explains how assets and entities within the higher education and research-intensive sectors might be subject to the regime.