National Security and Investment Act 2021: Do I Need Consent to Sell My Business?

The NSIA Regime relates to transactions involving the acquisition of certain thresholds of control in qualifying entities or assets.

Qualifying entities include UK companies, partnerships, trusts and other corporate bodies, whilst assets comprise land, moveable property and information with economic value, to name a few.

Suppose a qualifying entity is involved in particular activities within certain high-risk sectors of the economy.

In that case, companies are now required to notify the Government of any potential national security issues through either a mandatory or a voluntary notification, and the Government has the authority to unwind or block an acquisition accordingly.

Acquisitions completed before 12 November 2020 are exempt from this.

• The NSIA should be incorporated into the timetabling discussions with all key stakeholders, such as lenders, customers, suppliers, and employees
• Flag that the Government's call-in power also applies to "arrangements … in process or contemplation" (this could include any of the first steps in a transaction process) and so if the seller concludes that the NSIA is engaged, it should consider seeking guidance at the outset.
• Consider the buyers/investor, as the Government is more likely to approve a transaction if it is comfortable with the identity of the buyer/investor
• Reconsider the scope of the transaction: if the entity or assets causing the national security risk are not essential to the transaction's value, could a pre-deal reorganisation or hive-out be implemented to ensure that the buyer/investor does not gain control of the relevant entity or assets?
• Expect buyers to conduct enhanced due diligence to assess whether the NSIA could apply.

• Offences include failing to comply with interim, final, or attendance orders, completing a notifiable acquisition without approval, and disclosing information in contravention of the provisions.
• Penalties include reminders, warning letters, remedial action, and monetary penalties, with the maximum penalty for businesses being 5% of turnover or up to £10 million (whichever is higher).

What does the future hold?

In the future, the Secretary of State may use secondary legislation to extend the types of acquisitions subject to mandatory notifications and exempt certain acquirers from the mandatory notification regime.