On 24 July 2018, the U.K.'s Department for Business, Energy and Industrial Strategy (BEIS) published a White Paper consultation seeking views on proposed reforms to the government's powers in relation to protecting national security from hostile actors' acquisition of control over entities and assets.

This White Paper is the next stage in the reform of the government's powers regarding the protection of national security and follows the National Security and Infrastructure Investment Review Green Paper, published in October 2017 and takes account of the responses to that consultation. The Green Paper was considered in a Shearman & Sterling client briefing entitled "Foreign Investment Control: Trade Protectionism or Reasonable Control over a Nation's Industries?" which can be found here.

The proposals for legislative reforms would give the U.K. government significantly greater powers to intervene in U.K. transactions on national security grounds. The government will encourage businesses and investors to notify on a voluntary basis, in advance of transactions that might give rise to national security risks. The new regime would give new powers to scrutinise a far wider range of transactions than existing legislation, such as the purchase of intellectual property. Transactions which may be scrutinised include any investment or activity that involves the acquisition of:

  • more than 25% of an entity's shares or votes;
  • significant influence or control over an entity; or
  • further significant influence or control over an entity beyond the above thresholds.

The proposed regime also empowers the Government with a view of enabling it to prevent the proposed reforms from being subverted or evaded. The regime envisages the Government being able to assess control gained over assets, which would include acquisitions of:

  • more than 50% of the asset(s); or
  • "significant influence or control" over the asset(s).

The proposed package of reforms aims to strike an appropriate balance between maintaining the attractiveness of the U.K. as a destination for inward investment, while also providing the government with greater powers needed to protect the country.

The consultation closed on 16 October 2018 and the government will use the responses to the White Paper to refine the proposals ahead of the introduction of primary legislation.

The White Paper consultation can be found here: