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Rules aimed at limiting foreign acquisitions of security-sensitive UK companies should be rewritten as part of a broader attempt to enhance the terms of the company.
Under the Industrial Strategy released on Monday, the Minister released a review to make the UK investment scrutiny rules more “predictable and proportional” for businesses.
The National Security and Investment Act (NSIA) was created to provide a mechanism to oversee and ultimately block the acquisition of British companies and assets from foreign countries such as China.
The government on Monday promised a “predictable, proportional and transparent investment screening framework.”
He said there will be a 12-week review of the law to ensure that regulatory requirements are “proportional to the subject, protect national security and provide certainty to investors.”
This review could lead to a change in the list of 17 sensitive areas covered by the current system, but the Minister will soon announce some “specific new exemptions” for the enforcement regime.
The UK brought in new screening authority in January 2022 to address security concerns that overseas authority could easily purchase British companies of national importance in technology and other industries.
Trades in 17 sensitive industrial areas such as advanced materials, artificial intelligence, defense, energy, etc. should automatically alert the authorities.
Since then, the minister has used the law to block China-owned Nekperia the sale of Newport Wahfab, one of the few semiconductor companies in the UK.
The proposed merger of the UK Vodafone and three businesses owned by Hong Kong-based CK Hutchison Holdings also attracted scrutiny before it was finally cleared.
Czech billionaire Daniel Kuzechinsky was first to approve a 25% stake in the Royal Mail and had to approve a second national security review with a £3.6 billion acquisition.
“We will continue to update our guidance to ensure that investors are clear about how laws, including decision-making processes, work,” the government said in its Industrial Strategy.
“We will also explore opportunities to ensure that NSIA processes are more transparent and support growth while minimizing the burden.”
Companies considering UK deals and their advisors have criticised the current law as opaque and overly widespread, complaining that it has helped slow the UK’s M&A.
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In the year ending March 2024, the government received 847 notifications under the NSIA, of which 37 were summoned. As a result, 10 transactions were voluntarily withdrawn, with five issued in “final orders” from the minister who imposed conditions on the acquisition to mitigate the risks of national security.
One government official said the purpose of the law protecting UK intellectual property is not diluted given the world has become more dangerous in recent years. He added:
