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National Security and Investment Bill: Extensive new powers to protect companies from investments and takeover on National Security Grounds

Corporate and Commercial / 19 November 2020

Spurred on by recent concerns about foreign investment in certain sensitive UK Tech and other strategic sectors, on 11th November the Government published the National Security and Investment Bill (the “Bill”), which very significantly expands the Government’s powers in relation to transactions which may have an impact on national security.

The Bill which is currently going through Parliament applies to all types of companies, partnerships and other entities and is expected to become law by early 2021, leading to many more transactions being scrutinised than is the case under the current regime.

Key aspects of the new regime
The Bill hugely increases the Government’s powers to review, block or approve conditionally investments and takeovers in strategic sectors on national security grounds. Key features are:-

  Mandatory notification-a mandatory obligation to pre-notify a proposed acquisition in one of  17 identified core sectors of either a controlling interest in a company or other qualifying entity or becoming the holder of 15% or more of the shares/voting rights of such an entity. If such a transaction is completed without Government approval it is automatically void;

—  A “call-in” power-the Government can “call-in” triggering transactions on grounds of national security for up to 5 years after a transaction completes. This applies to a wide range of transactions (both share and asset deals including intellectual property) across all sectors of the economy;

  No thresholds– there is no minimum turnover, market share or other thresholds so the regime can apply to a wide range of transactions including early-stage and R&D companies involved in developing technology in sensitive areas;

—  Assessment and orders-If a call-in notice is issued, the transaction will go through a national security assessment for an initial 30 day period subject to extension. If a national security risk is deemed to exist, the Secretary of State may make a final order preventing, remedying or mitigating such risk

—  Voluntary notification-there is a voluntary notification procedure for transactions not subject to mandatory notification (because for example they are outside the prescribed core sectors or it is an asset deal) if the parties to a transaction consider it may raise national security concerns. Parties may decide to make such a voluntary notification to get legal certainty because of the risk of “call-in” for 5 years.

Specified sectors
The sectors (and activities within them) which will be covered by the mandatory notification provisions of the Bill are currently the subject of consultation until 6th January 2021.

However, the Government has identified 17 core sectors it expects to be covered- advanced materials, advanced robotics, artificial intelligence, civil nuclear, communications, computing hardware, critical suppliers to government, critical suppliers to the emergency services, cryptographic authentication, data infrastructure, defence, energy, engineering biology, military and dual-use, quantum technologies, satellite and space technologies, and transport.

Interim Retrospective Provisions
The Bill has immediate implications for on-going transactions because the ‘call-in’ power will apply retrospectively to any transaction which takes place between 12 November 2020 and the date the Bill becomes law. It will be possible to discuss any such transaction which the parties consider may be subject to “call-in” with the Government before the Bill becomes law.

Trigger Events
The Bill permits the Secretary of State to “call-in” a share or assets transaction if they reasonably suspect a “trigger event” has taken place or may take place and the event may give rise to a risk to national security.

A trigger event occurs when a person:

—  gains control of a company or other qualifying entity; or
—  gains control of a qualifying asset by  acquiring a right or interest in the asset  and being  able to use it, or direct or control its use, to a greater extent than prior to its acquisition

A “qualifying asset” includes intellectual property and land. Examples of intellectual property set out in the Bill include trade secrets, databases, source code, algorithms, formulae, designs, drawings, plans, specifications and software.

Control in relation to qualifying entities is widely drafted and  includes the acquisition of:

—  more than 25%, 50%, or 75% of the shares or voting rights in a qualifying entity;
—  voting rights that control the passing of resolutions governing the affairs of the qualifying entity; or
—  the ability to materially influence a qualifying entity’s policy.

In addition, although not a “trigger event”, the Bill requires mandatory notification of proposed transactions in the specified core sectors where there is an acquisition of 15% or more of the shares or voting rights in a qualifying entity.

There is a range of penalties for entities and directors under the Bill.  In particular, a notifiable acquisition that is completed before being approved by the Secretary of State will be void. The relevant parties may also be subject to fines of up to the higher of 5% of global turnover and £10 million and imprisonment for up to 5 years, for completing an acquisition without clearance.


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This update is for general purposes and guidance only and does not constitute legal or professional advice. You should seek legal advice before relying on its content. This update relates to the prevailing circumstances at the date of its original publication and may not have been updated to reflect subsequent developments. If you have general queries about our updates, please email:

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