Case Update: Company Owner Ordered To Sell Its Shares Under The National Security And Investment Act

^{Upp broadband – Picture courtesy of Upp}

The National Security and Investment Act (NSIA) came into force in January 2022 and has introduced substantial changes to how investments are scrutinized for national security risks.

For businesses operating or investing in the UK, understanding the implications of this legislation is crucial. The NSIA gives the UK government comprehensive powers to review and intervene in transactions involving the purchase of companies or assets that may pose a national security threat.

We have previously written about the scope of the NSIA, and a recent case (R (on the application of L1T FM Holdings UK Ltd) v Chancellor of the Duchy of Lancaster in the Cabinet Office [2024]) shows the extent of the government’s power to challenge transactions and order buyers sell their shares.

In January 2021, the LetterOne Group acquired UK broadband provider Upp Corporation Limited (Upp). The ultimate owners of LetterOne and Upp were five Russian nationals, four of whom were sanctioned by the UK in 2022. In May 2022 the government reviewed the transaction and ordered LetterOne to sell Upp as it considered the transaction a national security risk, because of the access Upp had to customer data and the potential for disruption and sabotage of broadband network operations. The company was ultimately sold to Virgin Media O2 in September 2023 for less than the £143.7 million the LetterOne Group had invested to date.

LetterOne challenged this order through a judicial review initiated on 16 January 2023, but the court sided with the government. The court gave a lot of weight to the government’s discretion in matters concerning national security, suggesting there is a high bar for those appealing an order made under the NSIA. 

If you are looking to sell your company or acquire shares in another company, the NSIA requires a proactive approach to compliance and risk management. Given the potential consequences of failing to consider NSIA, it is important to engage with legal advisers early in the transaction planning process to evaluate whether the transaction is likely to fall within its scope as approval from the government can cause delays.  

BHW’s Corporate & Commercial department regularly advises on share acquisitions and sales. If you would like advice in relation to either of these issues, please contact the Corporate & Commercial department by emailing info@bhwsolicitors.com or by calling 0116 289 7000.