The National Security and Investment Act 2021 (NSI) was enacted to address concerns around transactions involving the change of ownership of sensitive industry sectors and businesses either trading in the UK or supplying goods and services to people based in the UK. The acquisition of certain assets or interests in the energy sector may fall within the mandatory notification requirements of the NSI because the Government considers this sector to be important to our country’s economic stability and growth.
An online mandatory notification is needed for certain qualifying purchases. To find out if your purchase is caught, you will need to consider the key terms of your transaction, such as the structure and share ownership of the entity, the buyer and the subject of the purchase.
If the entity you are buying carries out activities in the energy sector and your shareholding or voting rights in that entity increase either:
- from 25% or less to more than 25%;
- from 50% or less to more than 50%; or
- from less than 75% to 75% or more; or
- you acquire voting rights which enable you to secure or prevent the passage of any class of resolution governing the affairs of the entity,
then a notification may be needed. The acquisition of a qualifying asset could also trigger the need for a notification.
Activities within the energy sector which are caught include onshore and offshore generation, storage, aggregation, transmission or distribution of electricity across Great Britain (excluding Northern Ireland). For the purposes of this blog, we have focussed on storage so, if the entity you are buying holds a generation licence or exemption for any technology type capable of generating or storing electricity for the purpose of enabling supply then a mandatory notification may be required.
However, as the NSI is only intended to apply to substantial generators or aggregators of electricity, the entity must own or operate either:
- a single generating asset with a capacity of 100MW or more; or
- the qualifying entity and the buyer or the buyer’s group of companies must together have a cumulative generation or aggregation capacity of 1GW or more.
It’s important to assess whether a notification is required as soon as possible because of the impact this could have on whether or not your purchase will be able to proceed. Generally, a notification should be made when there is a good faith intention to proceed, which could be evidenced by the existence of agreed heads of terms, financing arrangements being in place or board level approval of the purchase. Depending on the complexity of your proposed purchase, it may take up to 30 working days from acceptance of a notification to receive a decision. As it can take around two weeks for a notification to be accepted, a purchaser will need to allow approximately an additional six weeks before a purchase may proceed.
If you proceed without complying with NSI, then your purchase would be void. So, although this is an obligation which falls on the buyer, it is also in the seller’s interests that NSI is complied with because the sale would otherwise be void.
There are civil and criminal penalties for completing a transaction without first obtaining approval. A civil penalty could be up to 5% of the buyer’s global turnover or £10 million, whichever is greater, and criminal penalties include imprisonment for up to five years.
Get in Touch
If you need advice or assistance in respect of NSI, please do contact Beth Margetson, Julian Milan or Phil Hunt at mfg Solicitors on 0121 2367388, or fill in one of our Contact Forms and a member of our team will be in touch.
To find out how mfg can assist on your next Renewable Energy project, please visit our Renewable Energy page.
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