The UK government has implemented measures to increase its scope to review takeovers on national security grounds. We included a summary of this in our April Registry round-up, which can be found here.
These measures were part of the government's National Security and Infrastructure Investment Review. Following on from this, on 24 July, the government published a white paper setting out a second set of stand-alone measures to significantly increase its powers to scrutinise investments on national security grounds. Moreover, it was highlighted in the white paper that the previously introduced measures are only temporary until the new national security regime takes effect. The proposed regime would be separate from the UK merger control regime, and national security considerations would be removed from the public interest considerations.
Under the new regime, two thresholds will need to be met – 'trigger events' and a 'substantive' threshold. It will not be limited to any specific sectors, unlike the previously implemented short-term measures, and will have no turnover or share of supply requirements. The government has also proposed that it will have the power to call into review a trigger event relating to assets or entities outside the UK where they carry on activities or supply taking place in the UK. It, therefore, has the potential to affect much smaller transactions than the previous measures, and overall the proposed regime would include a wide range of qualifying transactions.
The government stated that the new regime will bring the UK in line with other countries' foreign investment regimes, and that they expect there to be a significant increase in notifications and transactions called in for review each year. Under a proposed voluntary notification system, businesses will be encouraged to notify the government ahead of major transactions, although the right will be reserved to intervene where parties have chosen not to notify.
The white paper includes a non-exhaustive list of potential outcomes to review:
- Confirmation to proceed
- Approval subject to conditions
- Blocking or unwinding a deal, where this has already taken place.
Moreover, the government is proposing to include sanctions for non-compliance with the regime, including custodial sentences, financial penalties, or director disqualifications.
The white paper can be found here, and the government is inviting comments until 16 October 2018.