There is a strong interest in the acquisition of UK companies by overseas investors. However, new legislation that comes into force from 4 January 2022 could limit who can acquire British businesses.

The National Security and Investment Act (NSI), introduced at the start of next year, can restrict acquisitions that could harm the UK’s national security.

The new laws will give Government the power to scrutinise deals and, where necessary, intervene in certain acquisitions. This could include imposing certain conditions on a transaction or, in rare circumstances, blocking or even unwinding acquisitions that have taken place.

These new rules apply to acquisitions currently in progress or that have already been completed up to 12 November 2020.

The new legislation is complex and requires acquisitions to meet certain criteria before they are scrutinised, including the qualifying entity falling into one or more of 17 defined sensitive areas of the UK economy.

If an acquisition meets the requirements of the NSI then you must get approval from the Government before you can complete it.

Completing the acquisition without prior approval will void the acquisition and may expose the acquirer to civil or criminal penalties.

Do the rules apply to an acquisition? 

Determining whether the rules apply is important before proceeding with an acquisition and you may even need to review previous recent sales to assess whether the Government should be notified.

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 per cent)
• The acquisition is within one or more of the 17 defined sensitive areas of the UK economy.

What you need to do before an acquisition

1. Check if the rules will apply to your acquisition. This depends on what business is acquired and how much control you have over it.
2. Check if you will need to tell the Government about your acquisition.
3. Tell the Government about your acquisition. You can do this online by submitting a notification.
4. The Government will review your acquisition. It can either clear your acquisition, impose certain conditions, or block or unwind it.

Full details of the NSI and the rules that apply to ‘notifiable acquisitions’ can be found here.

Raise awareness

This change to how UK acquisitions are managed is relatively unknown and under publicised, but it could have an impact on many sectors given the broad areas of the UK economy that it covers.

We highly advise that you share this information with businesses you intend to work with so that they are aware of these requirements and avoid potential obstacles to investment and acquisition.

If you need support with any overseas acquisition or investments, we are here to help. Thanks to our position as the exclusive UK member firm of Reanda International, we can access leading expertise in more than 40 countries worldwide. Speak to us today for advice.