The National Security and Investment Act 2021 (NSIA) came into effect in January 2022, and was the biggest legal shake-up for UK merger and acquisition (M&A) activity in years.
The UK Government recently sought evidence on how the NSIA has been working, and in response set out a series of proposed reforms.
It has already published an updated statement on its ap- proach to ‘calling in’ deals for review, as well as some updated market guidance.
Of most immediate interest to dealmakers, however, are potential updates to the sectors covered by the mandatory notification requirement and potential exemptions from notification for certain types of deal/acquirer.
Responses to the government’s call for evidence included requests for clearer definitions and/or guidance on certain areas covered by mandatory notification: particularly artificial intelligence, advanced materials, defence and critical suppliers to government.
The government has said it will consult on updating the key sector definitions, including proposals to add semiconductors and critical minerals (and possibly also water) to the list of key sectors.
That consultation was trailed for this summer, but the general election announcement may change that timing (if not the proposals themselves, which are presumably relatively apolitical due to their technical nature).
Respondents supported certain targeted exemptions to mandatory notification, including for the appointment of liquidators, official receivers and special administrators (administrators already being exempted); intra-group reorganisations; Scots law share pledges; and acquisitions by public bodies.
The government has accepted an exemption for liquidators (etc), but intends to risk-assess the other deal types before committing to any more exclusions.
Checking NSIA compliance is now a critical aspect of all M&A activity, with potentially serious consequences for mistakes or oversights.
Dealmakers should therefore monitor these potential changes to ensure they don’t get caught out by new sector definitions, and can benefit from any new exemptions.
Partner Content in association with Brodies LLP