For background on the Act and the National Security and Investment (NSI) regime, please see our November 2020 Client Alert, August 2021 Client Alert, and April 2022 Client Alert.On 19 July 2022, the UK government’s Department for Business, Energy & Industrial Strategy released Market Guidance Notes on the NSI Act (which took effect on 4 January 2022). The NSI Act creates powers for the UK government to intervene in, and scrutinize, business transactions in order to protect national security. The NSI regime’s key features are mandatory notification requirements of transactions in 17 specified sensitive sectors, voluntary notification requirements for certain transactions that give rise to national security concerns, and call-in powers under which the government can ‘call-in’ transactions across all sectors of the economy on national security grounds (see our April 2022 Client Alert at the link above).
The new Market Guidance Notes are of particular importance for insolvency practitioners, as they clarify that the appointment of liquidators and receivers may constitute an acquisition requiring mandatory notification under the NSI Act. The same is not true for administrators or creditors, who are afforded mandatory notification carve-outs.
The guidance sets out two scenarios in which mandatory notification is required:
- If the liquidator or receiver is appointed for an entity that has a shareholding of over 25% in another entity operating in a sensitive sector and, during the insolvency process, the liquidator acquires control of the shares’ voting rights; or
- If an individual becomes bankrupt and holds over 25% of the shareholding in an entity in a sensitive sector and the trustee in bankruptcy acquires the shares during the insolvency process.
All guidance on this far-reaching legislation is welcome and insolvency practitioners need to think carefully as to whether mandatory notification may be required of them.