Last month the Government introduced the National Security and Investment Bill to the House of Commons for its first reading. The purpose of the Bill is to give the government further powers to scrutinise and, where necessary, intervene in certain business transactions if it believes national security concerns are present; this will include mergers and acquisitions.
The UK’s current powers derive from law that is now 18 years old. Unsurprisingly the Government has branded current powers not fit for purpose to ‘address the challenging and changing national security threats the UK faces’. The new reforms will bring the UK in line with its allies’ approach to investment screening.
The key power outlined by the Bill is that the Secretary of State for Business, Energy and Industrial Strategy will be able to ’call in‘ any acquisitions of control where it is reasonably suspected that there is a risk to national security as a result of the acquisition.
Currently, the Government is not able to intervene unless specific thresholds, that include turnover or share in supply of products, are met. As such, small to medium size enterprises, who despite working in high risk areas, are largely devoid of government scrutiny.
These thresholds have been removed, as has the mandatory involvement of the Competition and Markets Authority unless there are competition concerns, and the ability to intervene in asset acquisitions.
Here are the key areas that power will only be used:
How might this affect your business?
The Bill, and accompanying regime, actively encourages all businesses to notify the government if an acquisition of control takes place. However, for transactions in specific high-risk sectors (due to be outlined in full in secondary legislation once the bill has received royal assent) the Bill will require a business to submit a formal notification. Once the Government has received a notification they will have a period of 30 days to decide whether or not the transaction posses a risk to national security. Criminal and civil sanctions bolster the governments arsenal in the event of non-compliance with an acquisition notification.