In his latest Coffee Break Briefing, Insolvency expert, Malcolm Niekirk explores the National Security and Investment Act 2021 and explains how the process works in practise.
In case you missed it, you can read a summary and watch the video here.
What is NSIA 2021?
The National Security and Investment Act 2021 gives the UK Government powers to review certain business transactions where there may be a risk to national security. This includes the ability to impose conditions, apply restrictions or block a proposed acquisition.
The key objectives of the Act are to:
- Maintain the UK’s position as an attractive destination for investment
- Protect national security, including the safety of citizens and the UK’s strategic interests
When might you hit NSIA 2021?
There are two main circumstances where you may encounter the National Security and Investment Act 2021:
Business and asset sales
The Act may be triggered where there is a sale or acquisition of a business, or in some cases, specific assets. This includes transactions involving shares, intellectual property, land or other key business assets.
Restructuring and changes in control
The Act is not limited to sales. It can also apply to business restructuring, particularly where there is a change in control. This means the Act can also apply to internal reorganisations, group restructures and refinancing arrangements if they result in a new party gaining control over a company or its assets. The key consideration is whether that change could have implications for national security.
In either case, if the Government considers that the transaction could give rise to a national security risk, it has the authority to step in. This may result in the deal being subject to conditions, restricted in scope or in some cases blocked entirely.
When does the legislation apply?
The National Security and Investment Act 2021 can apply to a range of transactions, particularly where there is a potential national security issue. There are three key mechanisms to be aware of:
Mandatory notification
In certain sectors, buyers are legally required to notify the Government before completing a transaction.
This applies where a business operates in areas considered sensitive to national security and the transaction involves acquiring a specified level of control.
Failure to notify in these cases can result in the transaction being legally void, alongside potential penalties.
Voluntary notification
Even where there is no legal obligation, parties can choose to notify the Government if there is any concern that a transaction could raise national security issues.
This is often used as a risk management tool, providing certainty that the deal will not be called in for review at a later stage.
Call-in powers
The Government also has the power to “call in” transactions for review, whether they have been notified or not.
This applies to both proposed and completed deals. If a transaction is called in, the Government can investigate and if necessary, impose conditions, block the deal, or even unwind a transaction that has already completed.
What should buyers do?
When a transaction may fall within the scope of the National Security and Investment Act 2021, buyers should take a structured approach to managing risk and ensuring compliance.
1. Check whether the Act applies
The first step is to assess whether the transaction falls within the scope of the Act. This will depend on factors such as the nature of the business or assets involved, the sector it operates in, and the level of control being acquired.
If the transaction is clearly outside the regime, no further action is required.
2. Consider whether notification is required
If the transaction is within scope, buyers should then determine whether a mandatory notification is required. Where the deal involves a sensitive sector and meets the relevant control thresholds, notification to the Secretary of State is a legal requirement before completion. Even if notification is not mandatory, buyers should consider whether a voluntary notification would be advisable to reduce the risk of future intervention.
3. Notify the Secretary of State (if required)
Where a notification is necessary, the buyer must submit the relevant details to the Secretary of State and obtain clearance before completing the transaction.
Completing a notifiable transaction without approval can have serious consequences, including the deal being void and potential penalties.
4. Await review and clearance
Once notified, the Government will review the transaction to assess any national security concerns. During this period, the transaction cannot complete (where mandatory notification applies) until approval is granted. The Government may clear the deal, impose conditions or carry out a more detailed investigation if required.
How long does this process take?
The review process is subject to defined statutory timeframes, although in practice these can vary depending on the circumstances.
Once a notification has been accepted, the Secretary of State has up to 30 working days to decide whether to:
- Clear the transaction
- Call the transaction in for a more detailed review
- Extend the review period
If the transaction is called in, an additional review period of up to 45 working days applies. This can be extended further if the Secretary of State requires more time and the parties agree to it.
The process can extend to around three months or more where a detailed review is required.
However, recent statistics suggest that the majority of cases are dealt with more quickly. In 2024/25, 100% of notified transactions were either cleared or called in within the initial 30 working day period, providing a degree of certainty for most transactions at an early stage.
When should the buyer notify the SOS?
The buyer will have to decide the point at which they choose to notify the Secretary of State about the proposed transaction. These are some of the common options:
- After heads of terms are agreed
- When financing is in place
- During board approval
The structure and key elements of the deal are usually clear at each of these stages.
In the case of public bids
For public transactions, notification is likely to be aligned with key market announcements, such as :
- The public announcement of a firm intention to make an offer
- The announcement of a possible offer
What are some possible Government interventions?
Information notices
The Government can issue an information notice, requiring the buyer (or other relevant parties) to provide further details about the transaction.
Attendance notices
An attendance notice may require individuals to attend a meeting with the Government to answer questions in person.
This allows the Government to gain a deeper understanding of the transaction and any potential national security risks.
Interim orders
The Government can impose interim orders to prevent certain actions from taking place while a review is ongoing.
For example, this may restrict the sharing of sensitive information, limit integration between businesses, or pause certain aspects of the transaction to mitigate the potential risk to national security.
Final orders
If the Government concludes that a transaction gives rise to national security concerns, it can impose a final order.
This may include conditions or restrictions on how the transaction is carried out. In more serious cases, the Government can block the deal entirely or require it to be unwound.
Final orders will typically set out:
- The conditions the buyer must comply with
- How compliance must be demonstrated
- The consequences of failing to comply with those conditions
Insolvency Coffee Break Briefings
Thank you for reading this summary. You can watch the full, detailed webinar here. If you have any questions after reading this article, please don't hesitate to get in touch with our bright and experienced team. Call us on 01202 499255, or fill out the form at the top of this page, for a free initial chat.
Never miss out on one of Malcom's FREE briefings again, and sign up to receive updates here.
Comments