With the potential takeover of Royal Mail currently making headlines in the news, the National Security and Investment Act (NSIA) and its wide-reaching powers are being brought to the fore.

The 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 equips the UK government with comprehensive powers to review and intervene in transactions involving the acquisition of entities or assets that may pose a national security threat.

Key Provisions of NSIA

Mandatory Notification Requirement

Transactions in the following 17 specified sensitive sectors require mandatory notification to the government:

Advanced MaterialsCritical Suppliers to GovernmentQuantum Technologies
Advanced RoboticsCryptographic AuthenticationSatellite and Space Technologies
Artificial IntelligenceData InfrastructureSuppliers to the Emergency Services
Civil NuclearDefenceSynthetic Biology
Computing HardwareMilitary and Dual-Use 

Failure to notify a relevant transaction can make it void and lead to significant penalties.

Call-in Powers

The government can call in any transaction for review if it suspects a national security risk, regardless of whether it falls within the mandatory notification sectors. This power can be exercised retroactively, up to five years after the transaction’s completion.

Review Process

An initial screening period of up to 30 working days assesses whether a detailed review is needed. If necessary, an additional 45 working days may be applied, with further possible extensions for complex cases.

Penalties for Non-compliance

Penalties for non-compliance include fines up to 5% of global turnover or £10 million, whichever is higher, and potential imprisonment of individuals for up to five years.

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 any of the mandatory notification sectors.

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.

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