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26 December 20224 minute read

United Kingdom: Impact of the UK’s National Security and Investment Act on intra-group reorganizations

The National Security and Investment Act 2021 (NSIA) came into force in the United Kingdom on 4 January 2022. The NSIA:

  • requires mandatory pre-closing notification of certain transactions and
  • gives the UK government’s Investment Security Unit extensive powers to "call in" and review transactions on national security grounds where there has been a trigger event, ie, an acquisition of control of either a "qualifying entity" or a “qualifying asset."

The NSIA is primarily intended to apply to M&A transactions; however, its scope is wide, and the UK government has confirmed that there is no exemption for restructuring transactions within the same corporate group (ie, intra-group reorganizations). There is also no exemption for purely domestic transactions which fall within its scope.

The UK government has jurisdiction to review a wide range of transactions, including asset transfers, acquisitions of minority shareholdings and acquisitions of entities which merely make sales into the UK from abroad.

However, the mandatory advance notification obligation applies only to acquisitions of "control" in "qualifying entities" (companies, LLPs, partnerships, trusts, unincorporated associations and other corporate bodies), where such entities carry on activities in the UK which fall within one of 17 sensitive sectors. These sectors are Advanced Materials, Advanced Robotics, Artificial Intelligence, Civil Nuclear, Communications, Computing Hardware, Critical Suppliers to Government, Critical Suppliers to the Emergency Services, Cryptographic Authentication, Data Infrastructure, Defense, Energy, Military and Dual Use Technologies, Quantum Technologies, Satellite and Space Technologies, Synthetic Biology and Transport.

The mandatory notification obligation applies not only to straightforward acquisitions of control, but also to intra-group reorganizations involving:

  • acquisitions of 25 percent or more of the shares or voting rights in "qualifying entities"
  • acquisitions of minority voting rights in "qualifying entities" (where such rights would allow the acquirer to prevent the passage of any class or resolution governing the affairs of the entity) and
  • increases in shareholdings/voting rights in "qualifying entities" (e.g., from less than 25 percent to 25 percent or more, from less than 50 percent to 50 percent or more and from less than 75 percent to 75 percent or more).

Mandatory notification can also be required for transactions involving entities formed or recognized outside of the UK, where such entities directly or indirectly (such as through a subsidiary or branch) carry on activities falling within a mandatory sector in the UK. For example, an offshore intra-group reorganization which increases the control of a United States entity in a Luxembourg entity would require mandatory pre-closing clearance in the UK if the Luxembourg entity controlled a UK subsidiary or branch carrying out activities in a mandatory notification sector.

While notification is voluntary for other types of acquisitions – as the NSIA permits the UK government to review and ultimately unwind acquisitions (including internal reorganizations) for up to five years after closing – voluntary notifications may be prudent to obtain deal certainty where intra-group reorganizations involve sectors that fall under the mandatory regime for share acquisitions.

After a notification (mandatory or voluntary) is made and "accepted" as complete, the UK government has 30 working days to either approve or “call in” the transaction for an extended review (which can take 75 working days, or longer if extended by requests for information). While these review periods may appear onerous for reorganizations involving multiple transfers of control, in certain circumstances it is possible to seek clearance for entire reorganizations via a single combined notification.

Failure to notify and/or suspend completion of a reorganization requiring mandatory notification carries substantial penalties of up to GBP10 million or 5 percent of worldwide annual revenues, whichever is greater, and imprisonment of up to five years for individuals. A non-notified reorganization meeting the above criteria is also void, unless subsequently validated by the UK government, and is at indefinite risk of a call-in notice.

The scope of the NSIA is wide and the consequences of breaching it are severe. If you are contemplating an intra-group transfer of shares or certain assets, either within the UK or with a nexus to the UK, please do plan to consult experienced counsel to protect yourself and your business.


Crossroads – ICR Insights is our series of short-read articles designed to assist organizations considering an international corporate reorganization (ICR). Each country-specific, solutions-based brief will answer a key consideration during a global transaction such as carveouts, spinoffs, acquisitions and dispositions, pre- and post-acquisition integration, or legal entity rationalization. Visit Crossroads – ICR Insights to view the entire collection or sign up to be notified of new postings. Have an idea of a topic or interested in discussing further? Email