GovWire

The government can scrutinise and intervene in certain acquisitions that could harm the UKs national security. They can impose certain conditions on an acquisition and in rare cases may unwind or block an acquisition completely.

The rules apply to acquisitions that are in progress or contemplation. Acquisitions completed before 12 November 2020 are exempt.

If you are planning an acquisition of a qualifying entity in one of 17 defined sensitive areas of the UK economy, you may need to get approval from the government before you can complete it. This is called a notifiable acquisition. Completing a notifiable acquisition without approval will mean the acquisition is void and may mean that the acquirer is subject to civil or criminal penalties.

This guidance tells you:

• what types of acquisitions are covered
• when you need to tell the government about an acquisition
• how the government will scrutinise the acquisition

These rules fall under the National Security and Investment (NSI), which came into force on 4 January 2022. The Act is administered by the Investment Security Unit (ISU) in Cabinet Office and the decision maker is the Chancellor of the Duchy of Lancaster, the Secretary of State in the Cabinet Office.

How the rules work

1. Check if the rules apply to your acquisition. This will depend on what you are acquiring and how much control you have over it.

2. Check if you need to tell the government about your acquisition. You are legally required to inform the government about certain acquisitions of entities if your acquisition is in a sensitive area of the UK economy.

3. Tell the government about your acquisition. You can do this online by submitting a notification using the National Security and Investment service.

4. The government will review your acquisition. It can either clear your acquisition, impose certain conditions, or block or unwind it.

Check if the rules apply to your acquisition

These rules only apply to qualifying acquisitions. These are referred to as trigger events in the National Security and Investment Act.

Your acquisition is a qualifying acquisition if all of the following apply:

• the acquisition is of a right or interest in, or in relation to, a qualifying asset or qualifying entity (these terms are explained below)
• the entity or asset you are acquiring is from, in, or has a connection to the UK
• the level of control you acquire over the qualifying entity or qualifying asset meets or passes a certain threshold (for example, your stake or voting rights in a qualifying entity becomes higher than 25%)
• the acquisition was not completed before 12 November 2020

If the government reasonably suspects that an acquisition meets these criteria and that it has given rise to, or may give rise to, a risk to national security, it can be scrutinised by the government.

In addition, if this qualifying acquisition is of an entity in one of the 17 defined sensitive areas of the economy it may need to be notified to the government. Qualifying acquisitions outside the 17 defined areas do not need to be notified to the government.

Check if you are acquiring a qualifying entity or asset

A qualifying entity is any entity other than an individual, including:

• a company
• a limited liability partnership
• any other body corporate
• a partnership
• an unincorporated association
• a trust

Qualifying assets include:

• land
• tangible moveable property
• ideas, information or techniques which have industrial, commercial or other economic value (intellectual property)

Entities and assets might be qualifying entities and qualifying assets if they are outside or not from the UK but have a connection to the UK.

Acquisitions of entities or assets outside or not from the UK

If an entity is formed or recognised under the law of a country or territory outside the UK, it is a qualifying entity if it either:

• carries on activities in the UK or
• supplies goods or services to people in the UK

For land or tangible moveable property situated outside the UK or its territorial sea, or for any intellectual property, it 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

Read further guidance on how the rules work for entities and assets outside or not from the UK.

Check the level of control you have acquired, or will acquire, over the qualifying entity or asset

If you are acquiring a qualifying entity or asset that is from, in, or has a connection to the UK, you will need to check if the level of control you have acquired, or will acquire, over it could bring it in scope of the rules.

Your acquisition is in scope of the rules if you acquire a right or interest in, or in relation to, a qualifying entity or asset, and the level of control you acquire meets any of the following thresholds:

• your shareholding stake or voting rights in a qualifying entity meets or crosses certain percentage thresholds (for example, it becomes higher than 25%)
• you acquire voting rights in a qualifying entity that allows you to pass or block resolutions governing the affairs of the entity
• you are able to materially influence the policy of a qualifying entity, for example acquiring the right to appoint members of the board of the entity that enables you to influence the strategic direction of the entity
• you are able to use a qualifying asset, or direct or control its use, or you are able to do so more than you could prior to the acquisition

If your qualifying acquisition takes place over more than one day, the acquisition will be treated as having taken place on the last day of the period.

Further details of each threshold are outlined below.

If your shareholding stake or voting rights meet or cross certain percentage thresholds

Your acquisition is in scope if your shareholding stake or voting rights increase:

• from 25% or less to more than 25%
• from 50% or less to more than 50%
• from less than 75% to 75% or more

If the entity has a share capital, the thresholds describe holding shares comprised in the issued share capital of a nominal value (in aggregate) of that percentage of the share capital.

If the entity does not have a share capital, the thresholds describe holding a right to that percentage share of the capital or profits of the entity.

If the entity is a limited liability partnership, the thresholds describe holding a right to that percentage share of any surplus assets of the partnership on its winding up. Where this is not expressly provided for, each member will be treated as having an equal share.

If you acquire voting rights that allow you to pass or block resolutions governing the affairs of the entity

Such an acquisition is in scope of the rules, regardless of the percentage of voting rights you may already hold, or the percentage of your shareholding, or taking into account other voting rights you hold as well as your acquisition. Any voting rights you already held before the acquisition are taken into account when assessing whether the acquisition meets this threshold.

Voting rights means rights that are given to shareholders or members to vote at general meetings on all, or substantially all, matters.

If the entity does not have general meetings at which matters are decided by such votes, voting rights includes any rights in relation to the entity that are of the equivalent effect.

In the case of minority veto rights, the voting rights only count where they provide the holder with a right to vote on all or substantially all matters governing the affairs of the entity.