Thursday, June 23 2022


UK: The National Security and Investment Act 2021

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The National Security and Investment Act 2021 (the act), which came into force on 4 January 2022, replaces the national security provisions of the Enterprise Act 2002. The law has been described by the government as “the biggest overhaul of the UK’s national security regime for 20 years” and aims to strengthen the powers of the government to investigate and intervene in acquisitions and investments in circumstances where the acquisition/investment could harm the national security of the UK.


The new Investment Security Unit (UIS), housed within the Department of Business, Energy and Industrial Strategy, will be responsible for managing the national security and investment regime established by law. Notifications will be made to the UIS via an online portal.

Key points of the law:

  • The Act applies to acquisitions of entities in qualifying sectors. The 17 defined sectors can be viewed on the government website and include artificial intelligence, communications, defense and energy.

  • The law provides for a mandatory notification procedure for acquisitions/disposals in these sectors. The events triggering the mandatory notification procedure are, an acquisition project of:
    • more than 25%, more than 50% or more than 75% of the votes or shares of an entity in a qualifying sector; Where

    • the acquisition of voting rights that would permit or prevent the passing of any class of resolutions governing the affairs of an entity in a qualifying industry.

In this case, prospective acquirers must notify the ISU and obtain its approval before closing the acquisition.

  • The law also provides for a voluntary notification system that must be used in transactions that fall under one of the trigger events listed above, but are not in relation to an entity in one of the eligible sectors.

  • In the absence of mandatory or voluntary notification, the law gives the Secretary of State the power to request a review of the transaction. A notice of appeal may be issued from the time the transaction is in progress or contemplated, until six months after the Secretary of State has been made aware of a completed transaction. This power will apply retroactively to capture in-scope transactions made on or after November 12, 2020.

Key points for lenders:

  • Although the vast majority of commercial loan agreements are unlikely to raise national security concerns, the law can impact secured loans in certain scenarios. In particular, it may have an impact on lenders seeking to assert security over shares or voting rights attached to shares if the criteria for mandatory notification of the transaction are met.

  • As a result, enforcement action could be delayed, restrictions or conditions could be imposed on the lender as it tries to enforce its security (or exercise its voting rights), or the lender may find that the acquisition or transfer of the guaranteed shares is prohibited. Absent a situation where mandatory notification under the Act becomes relevant, lenders who are concerned that the execution of their security may cause a triggering event, may wish to consider voluntary notification to avoid significant penalties that result from a violation of the Act.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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