National Security and Investment Act 2021

Part 1: Call-in for national security

Chapter 1: Call-in power

44. Sections 1 and 2 collectively provide for the "call-in power". The call-in power may be used by the Secretary of State in relation to a trigger event which has given rise to, or may give rise to, a risk to national security (see Chapter 2 for details on trigger events). Sections 3 and 4 provide for the publication of a statement which sets out how the Secretary of State expects to exercise the call-in power and the parliamentary procedure for the statement. The Secretary of State must publish the statement before giving a call-in notice and must have regard to it when exercising the call-in power.
45. The Secretary of State will be able to call in any trigger event that raises national security concerns, including those which have not been notified to him or her. He or she will be able to do this when the trigger event is in contemplation or progress, or within a prescribed period of up to 5 years after a trigger event has taken place (but a call-in notice may not be given after the end of the period of 6 months beginning with the day on which the Secretary of State became aware of the trigger event where the trigger event has already occurred).

Section 1: Call-in notice for national security purposes

46. Section 1 enables the Secretary of State to give a call-in notice in relation to a trigger event (see Chapter 2) which the Secretary of State reasonably suspects has taken place or is in progress or contemplation, and which they reasonably suspect has given rise to or may give rise to a risk to national security.
47. Subsection (1) provides for the test which much be met for the Secretary of State to issue a call-in notice.
48. Subsection (2) specifies that, for the purposes of the Act, the effect of section 13(1) must be disregarded when considering whether a trigger event has taken place or will take place.
49. Subsection (4) details the persons who must be given copies of the call-in notice. These include the acquirer and, if the acquisition relates to an entity, the entity itself. In addition, the Secretary of State may consider it appropriate to give a call-in notice to, for example, the seller or sellers, a significantly affected third party, or a relevant regulator.
50. Subsections (6) to (8) provide that the Secretary of State must publish and have regard to the statement provided for by section 3 before exercising the call-in power, but this power is not limited by anything contained in the statement.

Section 2: Further provision about call-in notices

51. Section 2 concerns matters relating to the limits on the exercise of the call-in power. The power may only be exercised once per trigger event. Where the call-in notice is given in relation to a trigger event that has already taken place, it may only be exercised up to 5 years after the trigger event has taken place and up to 6 months after the Secretary of State has become aware of the trigger event, unless the Secretary of State has been given false or misleading information (see section 22). The 5-year limit does not apply to notifiable acquisitions which have been completed without the approval of the Secretary of State (see section 13).
52. Call-in notices may be served in relation to trigger events which take place from the day after the date of introduction of the Act. Section 2(4) sets out the time periods within which the Secretary of State may serve a call-in notice in relation to trigger events that take place between 12 November and the commencement of section 2.

Section 3: Statement about exercise of call-in power

53. Section 3 concerns the statement which sets out how the Secretary of State expects to exercise the call-in power. While the Secretary of State is not obliged to publish a statement, the Secretary of State must do so before being able to exercise the call-in power, as stated in section 1(6).

Section 4: Consultation and parliamentary procedure

54. Section 4 sets out the procedure that must be followed before the Secretary of State is able to publish the statement about the exercise of the call-in power. Before the statement may be published, the Secretary of State must carry out such consultation as the Secretary of State thinks appropriate in relation to a draft of the statement, make any changes to the draft that appear to the Secretary of State to be necessary in view of the responses to the consultation, and lay the statement before Parliament, where it is subject to annulment by either House within a period of 40 sitting days.
55. Subsections (2) to (4) provide that either House of Parliament may annul a statement before the expiry of the 40 sitting day limit. The consequence of the annulment is that the statement must be withdrawn. The annulment of a statement does not affect the validity of any call-in notice given prior to its withdrawal, nor does it affect the publication of a new statement.

Chapter 2: Interpretation

Trigger events in relation to qualifying entities and qualifying assets

56. Sections 5-12 provide the criteria for the acquisitions of control over entities or assets that qualify for assessment by the Secretary of State under the national security regime. These acquisitions in scope of the call-in power (section 1) are described as "trigger events".
57. Section 6 describes those acquisitions which are "notifiable acquisitions". A notifiable acquisition takes place when a person acquires certain shares or voting rights in a qualifying entity specified in regulations by the Secretary of State. Notifiable acquisitions must be approved by the Secretary of State before completing, lest they be legally void.

Section 5: Meaning of "trigger event" and "acquirer"

58. Section 5 provides that a "trigger event" occurs when a person gains control of either a qualifying entity or a qualifying asset. Subsection (2) provides for the definition of "acquirer".

Section 6: Notifiable acquisitions

59. Section 6 describes those acquisitions which are "notifiable acquisitions". A notifiable acquisition takes place when a person acquires control of a qualifying entity specified in regulations by the Secretary of State in any of the circumstances described in subsections (2), (5) or (6) of section 8. The Secretary of State may by regulations amend the acquisitions which are to be notifiable, or exempt acquisitions on the basis of the characteristics of the acquirer.
60. Section 63 provides for the parliamentary procedures to be used for regulations under the Act. Regulations under section 6 must be laid in draft before Parliament and approved by both Houses of Parliament before they may be made.

Section 7: Qualifying entities and assets

61. Section 7 defines a "qualifying entity" as any entity that is not an individual.
62. However, an entity which is formed or recognised under the law of a country or territory outside the United Kingdom is only a "qualifying entity" if it carries on activities in, or supplies goods or services to, the United Kingdom.
63. Subsection (4) defines a "qualifying asset".
64. Subsection (5) provides examples of assets included in the category of "ideas, information or techniques which have industrial, commercial or other economic value" under subsection (4)(c).
65. Subsection (6) limits the definition of a "qualifying asset" in respect of land or moveable property situated outside the United Kingdom or the territorial sea adjacent to the United Kingdom, or assets within subsection (4)(c), to assets with a nexus to the United Kingdom.

Section 8: Control of entities

66. Section 8 defines the circumstances in which a person gains control of a qualifying entity for the purposes of the Act. This constitutes a "trigger event" and may be subject to assessment under the national security regime if the call-in test is met. This section also makes clear when the additional acquisition of shareholdings or rights in an entity will constitute a "trigger event".
67. There are four cases in which a person gains control of a qualifying entity, which are summarised below:
    1. a person increasing the percentage of shares that they hold in the entity by a specified proportion (section 8(2));
    2. a person increasing the voting rights that they hold in the entity by a specified proportion (section 8(5));
    3. a person acquiring voting rights in the entity which give powers to secure or prevent the passage of any resolution governing the affairs of that entity (section 8(6)), for instance in the case of an entity that does not conform to the thresholds for passing or blocking resolutions in Schedule 1A to the Companies Act 2006; or,
    4. a person acquiring a right or interest in, or relation to, the entity which enables them to materially influence the policy of that entity (section 8(8)).

Section 9: Control of assets

68. Section 9 defines the circumstances in which a person gains control of a qualifying asset for the purposes of the Act. This constitutes a "trigger event" and may be subject to assessment under the national security regime if the call-in test is met. A person gains control of a qualifying asset where they acquire a right or interest in, or in relation to, the asset and, as a result, are able either to:
    1. use the asset, or use it to a greater extent than prior to the acquisition, or,
    2. direct or control how the asset is used, or direct or control how the asset is used to a greater extent than prior to the acquisition.
69. Any right or interest in a qualifying asset, including a part-share in the asset or outright ownership, would be captured if they provide the ability to use, or direct or control how the asset is used. References to the use of an asset include references to its exploitation, alteration, manipulation, disposal or destruction.

Section 10: Holding and acquiring interests and rights: supplementary and Schedule 1: Trigger events: holding of interests and rights

70. Section 10 introduces Schedule 1 which provides for particular cases in which a person is to be treated as holding an interest or a right for the purposes of the Act. Subsection (2) provides for the occurrence of circumstances set out in Schedule 1 to be treated as acquisitions for the purposes of the Act.
71. Schedule 1 sets out further details as to how interests and rights are deemed to be held and therefore provides further explanation of the mechanisms through which control of entities and assets may be acquired.
72. Paragraph 2 of Schedule 1 provides that parties acting through joint arrangements are treated as holding the collective interests and rights that each party of that arrangement holds individually.
73. Paragraph 3 provides for interests or rights held indirectly to be in scope of the regime. This means that a person holding an interest or right in a parent entity of an entity or a chain of entities is, depending on the circumstances in sub-paragraph (2)(a) or (2)(b) being satisfied, treated as holding the interest or right in the entity at the bottom of the chain. If an entity is part of a chain of entities, a person will exercise the right indirectly if each entity in the chain has a majority stake in the entity immediately below it in the chain, and the last entity in the chain has the right in question (sub-paragraph (2)(b)). Sub-paragraph (3) defines "majority stake" by reference to a majority of voting rights, dominant influence or control, and the right to appoint or remove a majority of the board of directors.

    Example A: Indirect holdings Party A acquires 100% of votes and shares of Company B. Company B owns 51% of votes and shares of a subsidiary, Company C. As Company B holds a majority stake in Company C, Party A has acquired indirect control over Company C through the acquisition of Company B.

74. Paragraph 5 provides that a person who controls a right, as established in paragraph 5(2), is deemed to hold that right. This means that the controller of the right - and not the holder unless they are also the controller - will be considered to hold the right. Paragraph 5(2) sets out that control can be held through an arrangement between a person and others. The definition of an arrangement in paragraph 12 provides that there needs to be a degree of stability about it.
75. Paragraphs 6 and 7 provide for rights that are exercisable only in certain circumstances and rights attached to shares held by way of security respectively and replicate corresponding provisions in Schedule 1A to the Companies Act 2006.
76. Paragraphs 8-10 provide for the circumstances in which two or more persons are deemed to be connected persons by virtue of their relationship to one another. Each connected person is deemed to be holding the combined interests or rights of both or all of the connected persons.
77. Paragraph 11 provides for the circumstances in which two or more persons are deemed to be acting with common purpose and are therefore each deemed to be holding the collective interests and rights that each person holds individually.

    Example B: Common purpose Party A owns 20% of votes and shares of Company D. Party B owns 20% of votes and shares of Company D. Party C acquires 20% of votes and shares of Company D. Parties A, B and C co-ordinate the use of their votes, in practice meaning that they collectively use their votes to attempt to achieve a shared aim. In such circumstances, Party C’s acquisition would be a trigger event through which Parties A, B and C would be deemed to have each acquired 60% of the votes and shares in Company D.

Section 11: Exceptions relating to control of assets

78. Section 11 provides for exceptions from the definition of a "trigger event" in relation to assets. Subsection (1) provides that a person is not to be regarded as gaining control of a qualifying asset by reason of an acquisition made by an individual for purposes that are wholly or mainly outside the individual’s trade, business or craft. Such acquisitions are therefore not within scope of the call-in power.
79. Subsection (2) provides that these exceptions do not apply where the acquired asset is land or falls within specified export control provisions.
80. Subsection (3) provides that the Secretary of State may by regulations amend the list of assets in subsection (2).

Section 12: Trigger events: supplementary

81. Section 12 contains supplementary provisions in relation to determining when a trigger event that takes place over more than one day is to be treated as taking place (subsection (1)), and determining whether a trigger event is in progress or contemplation in circumstances where a person has entered into an agreement or arrangement which enables them to do something in the future that would result in a trigger event taking place (subsection (2)).

Chapter 3: Approval of notifiable acquisition

82. Chapter 3 of Part 1 provides for the consequences of a notifiable acquisition completing without the approval of the Secretary of State.

Section 13: Approval of notifiable acquisition

83. Section 13 provides that notifiable acquisitions which are completed without the approval of the Secretary of State are void. Subsection (2) sets out the ways in which the Secretary of State may approve a notifiable acquisition. Subsection (3) provides that a notifiable acquisition is void where it has been completed in a manner which is different to the stipulations of a final order (see section 26) made by the Secretary of State.

Chapter 4: Procedure

84. Chapter 4 of Part 1 provides for two routes for persons to notify acquisitions to the Secretary of State in order to receive a call-in decision. Section 14 is a mandatory notification route which applies to notifiable acquisitions (as defined in section 6). Section 18 is a voluntary notification route for trigger events which fall outside the mandatory notification regime. Sections 15, 16 and 17 provide for retrospective validation of notifiable acquisitions which have completed without the approval of the Secretary of State (see section 13).
85. Chapter 4 of Part 1 also provides for two mechanisms by which the Secretary of State may obtain information to assist him or her in carrying out his or her functions under the Act. Section 19 allows the Secretary of State to issue an information notice requiring specified information to be provided. Section 20 permits the Secretary of State to issue an attendance notice requiring a person to attend at a specified time and place and to give evidence to the Secretary of State. These powers may be used before or after a trigger event has been called in. Section 22 provides that the Secretary of State may reconsider a decision made under this Act, and affirm, vary or revoke it, if the decision is materially affected by false or misleading information.

Section 14: Mandatory notification procedure

86. Section 14 requires notifiable acquisitions (see section 6) to be notified to the Secretary of State and describes the procedure for doing so. Pursuant to subsection (1) a person who is to make a notifiable acquisition must give a mandatory notice to the Secretary of State prior to the acquisition taking place.
87. Subsection (4) provides that the Secretary of State may by regulations prescribe the form and content of a mandatory notice.
88. Subsection (5) provides that, as soon as reasonably practicable after receiving a mandatory notice, the Secretary of State must decide whether to reject or accept the notice.
89. Subsection (6) sets out the grounds on which the Secretary of State may reject a mandatory notice. Subsection (7) provides that, if a mandatory notice is rejected, the Secretary of State must, as soon as practicable, provide reasons in writing for that decision to the person who gave the notice.
90. Subsection (8) provides that, if a mandatory notice is accepted, the Secretary of State must, as soon as practicable, notify each relevant person, and, before the end of the review period (see the next paragraph), either give a call-in notice in relation to the proposed notifiable acquisition (see section 1), or notify each relevant person that no further action will be taken under the Act in relation to the acquisition. Subsection (10) defines "relevant person" as the person who gave the mandatory notice and such other persons as the Secretary of State considers appropriate.
91. Subsection (9) provides that the review period lasts 30 working days beginning with the day on which the Secretary of State notifies the person who gave the mandatory notice that it has been accepted.

Section 15: Requirement to consider retrospective validation without application

92. Section 15 applies to notifiable acquisitions which were not approved by the Secretary of State before they were completed, and which are consequently void. Where the Secretary of State becomes aware of a void notifiable acquisition, subsection (2) requires the Secretary of State to either give a call-in notice (see section 1) or a validation notice in relation to the acquisition, within 6 months.
93. Pursuant to subsection (3) the effect of a validation notice is that the notifiable acquisition in question is to be treated as having been completed with the approval of the Secretary of State, and it is therefore not void. A validation notice must be given to the person who was required to give a mandatory notice to the Secretary of State in relation to the notification (see section 14) and such other persons as the Secretary of State considers appropriate. The Secretary of State must also notify those persons that no further action is to be taken under the Act in relation to the acquisition.

Section 16: Application for retrospective validation of notifiable acquisition

94. Section 16 provides for validation applications: any person who has been materially affected by the voiding of a notifiable acquisition may apply to the Secretary of State for a validation notice (see section 15) in relation to the acquisition. Pursuant to subsection (3) the Secretary of State may by regulations prescribe the form and content of a validation application.
95. Subsection (4) provides that, as soon as reasonably practicable after receiving a validation application, the Secretary of State must decide whether to reject or accept the application (but, pursuant to subsection (8), he or she is not required to consider an application if, in his or her opinion, there has been no material change in circumstances since a previous application was made).
96. Subsection (5) sets out the grounds on which the Secretary of State may reject a validation application. Subsection (6) provides that, if a validation application is rejected, the Secretary of State must, as soon as practicable, provide reasons in writing for that decision to the person who made the application.
97. Subsection (8) provides that, if a validation application is accepted, the Secretary of State must, as soon as practicable, notify each relevant person, and, before the end of the review period (see the next paragraph), either give a call-in notice (see section 1) or a validation notice (see section 16) in relation to the acquisition. A validation notice must be given to each relevant person, who must also be notified that no further action will be taken under the Act in relation to the acquisition. Subsection (9) defines "relevant person" as the person who made the validation application and such other persons as the Secretary of State considers appropriate.
98. Subsection (9) provides that the review period lasts 30 working days beginning with the day on which the Secretary of State notifies the person who made the validation application that it has been accepted.

Section 17: Retrospective validation of notifiable acquisition following call-in

99. Section 17 applies where the Secretary of State has given a call-in notice in relation to a void notifiable acquisition (see Sections 15 and 16). Subsection (2) provides that, where a final notification is given in relation to the call-in notice (see section 26), the Secretary must also give a validation notice (see section 15) in relation to the acquisition. Subsection (3) specifies the persons to whom the validation notice must be given. Subsection (5) provides that, where a final order is made in relation to the call-in notice (see section 26), so much of the acquisition as is compatible with the final order is to be treated as having been completed with the approval of the Secretary of State and is not therefore void.

Section 18: Voluntary notification procedure

100. In circumstances where there is no requirement to notify, section 18 provides a mechanism by which parties may voluntarily notify the Secretary of State of a trigger event in order to receive a call-in decision.
101. Subsection (2) provide that a seller, acquirer or any qualifying entity concerned may give the Secretary of State a voluntary notice stating that a trigger event has taken place or that a trigger event is in progress or contemplation.
102. Pursuant to subsection (4) the Secretary of State may by regulations prescribe the form and content of a voluntary notice.
103. Subsections (5) to (8) provide for the process the Secretary of State must follow upon receiving a voluntary notice. In particular, the provisions set out the grounds on which the Secretary of State may reject a voluntary notice and the procedure which the Secretary of State must follow in responding to the relevant parties.
104. Subsection (9) provides that the Secretary of State has 30 working days to review a voluntary notice once it has been accepted. Before the end of this period, the Secretary of State must decide whether to call in the trigger event or whether to take no further action under the Act and notify relevant parties accordingly.

Section 19: Power to require information

105. Section 19 provides for investigatory powers which enable the Secretary of State to obtain information either before or after the call-in power is exercised. The information must relate to the exercise of the Secretary of State’s functions under the Act. Information may be required, for example, in order to determine whether a call-in notice should be given or whether remedies should be imposed.
106. Subsection (2) provides a proportionality test for use of this power.
107. Subsection (4) provides that the Secretary of State may specify in the notice the manner in which information is to be provided and the time limit for providing it. The time limit for providing information may depend on the type of information and the amount of time required to obtain it. Subsection (4)(c) enables the Secretary of State to require the person to provide any information within their possession or power which would enable the Secretary of State to find the information required by the notice.

Section 20: Attendance of witnesses

108. Section 20 gives the Secretary of State the power to require the attendance of witnesses to assist them to carry out their functions under the Act.

Section 21: Information notices and attendance notices: persons outside the UK

109. Section 21 makes provision in respect of the persons on whom the Secretary of State may serve an information notice or attendance notice outside the UK.
110. Subsection (2) provides that an information notice or attendance notice may be given to any person outside the UK who is: (a) a UK national; (b) an individual ordinarily resident in the UK; (c) a body incorporated or constituted under the law of any part of the UK; or (d) carrying on business in the UK.
111. Subsections (3) and (4) also provide the Secretary of State with the power to issue an information notice or attendance notice to persons outside the UK who have acquired, or who are in the process of acquiring, qualifying UK entities or assets that are either located in the UK or otherwise connected to the UK.

Section 22: False or misleading information

112. Section 22 gives the Secretary of State the power to reconsider a decision they have made under the Act if it is materially affected by false or misleading information that has been provided to them. Offences in relation to providing false or misleading information are set out in section 34.