The National Security and Investment Act 2021 (NSIA): guidance on “notifiable acquisitions” and on process

Mandatory notification

Critically, the new rules introduce mandatory suspensory notification for certain acquisitions of qualifying entities that carry out particular activities in the UK within 17 designated sensitive areas of the economy ‒ so called “notifiable acquisitions”.

Knowing whether an acquisition is a notifiable acquisition is key. If a notifiable acquisition is completed without first notifying and gaining government approval, it is void. And the government could seek to impose civil and criminal penalties including substantial fines.

The government’s latest guidance, National Security and Investment Act: guidance on notifiable acquisitions, therefore provides welcome clarity. It is intended to assist the interpretation of the notifiable acquisitions regulations which detail the relevant activities of qualifying entities in each of the 17 areas of the economy.

In particular, the guidance sets out the nature of the relevant activities for each of the 17 high-risk sectors, with questions and examples to aid an assessment of whether an acquisition is in scope.  

Process

With the start of the regime just weeks away, the government has published the content and form of the notification forms. Three different notices for mandatory notification, voluntary notification and a retrospective validation application are now set out in regulations laid before Parliament. In addition to certain specified information, the regulations prescribe wording for declarations in respect of the truth of the information provided and the authorisation of any appointed representative. As expected, the information required is extensive, covering areas including details on the acquirer, the acquisition, the qualifying entity/asset, any other related UK regulatory approvals and any notifications to overseas investment screening regimes within the previous 12 months. The government explains that not all categories of information will be required in every case and that the online portal will reflect this.

The government has also worked up its existing guidance National Security and Investment Act: prepare for new rules about acquisitions. This guidance covers the national security regime more broadly.

Significantly, the government has added sections to the guidance on process and the government’s potential response, including:

• How to submit an online notification form. While we now have sight of the form and content of the notification forms, information on the submission process is still sketchy. Further guidance on how to register for the online notification form service and complete notification forms will be published closer to full commencement of the regime.
• The review period, which applies to all notified acquisitions. This lasts up to 30 working days. The government expects most acquisitions to be cleared at this stage but it may call in the acquisition for further investigation during an assessment period.
• The assessment period, which applies only if an acquisition, whether notified or not, is called in for a full assessment of the national security risk.
  • This also takes an initial 30 working days, but may be extended by the government for an additional 45 working days and a further voluntary period could be agreed with the acquirer. There is no indication of how often the government is likely to make use of the additional period. Notably, during this assessment period only, information notices and attendance notices will stop the clock running. This adds a significant degree of uncertainty to the process, making overall timelines difficult to predict.
  • During this period, the government may also issue an interim order to put in place immediate and temporary controls to prevent action that might undermine any conditions that might ultimately be put in place. Controls could include preventing the exchange of confidential information and access to sensitive sites or assets. They may also prevent the progress of an acquisition. The orders might apply to people outside the UK.
• Confidentiality. The government will not routinely make public that it has called in an acquisition for national security assessment or that it has issued an interim order. It will inform the acquirer if it intends to do so. The guidance also notes that the government’s Investment Screening Unit (ISU) will assist should there be doubts or concerns about other legislative disclosure obligations conflicting with aspects of the national security regime.
• Compliance and enforcement. The government is keen to point out that its aim is to support acquirers to meet their obligations under the regime. It may provide advice, guidance and warnings, or agree actions with parties before applying for civil injunctions, imposing civil penalties or instituting criminal proceedings. We can expect a clearer indication on its approach in further guidance to be published closer to commencement. But it appears that the government does not intend to automatically reach for its fining powers in all cases of non-compliance, as some had initially feared.

The revised guidance also now highlights that an acquisition could be a notifiable acquisition when the qualifying entity is formed or recognised under the law of a country or territory outside the UK – if it carries on activities in the UK specified in the notifiable acquisitions regulations. Additional guidance on how the regime could affect people or acquisitions outside the UK, together with other guidance to help interpretation of and preparation for the new rules, has already been published.

The ISU is already open for business. It is available for general enquiries or informal discussion around future acquisitions or a specific notification. And our FDI experts are engaging with the government and the ISU as the regime moves towards commencement. Please get in touch with your usual Allen & Overy contact if you would like to discuss the implications of the new regime for your business.