The National Security and Investment (NSI) Act: What is it, and what does it mean for UK universities?

This blog will try to provide an overview of the new NSI Act as clearly and concisely as possible. Nevertheless, you should always consult government guidance on the matter before implementing new policy - you can find a list of official resources on the matter at the bottom of this blog.

This blog is intended as high-level information only, and does not constitute legal advice. Please refer to the full government guidance for more detailed information on the NSI Act.

What is the NSI Act?

The Act will grant the UK government the right to scrutinise and intervene in certain business or commercial acquisitions made by anyone, including universities, that could harm the UK’s national security. The government will be able to impose certain conditions on an acquisition, and in rare instances, it may unwind or block an acquisition completely.

This means that from 4 January 2022, whenever you are contemplating, commencing, or completing an acquisition you need to:

Check if the rules apply to your acquisition. This will depend on what you are acquiring and how much control you have over it.
Check if you need to tell the government about your acquisition. You will be legally required to inform the government about certain acquisitions of entities if your acquisition is in a sensitive area of the UK economy.
Tell the government about your acquisition if it falls under the remit of the NSI Act. You can do this online by submitting a notification form.

After completing these steps, the government will review your acquisition. It can either clear your acquisition, impose certain conditions, or block it.

Responsibility for notification lies with the acquirer, not the funder of a project or the party that sells an entity or asset. Whoever acquires a qualifying entity (more on this below) has the legal responsibility to notify the government.

What kind of operations are covered by the NSI Act?

The NSI act requires you to notify the government if you are acquiring entities or assets in one of 17 areas of the economy deemed sensitive to national security.

This includes:

Advanced Materials
Advanced Robotics
Artificial Intelligence
Civil Nuclear
Communications
Computing Hardware
Critical Suppliers to Government
Cryptographic Authentication
Data Infrastructure
Defence
Energy
Military and Dual-Use
Quantum Technologies
Satellite and Space Technologies
Suppliers to the Emergency Services
Synthetic Biology
Transport

If you are acquiring a qualifying entity (i.e. a company or organisation with legal rights) or a qualifying asset (i.e. tangible or intangible property with value) related to one of these 17 fields, you might have to inform the government of your acquisition. As long as the acquisition has a link to the UK, it falls under the scope of the law, which means that even if you are acquiring something based offshore, you still have to comply.

When do I have to notify the government of an acquisition?

Your acquisition is a ‘notifiable acquisition’ if it meets the following criteria:

You are acquiring a qualifying entity (not an asset) that carries out certain activities in the UK within one of 17 sensitive areas of the economy (listed above).
Any of the following apply:
1. Your shareholding stake or voting rights increase:
- from 25% or less to more than 25%
- from 50% or less to more than 50%
- from less than 75% to 75% or more
Your acquisition is of voting rights, and this will enable you to secure or prevent the passage of any class of resolution governing the affairs of the entity.

A thing to note is that the NSI Act is retroactive. If you have completed any qualifying transactions between 12 November 2020 and 4 January 2022, you must report them to the government via a specific retroactive validation form.

You can notify the government of an acquisition through an online form here. This page allows you to submit mandatory notifications. It also allows you to submit retroactive notifications which were discussed above, as well as voluntary notifications of acquisitions (mostly assets which do not fall under mandatory notification) you believe the government should be informed of.

What happens next?

The government expects that the vast majority of notifiable acquisitions will be cleared. As mentioned earlier, the Act isn’t higher education-specific – it also applies to private businesses and investors.

That being said, you do have to get prepared. Not only will you have to build the NSI Act into your existing due diligence practices, but you will also have to inform the government of any qualifying acquisitions commenced or completed between 12 November 2020 and 4 January 2022, as noted above.

Where can I find more information on this?

The NSI scheme will be administered by a dedicated team at the Department for Business, Energy & Industrial Strategy, who have provided a range of guidance on the matter. You can find a non-exhaustive list of these here:

The National Security and Investment Act 2021 in full

National Security and Investment Act: prepare for new rules about acquisitions

National Security and Investment Act: guidance for the higher education and research-intensive sectors

National Security and Investment Act: guidance on notifiable acquisitions

Further guidance to help businesses understand their obligations under new laws to strengthen national security

Publications

The National Security and Investment Act: guidance for universities

The National Security and Investment (NSI) Act gives the government the right to look into and sometimes ban certain business transactions that involve sectors of the economy seen as sensitive to national security.