The National Security and Investment Act 2021 (NSI) came into force in January 2022 and established a new stand-alone screening regime requiring the notification of, and giving the UK Government the power to intervene in, certain transactions investing in or acquiring UK companies or assets in certain designated sectors on grounds of national security.

On 19 July 2022, the Department for Business, Energy & Industrial Strategy (BEIS) published the first set of Market Guidance Notes designed to complement existing guidance in relation to the NSI. The Market Guidance Notes are based on an analysis of the notifications processed by the Investment Support Unit and feedback received during the first 6 months of the NSI being in operation.

Key takeaways include:

  • Different types of voting rights – the government has clarified that the acquisition of contractual veto/consent rights such as those typically taken by minority investors (particularly when providing early-stage investment) will not be considered a trigger event subject to mandatory notification under the NSI. However, the contractual veto/consent rights may amount to “material influence” over the entity and the acquirer may wish to consider making a voluntary notification.
  • Granting of security over shares – the grant of share security would not be considered a notifiable acquisition subject to the mandatory notification requirements, even if the entity involved carries on activities in one or more of the 17 sensitive sectors. However, if legal title is transferred/control passes in some other way or the security is enforced (the result of which would amount to an acquisition of control under the NSI) a notifiable acquisition may have taken place and could be subject to the mandatory notification requirements.
  • Insolvency proceedings – The government has confirmed that the appointment of a liquidator or receiver may be considered a qualifying acquisition under the NSI and could require mandatory notification. As there are no expedited notification procedures, insolvency practitioners should be mindful of the review and assessments periods if a mandatory notification is required.

The BEIS expects to publish further Market Guidance Notes in early 2023 and would welcome suggestions for topics to be included in the future. You can read more here.