On 4 January 2022, new rules entered into force that require acquisitions of shares and assets that have implications for UK national security to be notified to the Department for Business for clearance in advance of completion. Failure to get a clearance will render the transaction concerned void, and fines and criminal penalties can be imposed.
There is no de minimis threshold – the rules apply to all mergers irrespective of the size of the deal or companies involved. They also apply whether the acquirer is a UK or foreign national/company.
The Government has mandated that deals affecting 17 specific sectors must be cleared in advance but others can also be “called in” for investigation up to 5 years post-completion. It will be critical for all deals to be vetted to see whether they might fall within the scope of the clearance requirement and, if not, to see what can be done to mitigate the risks of later challenge.
The 17 sector are:
- advanced materials
- advanced robotics
- artificial intelligence
- civil nuclear
- communications
- computing hardware
- critical suppliers to government
- cryptographic authentication
- data infrastructure
- defence
- energy
- military and dual-use
- quantum technologies
- satellite and space technologies
- suppliers to the emergency services
- synthetic biology
- transport.
These new rules will have implications for auction processes, due diligence, agreement drafting (conditions precedent and warranties) and the deal timetable. We recommend clients get advice as early as possible to check whether their deal is affected.