The National Security and Investment Act 2021

The National Security and Investment Act 2021 (the Act), which came into force on 4 January 2022, replaces the national security provisions of the Enterprise Act 2002. The Act has been described by the government as ‘the biggest shake up of the UK’s national security regime for 20 years’ and is intended to strengthen the government’s powers to investigate and intervene in acquisitions and investments in circumstances where the acquisition/investment might harm the UK’s national security.

The newly formed Investment Security Unit (ISU), housed within the Department for Business, Energy & Industrial Strategy, will be responsible for operating the National Security and Investment regime established by the Act. Notifications will be made to the ISU via an online portal.

Key points of the Act:

  • The Act applies to acquisitions of entities in qualifying sectors. The 17 defined sectors can be found on the government website and include artificial intelligence, communications, defence and energy.
  • The Act provides for a mandatory notification procedure for acquisitions/disposals in these sectors. Trigger events for the mandatory notification procedure are, a proposed acquisition of:
    • more than 25%, more than 50% or more than 75% of the votes or shares of an entity in a qualifying sector; or
    • the acquisition of voting rights which would enable or prevent any class of resolution governing the affairs of an entity in a qualifying sector to be passed.

In this case, proposed acquirers must notify the ISU and obtain approval before completing the acquisition.

  • The Act also provides for a voluntary notification system which is to be used in transactions which fall within one of the trigger events listed above , but which are not in relation to an entity in one of the qualifying sectors.
  • In the absence of a mandatory or voluntary notification, the Act gives the Secretary of State the power to call in the transaction for review. A call notice can be issued from when the transaction is in progress or contemplation, through to within six months of the Secretary of State being made aware of a completed transaction. This power will apply retroactively to capture in-scope transactions completed from 12 November 2020 onwards.

Key points for lenders:

  • Whilst the vast majority of commercial lending arrangements are not likely to raise national security issues, the Act may have an impact on secured lending in certain scenarios. In particular, it may have an impact on lenders seeking to enforce security over shares or over voting rights attached to shares if the criteria for mandatory notification of the transaction are met.
  • As a result, enforcement action could be delayed, restrictions or conditions could be imposed on the lender as it tries to enforce its security (or, exercise its voting rights) or the lender may find the acquisition or disposal of the secured shares is prohibited. Absent a situation where mandatory notification under the Act becomes relevant, lenders who are concerned that enforcing their security might cause a trigger event, may wish to consider making a voluntary notification to avoid the not inconsiderable sanctions which arise for a breach of the Act.

If you have an enquiry relating to The National Security and Investment Act 2021 or for further advise on the issues discussed in this article, please contact Sarah Naylor, Partner and Head of our Banking a Finance team, by email or by phone on 07435 752739

About the authors

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Sarah Naylor


Expert in a range of corporate finance, real estate investment and development finance and asset-based lending matters.

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