Ecovis Global > The UK’s New Merger Controls: Protecting National Security or Adding Uncertainty for Investors?
The UK’s New Merger Controls: Protecting National Security or Adding Uncertainty for Investors?
11. February 2021
A new National Security and Investment law is about to become law in the UK. It will have a significant impact on any acquisition of a business which is active in, or supplies goods or services into, the UK. It will apply wherever the buyer or the target is located.
The new law will give the UK government the power to:
Stop, regulate and even undo any acquisition of any UK-based businesses or assets
Require advanced notice and approval of all deals in 17 “sensitive” sectors
The law will:
Allow the Secretary of State (SoS) to assess whether, and act if, a deal is a national security risk
Require buyers in the sensitive sectors to seek approval
Require notice for an increase in shareholding beyond 15%
Encourage voluntary notice in other sectors
Impose remarkable financial and criminal sanctions for non-compliance
Mandatory Disclosure Defined for Some Sectors
The sensitive sectors in which notice is mandatory are widely defined. They include advanced materials and robotics, AI, nuclear, communications, computer hardware, critical supplies to government, cryptographic authentication, data infrastructure, defence, energy, engineering biology, military, quantum satellite and space technologies, and transport, explain the advisers from Moore Barlow LLP, a member of ECOVIS International.
We can advise you on all aspects of the new law including whether a transaction is notifiable and how to deal with the risks. Mark Lucas, Partner, Moore Barlow LLP – Member of ECOVIS International, Guildford, Surrey, UK
The new regime also applies to any assignment or licence of an asset (e.g., intellectual property, technology, or information) and any dealing with potentially strategic land. It applies wherever the asset is located, so long as it is used in an activity in the UK or to supply goods or services in the UK.
The test is whether the SoS is satisfied that they could pose a national security risk. There is no clear definition yet of what that means. If thought to pose such a risk, the SoS can stop or undo the deal or impose any conditions. For example, the SoS could order changes to the deal terms, or how the target operates.
Any Unauthorised Transaction Could Result in Fines
Where the mandatory notice regime applies and a transaction is completed before it is cleared, the transaction will be void and the parties can be subject to fines of up to the higher of 5% of worldwide turnover and GBP 10 million. Individuals may also be imprisoned for up to five years. Other penalties also apply for non-compliance with aspects of the review process.