At present, the Bill includes intragroup reorganisations in the mandatory notification regime if the entity being transferred within a corporate group carries on activities in one of the 17 specified sectors. We could not believe this at first (how could an internal restructuring within a single group of companies which, by definition, does not involve any change of control of that group of companies, possibly be a national security risk?). So we wrote to BEIS and the BEIS officials confirmed that our interpretation of the Bill is correct.
If mandatory notifications are not made, under the Bill, those who should have made the notification will have their internal transactions automatically voided and will be exposed to fines of up to 5% of their worldwide turnover with their people being at risk of being imprisoned for up to five years.
Hundreds of intragroup restructurings take place every day for a range of purposes (e.g. reducing costs, incorporating new technology and consolidating debt etc.) and we cannot believe that Parliament intended to include such arrangements within the scope of the Bill’s mandatory notification regime. There are already concerns that the ISU will be flooded with notifications once the mandatory notification system goes live. It is imperative that intragroup reorganisations are removed from the mandatory notification system to help stem a huge flow of utterly benign transactions from a national security perspective being notified
In our view, internal restructurings which do not involve a change of control should be removed from the ambit of the Bill altogether. However, if it is too late for this, the Government must at least amend the Bill so that such transactions are not mandatorily notifiable. Our drafting amendment to achieve this is set out below:
Proposed Amendment to Section 6(3) of the Bill
But a notifiable acquisition does not take place if the acquisition takes place due to a person being treated as acquiring an interest or right under section 10(2)(b) or if complying with the requirement to give a mandatory notice under section 14(1) in relation to the gaining of control, or the acquisition of the right or interest, would be impossible for the person within subsection (2).