Following feedback on the first edition of the National Security and Investment Act 2021 (NSI Act) market guidance, a recently published second edition clarifies aspects of the NSI Act for businesses falling within its scope.


The UK’s national security and investment regime came into effect on January 4, 2022, through which the UK government committed to periodically publishing market guidance to support businesses engaging with the NSI Act. The UK government published its first edition of the market guidance in July 2022 and has since gathered feedback from businesses to inform its second edition (the Market Guidance).

The NSI Act creates a new standalone regime for the screening of investments in the United Kingdom. The new investment screening rules enable the UK government to intervene in certain acquisitions that could harm the country’s national security. Certain acquisitions of entities active in 17 particularly sensitive sectors of the UK economy are subject to mandatory preclosing notifications.[1] The Investment Security Unit within the Cabinet Office is responsible for enforcing the NSI Act screening regime.

The Market Guidance provides advice on the following topics:

Changes to Main NSI Act Guidance

Clarity for Acquisitions Involving Parties Suffering from Material Financial Distress

The UK government has clarified that in exceptional situations it may be possible to expedite the assessment process under the NSI Act with respect to acquisitions involving parties that are experiencing material financial distress.

Parties must provide sufficient evidence of material financial distress to take advantage of the expedited process. The Market Guidance explains that evidence may include external legal, restructuring, and insolvency analysis; 13-week cashflow statement showing a deficit and breach of facilities; current balance sheet and profit and loss account; and other relevant evidence.

Notification of a Qualifying Transaction Requires a Good-Faith Intention to Proceed

The Market Guidance clarifies that it would be appropriate to notify a qualifying transaction when there is a good-faith intention to proceed. A good-faith intention to proceed might be evidenced by the existence of heads of terms, financing arrangements being in place, board-level consideration of the acquisition, or, if it is a public bid, a public announcement of a firm intention to make an offer or the announcement of a possible offer.

Parties should be aware that there may be consequences for premature notification such as delay, as early notification may necessitate further information requests in relation to the acquisition.

Further Guidance on the Stages of the NSI Act Assessment Process

The Market Guidance notes the UK government’s ability to impose certain orders on the parties during the assessment period. This includes an interim order if the UK government reasonably considers that it is necessary to prevent or reverse preemptive action by parties or mitigate its effects.

The Market Guidance also notes that the UK government may request information from the parties or third parties (an information notice) or require individuals to attend a meeting (an attendance notice). Such notices will pause the clock on the assessment period.

The Market Guidance further notes that parties are able to withdraw from an acquisition at any stage of the process and must inform the UK government in writing if they intend to withdraw.

The UK Government May, in Rare Circumstances, Provide Financial Assistance to Businesses Following a Final Order

The updated Market Guidance confirms that the UK government has the power under the NSI Act to provide financial assistance such as loans, guarantees, or indemnities to businesses affected by a final order. Financial assistance will only be provided in rare instances where no alternative is available.

Businesses May Contact the UK Government if There Is Uncertainty About Whether an Acquisition Is Notifiable

The Market Guidance explains that businesses may contact the UK government where there is significant uncertainty about whether an acquisition is notifiable, before formal notification. Businesses are advised to include as much detail as possible in their request, explaining why there is uncertainty in the acquisition and clearly setting out any timing considerations.

Practical Guidance on Completing Notifications

The Market Guidance also gives businesses advice on completing the notification form. Businesses should ensure the correct economic area under the NSI Act has been selected and appropriate declarations have been included and signed, and verify that each response box can be read as a standalone response.

The Market Guidance sets out other helpful information that could be included in the notification form such as whether and why the acquisition raises national security concerns, the rationale for the acquisition, and the relevant financial or economic information of the target.

Next Steps

The UK government has said that it will continue to engage with stakeholders to improve predictability and transparency for businesses engaging with the NSI Act.