Buying a UK Company in a Sensitive Sector

When does the NSI Act apply?#

Under the National Security and Investment Act 2021, a notifiable acquisition is one that gives the acquirer control of a qualifying entity, where that entity carries on specified activities in one of the mandatory sensitive sectors. Sections 8(2), 8(5) and 8(6) of the Act define the ways control can be acquired: acquisition of more than 25%, more than 50%, or 75% or more of the shares or voting rights, or voting rights enabling or preventing the passing of a resolution. A share purchase that crosses any of these thresholds in a qualifying entity therefore triggers a mandatory notification and a standstill obligation: the transaction must not complete until the Secretary of State has reviewed it, with a call-in decision due within 30 working days of a valid notification and a full national security assessment taking a further 30 working days (extendable to 45).

Completion without clearance is legally ineffective. The Act provides that a notifiable acquisition completed without approval is void as a matter of law, and the government can also impose civil penalties and, for individuals, criminal liability. The practical consequence for a Chinese buyer is simple: the NSI Act timeline belongs in the deal timetable from day one, not as a condition discovered at signing.

The 17 mandatory sectors#

The mandatory notification regime covers qualifying entities active in the sectors set out in the National Security and Investment Act 2021 (Notifiable Acquisition) (Specification of Qualifying Entities) Regulations 2021: advanced materials, advanced robotics, artificial intelligence, civil nuclear, communications, computing hardware, critical suppliers to government, cryptographic authentication, data infrastructure, defence, energy, military and dual-use, quantum technologies, satellite and space technologies, suppliers to the emergency services, synthetic biology, and transport. These sectors matter to Chinese acquirers in practice because many high-value targets in the UK sit in them: semiconductor design and manufacturing, advanced engineering, AI and data infrastructure, and defence supply chains.

Not every company in these sectors is in scope. The key question is whether the entity's activities fall within the specified descriptions in the Regulations, so the first piece of work is a sector and activity screen against the current Regulations, not a label check.

The enforcement record: four real cases#

Newport Wafer Fab / Nexperia (2022)#

On 16 November 2022 the UK Business Secretary used his powers under the NSI Act to block Nexperia's acquisition of Newport Wafer Fab, a UK semiconductor foundry, requiring the transaction to be reversed. The case is the clearest example of a completed deal being unwound after review, and it put all Chinese semiconductor investments in the UK on notice that completion without clearance was not a safe outcome.

Manchester University / Beijing Infinite Vision (2022)#

On 20 July 2022 the government issued its first reported prohibition order, blocking the licensing of certain intellectual property between the University of Manchester and Beijing Infinite Vision Technology Company Ltd. The case is important because it shows the NSI Act reaches intellectual property licences, not just share purchases, where the arrangement could confer control over technology relevant to national security.

Pulsic / Super Orange HK Holding (2022)#

On 17 August 2022 the government blocked the acquisition of Pulsic Ltd, an electronic design automation (EDA) company, by a Hong Kong-incorporated entity, on the basis that the EDA tools had dual-use applications in both civilian and military supply chains.

FTDI Holdings (2023-2024)#

The FTDI matter shows the reach of the retrospective call-in power. A Chinese consortium led by Beijing Jianguang Asset Management (JAC Capital) completed a USD 414 million acquisition of an 80.2% stake in FTDI, a chipmaker, in December 2021. The Investment Security Unit called the transaction in on 22 November 2023, and on 5 November 2024 the government issued a final order requiring divestment of the entire shareholding. When the consortium challenged the order by judicial review, the High Court upheld the order in 2025. The timeline is the warning: a deal closed in 2021 was still being unwound in 2024.

Allocating NSI risk in the SPA#

Once the NSI Act screen is complete, the residual risk belongs in the acquisition documents. The standard toolkit is the same one English M&A uses for any regulatory condition, and it is worth setting out how the pieces work together:

• Condition precedent — completion is conditioned on NSI Act clearance or, where appropriate, the expiry of the call-in window without intervention.
• Warranties — the seller warrants the accuracy of the information in the data room and the condition of the target's business, so that a buyer that has relied on a disclosure pack has a contractual remedy if it proves wrong. In the UK, warranties are qualified by disclosures set out in a disclosure letter delivered alongside the SPA, and general disclosures are usually confined to matters of public record such as Companies House filings.
• Specific indemnities — for known, identifiable risks such as a pending regulatory investigation or a tax exposure, a buyer should seek indemnities rather than rely on a warranty alone, because indemnities avoid the need to prove loss and remoteness in the same way.
• Liability caps and time limits — the cap, the basket and the survival period are where the deal is really negotiated. A buyer in a sensitive sector should resist a cap that is too low relative to the NSI risk, and should ensure the warranty package survives long enough to cover the enforcement window.

Chinese buyers also need to coordinate the UK workstream with the PRC ODI sequence described in our companion guide on ODI filing in China. The UK standstill can run for weeks after signing; the NDRC, MOFCOM and SAFE steps in China also take time. The two calendars must be built together.

What is changing in 2026#

In March 2026 the UK government published its planned changes to the mandatory notification sectors, confirming that the regime will expand from 17 to 19 sensitive sectors and updating the scope of several existing descriptions. The direction of travel is clear: more transactions will fall inside mandatory notification, not fewer. Buyers should re-run their sector screen against the current Regulations and the proposed changes before committing to a timeline, and should ask counsel to confirm which version of the sector descriptions applies to the target's activities on the signing date.

Next steps#

The NSI Act is a completion blocker, not a formality. The practical sequence for a Chinese buyer is: (1) screen the target's activities against the current sector Regulations; (2) model the mandatory or voluntary notification route and the call-in timeline into the deal schedule; (3) negotiate the SPA conditions, warranties, indemnities and liability caps around that timeline; and (4) coordinate the UK calendar with the PRC ODI sequence. James Rees advises Chinese buyers on UK and cross-border M&A, including NSI Act clearance, SPA drafting and post-closing integration, and works in English and Mandarin. Engagements are confirmed in writing.

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