The UK’s new NSI regime – what you need to know

Written by Marnie Thomas,  Solicitor

At the beginning of the year, the government introduced new rules around business acquisitions which could harm the UK’s national security. The National Security and Investment (NSI) regime has wide-ranging implications for UK businesses and investors around the world. It applies not only to acquisitions of UK entities, but also captures foreign deals, where the target business exports goods or services to UK customers.

How does the new NSI regime operate?

Under the new regime, certain transactions must be notified to the government. There is a bar on closing the transaction until clearance is received. The remainder, and this covers a wide range of deals, will be subject to a voluntary notification regime. The government can also “call-in” deals for review that completed on or after 12 November 2020, for up to five years after completion.

If the government decides to scrutinise a transaction, it has an initial period of 30 working days to complete a detailed national security assessment. This can be extended by a further 45 working days. At conclusion of the assessment, the government may:

  1. impose conditions on the deal;
  2. block the deal; or
  3. unwind a completed deal.

Is your transaction captured by the new rules?

For the rules to apply, the transaction must satisfy three conditions:

  1. The buyer acquires a right or interest in: 
    • an entity (e.g companies, LLPs, partnerships and trusts); or
    • an asset (e.g land, tangible moveable property and any idea, information or technique with industrial, commercial or other economic value including intellectual property).
  2. The entity or asset is from, in or has a connection to the UK. This captures international acquisitions where the target has activities in the UK and/or supplies goods or services to the UK.
  3. The level of control over the entity or asset passes a certain threshold. Namely, the buyer:
    • acquires more than 25%, 50% or 75% of votes or shares in an entity;
    • acquires rights that enable it to pass or block resolutions in an entity; or
    • acquires an interest which allows it to materially influence the policy of an entity or direct the use of an asset.

Are you obliged to notify?

For transactions involving entities in specific sectors, the buyer must submit a formal notification to the government and the transaction cannot close until clearance is received. Although the obligation to notify falls on the buyer, it is clearly in the seller’s interests to cooperate with notification, because if clearance is not received before the deal closes, the transaction could be declared void.

The specific sectors are those which the government has identified as posing an enhanced risk to national security. They cover a broader range than you might expect. Included are several tech sectors, such as artificial intelligence and computing hardware and key infrastructure sectors such as energy, communications and transport. The more obvious high-risk sectors include civil nuclear, critical supplies to the government and defence. This includes the manufacturers of components to those sectors.

Notification for the wider economy

If a transaction does not involve one of the 17 sectors listed in the legislation, the buyer is under no obligation to notify. Although businesses are encouraged to submit a notification where the transaction has the potential to raise security concerns.

Failure to comply

There could be civil or criminal penalties for failure to comply with the new law. A civil penalty could require payment of up to 5% of global turnover or £10million, whichever is greater. The criminal penalty is up to five years in prison.

Voluntary notification is clearly an important mechanism for businesses looking to mitigate the risks associated with failure to file a notification.

Our Company Commercial team has a wealth of experience advising on the sale and purchase of businesses and companies across a range of business sectors.

Caroline Carretta is a Partner based in our Dorchester office and Martin Varley is a Partner in Poole.

You can call Caroline Carretta on 01305 252578, or email her on

You can call Martin Varley on 01202 725408, or email him on

The information contained in this article is provided for informational purposes only and should not be construed as legal advice on any matter. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice based on their own particular circumstances.


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