National Security and Investment Bill – when will it come into force?
This blog considers when the National Security and Investment Bill might come into force, and the risk that transactions currently underway might be caught by the incoming rules.
It is now over three months since the government published the National Security and Investment Bill, draft legislation which is expected to bring a major change in the way in which UK M&A transactions (and more) can be carried out. This is no longer an issue for the dim and distant future – people working on deals now need to consider whether the bill might come into force before those deals have completed.
What is the National Security and Investment Bill?
Our previous blog on this topic can be found here. In short, the bill proposes to give the government wide ranging powers to intervene in transactions on national security grounds. "National security" is not clearly defined, but what is clear is that the bill is about far more than just traditional military equipment, but is also concerned with infrastructure, modern technologies, government suppliers and more.
Acquisitions of companies within scope of the "mandatory regime" will require mandatory notification to a newly formed government entity before they can be completed. Notification of acquisitions of other companies will be voluntary – but given the lack of a clear definition of "national security" and the power of the government to unwind transactions for up to five years after completion, many people will want to seek pre-clearance to de-risk their deal.
When will it come into force?
Given that the bill was published on 11 November 2020, the key question for people currently working on deals is when will the bill come into force? The bill is currently working its way through Parliament and has already been approved by the House of Commons. It had its second reading in the House of Lords on 4 February 2021 and is scheduled to undergo committee stage examination on 2 March 2021. Based on usual timetables, it could be expected to have had its third reading in the House of Lords within two to three weeks of that date. Therefore, it is possible that the bill could have been approved by both Houses of Parliament, and be ready to be granted Royal Asset, before the end of March.
However, a number of amendments have been proposed to the bill which if approved by the House of Lords would require the bill to be reconsidered by the House of Commons. Further, once a bill is ready for Royal Assent there is no certainty as to when that will happen – often multiple bills are stored up and all receive Royal Assent on the same day. Finally, we don't yet know how long a gap there will be (if any) between the bill receiving Royal Assent and its commencement date.
Therefore, it is difficult to be precise as to when the National Security and Investment Bill will come into force. However, it is possible that it could be in force by as early as April. Therefore, many transactions which are underway now may not be completed until after the bill has come into force, and may find themselves caught by its wide new powers.