The new National Security and Investment Act (NSIA) increases the UK Government’s powers to scrutinise and intervene in acquisitions that could affect national security. So how might this affect funding for an acquisition?

Mandatory notification obligations 

NSIA applies to any entity that carries on activities in the UK – in other words, both UK entities and overseas incorporated entities. A total of 17 ‘sensitive’ markets fall within NSIA’s scope ranging from artificial intelligence and advanced robotics to defence and energy [1].  If you, or another company that you acquire, operate within one of these 17 markets and your transaction leads to changes in voting rights (over certain thresholds) or triggers the acquistion of material influence over the relevant entity's policy, then you’re legally obliged under NSIA to notify the new Investment Security Unit (ISU). ISU screens notifications, exercises call-in powers and approves transactions that fall within the scope of the NSIA. 


The Secretary of State has 30 working days to clear a transaction. If they decide that the transaction represents a reasonable risk to national security and that they need to scrutinise it in more detail, they can then take a further 30 working days (or 45 in exceptional circumstances). 

Significant sanctions

You may face significant sanctions if you fail to notify the ISU of a transaction that falls within the scope of NSIA. Any such transaction will automatically be void and the Secretary of State has the power to call in the transaction and either approve it, impose conditions, block it or unwind it. This power applies retrospectively to transactions that completed from 12 November 2020 and continues for up to 5 years from the date of a transaction. Those who have gone ahead with transactions that needed approval from the ISU face heavy penalties: prison sentences of up to five years for individuals and fines of up to £10 million or 5% of total worldwide turnover (whichever is the higher and including the turnover of any business owned or controlled by the relevant person) or £10 million in the case of individuals. 

Keep your funders informed

If you’re aware that the National Security and Investment Act (NSIA) applies to (or may apply to) your transaction, then it’s important to let your funders know this as soon as possible. Given the consequences of failure to notify, in the interests of certainty, your funders may make funding conditional on you obtaining voluntary clearance where your transaction falls within the voluntary notification regime.  In addition, if you will be providing security for your funding (and in particular, security over shares), your funders will want to consider the potential impacts of NSIA should they want to enforce that security in the future. Understanding your funders' requirements upfront will mean you can allow enough time in the transaction timetable to meet their needs.  

So, in conclusion, make sure you have open and timely discussions with your funders about all NSIA issues. That way you’ll avoid delays and nasty surprises, and will minimise the risk of your transaction stalling near the finish line. 

If you’d like to discuss the impact of NSIA on your transaction, please contact Andrew Fordham or Natalie Hewitt.

Look out for the next article in our ‘Financing your business: more flow, less friction’ series. This will look at what you need to consider if you have a defined benefit pension scheme – and the additional controls your funders may require.


[1] The 17 "sensitive" markets identified as within NSIA's scope - (1) Advanced Materials, (2) Advanced Robotics, (3) Artificial Intelligence, (4) Civil Nuclear, (5) Communications, (6) Computing Hardware, (7) Critical Suppliers to Government, (8) Cryptographic Authentication, (9) Data Infrastructure, (10) Defence, (11) Energy, (12) Military and Dual-Use Technologies, (13) Quantum Technologies, (14) Satellite and Space Technologies, (15) Suppliers to the Emergency Services, (16) Synthetic Biology and (17) Transport)

Key Contacts

Andrew Fordham

Andrew Fordham

Partner, Finance
Leeds, UK

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