National Security and Investment Bill – Headline Points

This blog summarises the key headlines from the new National Security and Investment Bill.

The government published the long anticipated National Security and Investment Bill:

This will give the UK government much wider powers to intervene in transactions on national security grounds and is expected to come into force in Q1 or Q2 next year (depending on how long it takes for the bill to pass through Parliament).

This is a big expansion in this area of law.  Going forward, when doing transactions, people are going to need to bear this legislation in mind – if only to confirm that it doesn't apply.

Here are the initial headlines:

1. It's very difficult to define what "national security" actually means.  Prior to the legislation coming into force there will be a process for informal discussion with the Department for Business and Energy, so that might be an important way of getting clarity for transactions currently in process.
   
   
2. There are 17 sectors for which notification to the government is mandatory prior to completing a transaction.  This is about much more than just traditional military equipment, and captures sectors such as transport, energy, data infrastructure, communications and AI.
   
   
3. Even if a transaction does not fall within a mandatory notification, the government still has the power to "call in" a transaction which meets the "trigger event" threshold for up to 5 years after it has completed.  So the "trigger event" threshold (which turns on control of entities and assets as mentioned below) becomes the key test. 
   
   
4. Whether a trigger event occurs depends on "control", not "ownership".  Control can mean shareholdings as low as 15% or negative control of voting rights.
   
   
5. Trigger events can occur when somebody takes control of "assets" as well as "entities" – so the legislation may capture transactions beyond just M&A (e.g. control of assets through an outsourcing arrangement).
   
   
6. If the trigger event threshold is met, given the inherent uncertainty over what national security means, parties may want to make a voluntary notification pre-completion to avoid the risk of a deal being unwound post-completion.
   
   
7. There are big penalties for breaching the new rules.  A criminal offence of up to 5 years imprisonment (including for directors of companies involved) and also fines of up to 5% of global turnover or £10m (whichever is higher)