Changes to forthcoming UK foreign investment rules to make 25% the threshold for mandatory notification, up from 15%

According to recent reports, the UK Government is shortly to table an amendment to the National Security and Investment Bill, the UK’s yet to be implemented foreign investment screening legislation. The amendment would raise the mandatory notification threshold from 15% or more to 25% or more of an entity active in one of the 17 specified sectors (a qualifying entity).

The late change (the Bill is scheduled for report stage in the Lords on 15 April) has apparently resulted from concerns raised by a number of business groups who have pressed for a higher threshold for mandatory notification, arguing that a 15% starting point would unnecessarily delay benign transactions - particularly in the tech sector - which rely on rapid fundraising rounds. A government spokesperson indicated that the change “will ensure the new regime is proportionate and as transparent as possible without reducing the Government’s intervention powers”.

A 25% threshold for mandatory notification would also bring the UK regime into line with the US CFIUS regime (although call-in will remain possible at lower levels of shareholdings if these confer “material influence” or in relation to asset acquisitions). However, it would deviate from the approach taken by certain Continental European regimes, such as Germany and Italy, which have a lower filing threshold of 10% for acquisitions by non-European investors in sensitive sectors. Meanwhile, France generally also applies a 25% threshold, with the exception of listed companies - for which a mandatory filing requirement may arise from as low as 10% of voting rights.