Last year, we wrote about the UK’s National Security and Investment Bill, which was pending approval at the end of 2020. A few months into the New Year, the bill received Royal Assent, making it the “biggest shake-up of UK’s investment screening regime in 20 years.”

The NSI Act is now scheduled to take effect on January 4, 2022. However, businesses should be aware of the Act’s requirements now because it has a retroactive effect, where the government can “call in” transactions that have closed since November 12, 2020 for in-depth review if it believes a transaction gives rise to national security concerns. Transactions subject to this retroactive assessment can be cleared in full, cleared subject to conditions, unwound, or blocked.

The new regime is designed to strengthen the government’s ability to investigate and intervene in mergers, acquisitions, and other deals that raise national security concerns. It provides new regulatory oversight and enforcement authority, which opens the door to additional D&O exposures. For example, the Act imposes a mandatory notification system for certain transactions in sensitive sectors of the economy. If a company fails to seek authorization, the transaction will be void and the company may be subject to criminal or civil penalties. Further, the Secretary of State will have the broad power to “call in” and investigate transactions that the government reasonably suspects may give rise to national security concerns.

D&O policies may respond to investigations and enforcement actions like those under the Act. As we approach the commencement date, companies should ensure they understand the requirements of the Act and that they have broad D&O coverage for the investigations and enforcement actions that may result.