In a similar vein, in 2021 the UK government enacted a new National Security and Investment Act ( NSIA ) which came into force on 4 January 2022. The NSIA makes transactions in sectors deemed to be of “national or security interest” subject to government oversight, irrespective of the size of the parties. The government has set out a list of 17 such sectors in which it will be mandatory to notify any qualifying transaction. The NSIA applies to entities and assets located in the UK, as well as those located outside the UK if they carry on activities in the UK or supply good to services to people in the UK. The government can also “call - in” transactions for investigation; much do not qualify under the NSIA thresholds, but nonetheless may give rise to national security concerns. Parties who fail to comply can be subject to large fines (and even criminal liability). Larger transactions may fall under the jurisdiction of the EU Commission under the EU Merger Control Regulation. These require compulsory notification and therefore that completion is suspended pending competition clearance. Given the implications, it is advisable always to obtain specialist competition law input at an early stage in relation to any proposed transaction. 4. Local shareholding/directors There are no requirements in England for a local shareholder or director. 5. Minority shareholders’ rights and protections Members of a company or an LLP have protection against being “unfairly prejudiced” and can bring action in the courts to seek relief for this. In the case of LLPs, this can be excluded by written agreement (typically, within the LLP members’ agreement).

• the merging parties’ combined share of supply of goods/services of a particular description in the UK/a substantial part of the UK is 25% or more. Unlike most of its equivalents in other jurisdictions, the UK has a “voluntary” system of merger control which means that parties to a qualifying merger are not under an obligation to notify and seek approval from the CMA prior to completing their transaction. However, where they fail to do so, the parties run the risk that the CMA decides to intervene and carry out an investigation into the competitive impact of the deal, which it is entitled to do at any point up to 4 months from completion or from when it first becomes aware of the transaction (whichever is later). In those circumstances, the CMA has powers to impose “hold separate” obligations on the parties forcing them to keep the merging businesses running as separate entities pending completion of any investigation. Ultimately, if the CMA decides there are competition issues, it can demand concessions from the parties or even force the buyer to sell the acquired firm/assets. It is therefore important to assess at the outset whether the CMA might wish to review any qualifying transaction and what steps to take to mitigate any concerns it might otherwise have. Whilst the UK government operates a largely “merger friendly” regime which encourages corporate activity, does not include any specific governmental oversight of transactions and leaves the analysis of the competitive impact to the CMA, the government does reserve the power to act where a transaction engages the “public interest”. Recently, these powers have been extended to include transactions which involve national security concerns, notably those covering military/dual-use products, computing hardware and quantum technology.

ILN Corporate Group – Establishing a Business Entity Series

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