{"id":1112,"date":"2022-01-04T11:50:48","date_gmt":"2022-01-04T10:50:48","guid":{"rendered":"http:\/\/haavind.local\/en\/2022\/01\/04\/new-fdi-regime-in-the-uk-what-foreign-investors-need-to-know\/"},"modified":"2022-07-21T12:50:49","modified_gmt":"2022-07-21T12:50:49","slug":"new-fdi-regime-in-the-uk-what-foreign-investors-need-to-know","status":"publish","type":"post","link":"https:\/\/haavind.stage01.dekodes.no\/en\/new-fdi-regime-in-the-uk-what-foreign-investors-need-to-know\/","title":{"rendered":"New foreign direct investment regime in the UK: what foreign investors need to know"},"content":{"rendered":"\t
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New foreign direct investment regime in the UK: what foreign investors need to know<\/h1>\n\n

On 4 January 2022, the UK\u2019s new foreign direct investment regime entered into force. The mandatory filing rules set out in the National Security and Investment Act 2021 (\u201cNSI Act\u201d) may apply not only to investments in UK companies but also in non-UK businesses.
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EU\/EEA and competition<\/span><\/div>\n\t\t\t\t<\/div>\n\t\t\t<\/div>\n\n

On 4 January 2022, the UK\u2019s new foreign direct investment regime entered into force. The mandatory filing rules set out in the National Security and Investment Act 2021 (\u201cNSI Act\u201d) may apply not only to investments in UK companies but also in non-UK businesses.
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The UK follows the global trend towards closer oversight and scrutiny of foreign investments and acquisitions. The national security provisions of the Enterprise Act 2002 provided the government with quite limited powers to intervene on the grounds of national security. The introduction of the NSI Act is intended to broaden and modernize the government\u2019s powers, as well as to bring them into line with recent developments in other countries.<\/p>\n\n\n\n

Unlike the old regime, there are no financial thresholds for notification and no exemptions for de minimis transactions. Instead, the government has a broad power to scrutinize acquisitions of control over entities or assets where there is or could be a potential risk to national security. An extensive call-in power has also been introduced in order to catch unnotified transactions.<\/p>\n\n\n\n

The broad nature of the new regime makes it likely to affect a large number of transactions. Indeed, the government\u2019s impact assessment estimated that up to 1830 transactions will be notified and up to 95 transactions will be called in, every year.[1]<\/a> It is the newly established Investment Security Unit (\u201cISU\u201d), sitting within the Department for Business, Energy and Industrial Strategy (\u201cBEIS\u201d), that will carry out the reviews.<\/p>\n\n\n\n

Parties to a transaction that are unsure about the potential national security implications are invited to submit voluntary notifications in order to increase legal certainty. The ISU has indicated a willingness to help parties get to grips with the new regime and stated that advice will generally be provided within 30 days after receiving a request.<\/p>\n\n\n\n

The following guide introduces the new regime by setting out questions and elements investors should consider during the transaction process.<\/p>\n\n\n\n

[1]<\/a> NSI Impact Assessment (publishing.service.gov.uk)<\/a><\/p>\n\n\n

1. Early stages and due diligence: determining whether or not to notify the transaction <\/h2>\n\n\n

What is the target of the transaction? <\/strong>Under the new regime, the government has the power to review acquisitions of control of both qualified entities and assets. Qualified entities include any entity established under UK law\/entities formed under UK law and entities that carry out activities in the UK or supply goods or services to the UK<\/em>. Assets include land and tangible property, as well as intellectual property. It is sufficient that the assets are used in connection with activities carried out in or to the UK.<\/em> In practice, every due diligence process where the target has connections to the UK, should now include a mapping of an entity\u2019s sales to or activities in the UK.<\/p>\n\n\n\n

Does the target fall within one of the critical sectors? <\/strong>Mapping the target\u2019s potentially critical products or services is essential to understanding whether notification is mandatory. The new regime specifies 17 critical sectors subject to mandatory approval, including advanced materials, AI, communications, critical suppliers to government, data infrastructure, defense, energy, military and dual-use, and transport. The definitions of all the critical sectors, set out in the Notifiable Acquisition Regulations 2021, are highly technical and should be consulted in cooperation with legal counsel.<\/p>\n\n\n\n

What is the stake acquired in the target?<\/strong> The new regime catches any investments resulting in an acquisition of control of a qualified entity or asset within one of the 17 specified sectors. Note that qualifying acquisitions that are part of corporate restructures or reorganizations may also be covered, even if these take place within the same corporate group. Any of the following amounts to a qualified stake:<\/p>\n\n\n\n