The UK has three largely separate legal systems for England and Wales, Scotland, and Northern Ireland. Scotland has a mixed common law and civil law system, whereas England and Wales and Northern Ireland have a common law system. The material in this chapter deals primarily with the laws of England and Wales but makes reference to other parts of the UK where relevant.

Sources of Law

The key source of law in the UK is legislation, ie, statutes enacted by Parliament (as the supreme law-making body), in addition to statutory instruments. This is supplemented by the rules of common law and equitable principles, as established and developed over the centuries through decisions of the UK courts.

The interpretation of legislation made by Parliament is for the courts when they hear cases. When conflicts arise between common law and legislation, these are also dealt with by the courts, with legislation taking priority over (and having the ability to amend) common law.

In considering cases, judges are bound by precedent, with decisions of the higher courts (or “courts of record”) being binding on less senior courts. The Supreme Court is the final court of appeal in the UK. It hears appeals on arguable points of law of public importance for the whole of the UK in civil cases, and for England and Wales and Northern Ireland in criminal cases.

European Law Post-Brexit

Prior to the UK’s departure from the EU (“Brexit”), EU law also formed a significant source of law in the UK, either through directly applicable EU regulations or through domestic enactments of EU Directives. Following Brexit, a snapshot of EU law as it applied to the UK at that time was retained and incorporated into UK domestic law (known until the end of 2023 as “retained EU law”). Parliament is now in the process of reforming that retained EU law through various amendments and revocations, and has renamed it “assimilated law” to reflect the significant changes being made.

Rules and Regulators

In addition to legislation, there are various persons and regulatory bodies that have the ability to make rules in the UK. They include the Registrar of Companies, the Takeover Panel, the Financial Conduct Authority (the “FCA”) and the Financial Reporting Council.

National Security and Investment Act 2021 (NSIA)

The NSIA established a dedicated regime to review transactions on national security grounds. The NSIA is administered by the Investment Security Unit (the “ISU”), the body to whom notifications are made, with decisions taken by the Secretary of State in the Cabinet Office (the “Secretary of State”).

The NSIA allows the Secretary of State to review almost any transaction that they consider may give rise to a risk to UK national security (see 7.2 Criteria for Review). The NSIA also requires mandatory notification of certain transactions concerning target businesses that have activities within one or more of 17 sectors specified in the notifiable acquisition regulations (the “NARs”). Transactions not subject to the mandatory notification requirement may be voluntarily notified to the ISU.

Enterprise Act 2002 (EA02)

The UK government has the power to issue an intervention notice in respect of any transaction meeting certain thresholds, reflecting, for the most part, the thresholds used to determine whether the UK’s Competition and Markets Authority (the “CMA”) has jurisdiction to review the transaction for merger control purposes (see 7.2 Criteria for Review) on the grounds specified in Section 58 of the EA02 (the public interest intervention notice (PIIN) regime). These grounds include media plurality, stability of the financial system, or public health. (Until the NSIA was introduced, this also included national security).

Please refer to the UK Trends and Developments chapter in this guide, in which the authors discuss the outlook for 2025 and draw out certain key legal developments and market trends to monitor.

The way in which a company is acquired in the UK generally depends upon whether the company is a private or public company.

Private Companies

For private companies, it is typical to either acquire the company’s shares or the company’s business or assets. The difference is that, in the case of a share purchase, the ownership of the company as a separate legal entity is acquired, comprising all of its assets and liabilities. However, in the case of a business acquisition, the buyer selects which individual categories of the company’s assets and liabilities it is interested in acquiring.

The main commercial advantage to structuring an acquisition as a share purchase is that continuity of the business is preserved. Both before and after completion, the business is carried on by the same company and as far as the world at large is concerned no change has taken place.

The main commercial advantage of a business acquisition is the ability to avoid inheriting the liabilities of the target business. Even though the buyer will be carrying on a business in succession to the seller under the same business name, any debts or other liabilities incurred by the seller before the acquisition of the business by the buyer are not in general automatically transferred to the buyer unless there is a specific agreement to take these on.

One point to consider is that a business acquisition may be much more complex than a share acquisition. In a business acquisition, the buyer must ensure that the ownership of each asset has been correctly transferred (which may require numerous documents and consents), whereas a share acquisition essentially only requires a share transfer form to transfer title.

Public Companies

The acquisition of UK public companies is governed by the City Code on Takeovers and Mergers (the “Takeover Code”), which is administered by the Takeover Panel. Changes to the Takeover Code are coming into effect on 3 February 2025 and will narrow the scope of companies to which the Takeover Code applies to companies which are, or have in the last two years been, quoted in the UK, subject to a two-year transitional period from this date. Unlisted public companies, for example, will no longer be covered.

There are two principal ways to effect a takeover of a UK public company. These are a contractual takeover offer by the bidder to acquire the shares of the target (a takeover offer) or a court procedure known as a scheme of arrangement (a scheme).

A takeover offer involves an offer contract (the offer document) between the bidder and the shareholders of the target, which includes the financial terms, conditions and other offer provisions. A minimum condition of the offer must be that sufficient acceptances are received to give the bidder ownership of at least 50% of the target’s voting shares (this is a Takeover Code requirement). However, bidders normally opt for a higher 90% acceptance level in order to use statutory compulsory acquisition/squeeze-out powers under UK law to obtain 100% ownership.

A scheme is a court procedure, proposed by the target company to its shareholders. The shareholders are asked to pass resolutions to approve the scheme at a shareholders’ meeting, requiring a majority in number representing 75% in value of those voting (excluding any shares already held by the bidder). If the resolutions are passed and the scheme is sanctioned, it is binding on all shareholders, regardless of whether they voted in favour of the scheme or not. Schemes are usually used for takeovers recommended by the target board, as they have the advantage of ensuring 100% ownership once approved.

Minority Investments

For minority investments (ie, a shareholding of less than 50%), investors typically acquire their interests through a share transfer from another shareholder or the purchase of new shares issued by the company. It is worth noting that the Takeover Code will require an investor in a public company to make a mandatory offer for the company if it, together with any concert parties (broadly defined), acquires an interest in 30% or more of the company’s issued share capital.

See 6. Antitrust/Competition for a summary of the key UK merger regimes that apply to domestic M&A transactions and 8. Other Review/Approvals for a summary of other relevant regimes.

In the UK, the most common forms of legal entities are:

• private companies limited by shares;
• public companies limited by shares; and
• partnerships.

The key factors to consider when determining what form to select are limitations on liabilities, the desired nature of the entity (ie, whether it will be publicly or privately held), and the relevant tax treatment. For example, only public companies are permitted to offer their shares to the public.

Corporate Governance Framework

The corporate governance framework in the UK comprises laws, codes of practice, market guidelines and constitutional documents. The key sources for companies are as follows.

• The UK company law regime is primarily set out in the Companies Act 2006.
• The Insolvency Act 1986 contains provisions relating to the winding-up of companies.
• The Financial Services and Markets Act 2000 (the “FSMA”) sets out the UK regime for financial services and securities law. Specifically, there are restrictions on offering or promoting securities and companies need to produce a prospectus when they offer their shares to the public.
• In addition, public companies whose shares are traded on the Main Market of the London Stock Exchange will need to comply with the UK Listing Rules, Prospectus Rules, Disclosure Guidance and Transparency Rules (the “LPDT Rules”) issued by the FCA.
• The internal affairs of companies are governed by their constitutional documents, the key one being its articles of association. These include the rights attached to a company’s shares (including voting rights), the powers of the directors, the regulation of shareholders’ and directors’ meetings, the alteration of capital, and the transfer of shares.
• Some companies also adopt corporate governance codes. For example, listed companies in the equity shares of commercial companies (ESCC) category must adopt the UK Corporate Governance Code, which consists of principles and provisions of good governance and apply it on a comply or explain basis.

Minority investors are granted certain basic protections under UK company law, such as:

• the ability to bring an action on behalf of the company against the company’s directors for negligence, default, breach of duty or breach of trust; and
• the right to petition the court for an order that the affairs of the company are being conducted by the majority in a way that is unfairly prejudicial (subject to meeting the various requirements for these claims).

A 5% shareholder can require the directors of a company to call a general meeting and a 25% shareholder can block a special resolution, which can prevent a company from altering its articles of association, removing statutory pre-emption rights, changing its name or passing a winding-up resolution.

This level of protection, while helpful, often falls short of the typical commercial controls sought by minority investors in private companies. It would therefore be usual for investors in private companies to seek to negotiate express contractual and constitutional rights (such as veto rights or reserved matters, board representation, transfer and exit provisions and anti-dilution protections) in order to protect themselves better. These rights often form part of a shareholders’ agreement with other shareholders or are embedded in the company’s articles.

Public Companies

Under Disclosure Guidance and Transparency Rules (DTR) 5, if an investor’s aggregate interest in a listed company reaches, exceeds or falls below 3% (or 5% for certain types of professional investor) or any whole percentage point thereafter, it must notify the company within two trading days. This applies where there is an acquisition or disposal of shares or financial instruments by the investor, or where there is a change in the company’s total voting rights.

If a listed company enters into an offer period under the Takeover Code, additional disclosure rules apply to investors with interests of 1% or more. This includes making a public opening position disclosure within ten business days of the offer period commencing and disclosing any market dealings in the listed company’s shares.

Disclosure obligations under the UK Market Abuse Regulation (the “UK MAR”), the UK version of the EU Short Selling Regulation and the Alternative Investment Market Rules (the “AIM Rules”), may also apply, depending on the nature of the investor and the public company. For example, if the investor is also a director of a listed company, they will need to notify any dealings in the company’s shares to the company and the FCA under the UK MAR.

Private Companies

The people with significant control (PSC) regime applies to all UK companies, apart from listed public companies. It is intended to promote transparency within UK holding structures by making information on beneficial owners publicly available. It requires companies to maintain a register of people with significant influence or control over the company (a “PSC register”, which includes any investor with more than 25% of the company’s shares or voting rights) and to file the PSC information on the public register at Companies House.

In the UK, both debt and equity capital markets provide a major source of financing for businesses. Specifically, the significant increase in UK corporate debt in recent years has primarily been funded through the debt capital markets, instead of bank financing. Since the global financial crisis, nearly all of the GBP425 billion net increase in UK corporate debt has come from market-based finance (according to the Bank of England).

In the equity capital markets, there is a divide between public and private companies. Public companies generally generate sufficient cash resources to meet their day-to-day capex and opex requirements without needing to issue new equity and focus instead on returning value to shareholders through dividends and share buybacks. Public companies therefore predominantly only access the equity capital markets where they are making a significant new investment (eg, a major acquisition) or are in financial distress.

That said, during the COVID-19 pandemic, UK public companies used the equity capital markets to raise significant amounts of funding through non-pre-emptive placings, rights issues and open offers. Historically, non-pre-emptive placings have had little opportunity for retail participation. However, during this period, the trend to involve retail shareholders using new platform technology (such as PrimaryBid) became more prevalent.

In contrast, private companies continue to be fuelled by equity investments as well as debt. A growing number of private companies are remaining private for longer and attracting significant investments from venture and growth capital investors. The UK continues to have the most unicorns in Europe (private start-up companies valued at over USD1 billion), with the UK home to more than 160 unicorns in 2024. Start-ups in the UK raised USD21.3 billion of investment in 2023, according to Dealroom data. This was the third globally in terms of venture capital (VC) investment.

Ongoing Reforms

It is worth noting that the UK has been undertaking a radical restructuring of its listing regime, with the new UK Listing Rules (in force from 29 July 2024) aiming to encourage a greater range of companies to list in the UK. The Rules will create a single category for UK listings of ESCC and dramatically scale back those aspects of the UK’s listing regime that were seen as uncompetitive compared with other listing venues. For example, ESCC-listed companies no longer require shareholder approval for significant or related party transactions.

Furthermore, recommendations from the Secondary Capital Raisings Review published in July 2022 are being implemented with the intention of making the process of raising capital for existing listed companies more efficient. Undocumented capital raises are expected to become easier as a result. Under current proposals, a listed company would be able to raise up to 75% of the securities already admitted to trading over a period of 12 months without an FCA-approved prospectus. The final rules are anticipated to come into force in 2025.

Currently, securities offerings in the UK are principally governed by the FSMA, as supplemented by the LPDT Rules. However, significant equity capital markets reforms are ongoing and material changes to the UK prospectus regime, in particular, are expected to take effect in 2025. The Financial Services and Markets Act 2023 provides the new framework and the Public Offers and Admissions to Trading Regulations 2024 will give the FCA discretion on when a prospectus is required.

Until then, a prospectus will be required if a company:

• makes an offer of transferable securities to the public in the UK; and/or
• applies for the securities to be admitted to trading on a regulated market in the UK.

Exemptions apply:

• where the offer is addressed solely to qualified investors or to fewer than 150 persons; or
• where the securities are already admitted to trading and represent less than 20% of the securities already admitted to trading over a 12-month period.

Communications of an invitation or inducement to engage in investment activity (“financial promotions”) are strictly regulated (with criminal penalties). Financial promotions must either fall within an exemption or be made or approved by an authorised firm.

For issuers admitted to the Main Market of the London Stock Exchange, the London Stock Exchange’s Admission and Disclosure Standards will also apply. Further issues of shares (ie, by a placing, open offer or rights issue) will also be subject to the requirements of the Companies Act 2006 and will need to consider investor guidelines, principally those of the Investment Association and the Pre-Emption Group.

A foreign investor structured as an investment fund would not be subject to any additional regulatory review beyond the merger control and FDI regimes described in 6. Antitrust/Competition unless as part of the investment interests in the relevant fund are offered to UK persons (where marketing restrictions would then apply).

The UK merger regime applies to “relevant merger situations”. A “relevant merger situation” arises where two or more enterprises cease to be distinct and one or more of the UK jurisdictional thresholds are met. The Digital Markets, Competition and Consumers Act 2024 (the “DMCC Act”) introduced material amendments to the UK merger control regime which came into force on 1 January 2025. The jurisdictional thresholds for most mergers are now as follows:

• the turnover test – this is met where the UK turnover generated by the target enterprise exceeds GBP100 million (prior to the DMCC Act this was GBP70 million);
• the share of supply test – this is met where the merged entity will, as a result of the transaction, supply 25% or more of goods or services of a particular description in the UK as a whole (or a substantial part of it) and the transaction increases that share; or
• A new “hybrid” test, introduced by the DMCC Act, under which the CMA will have jurisdiction where the following conditions are satisfied:
1. one party has an existing share of supply of goods or services of at least 33% in the UK or a substantial part of the UK;
2. the same party has a UK turnover exceeding GBP350 million; and
3. any other party meets a UK nexus test.

The rationale for the new “hybrid” test is to enable the CMA to investigate so-called “killer acquisitions”, as well as purely vertical mergers, which may not have been caught by the turnover or share of supply tests.

The DMCC Act also introduced a “small merger safe harbour” exempting most transactions from review, where each party’s UK turnover does not exceed GBP10 million.

Enterprises cease to be distinct if they are brought under common ownership or common control. The EA02 recognises three levels of control, each of which can give rise to a notifiable merger:

• legal control – acquired through an interest which carries more than 50% of the voting rights;
• de facto control – where an entity controls an enterprise’s activities despite holding less than the majority of voting rights; or
• material influence – this is the lowest level of control that may give rise to a relevant merger situation and may capture minority interests where there are factors that enable the acquirer to influence the target’s commercial policy.

Notification Process

There is no obligation to notify mergers in the UK, although in practice many transactions are notified in the interest of legal certainty. The CMA can also review non-notified mergers, including completed mergers, and make a Phase 2 reference up to four months after completion of the transaction is made sufficiently public. The CMA has dedicated mergers intelligence staff responsible for monitoring non-notified merger activity and is therefore likely to pick up on mergers of its own accord. The parties to a transaction can seek non-binding comfort that the CMA is not minded to investigate a transaction by filing a short briefing paper with the CMA.

Notification is made in the form of a statutory Merger Notice, which requires significant amounts of information.

The CMA merger investigation process comprises two stages: Phase 1 and Phase 2. At Phase 1, the CMA has a statutory requirement to refer a transaction for an in-depth Phase 2 investigation where it believes that a relevant merger situation “may” give rise to a “substantial lessening of competition” (SLC) (or has already done so in the case of completed mergers). For the purposes of Phase 1, the CMA must merely consider the prospect of a SLC to be more than fanciful.

Where the test for a Phase 2 reference is met, the CMA may accept undertakings in lieu of a reference (UILs) from the merging parties as an alternative to making a Phase 2 reference. In order to accept UILs, the CMA must be confident that all potential competition concerns will be resolved by these undertakings without the need for further investigation.

Where the CMA makes a Phase 2 reference, the CMA is required to assess whether a transaction is a relevant merger situation and, if so, whether the SLC test is met. At this stage, the CMA must assess whether on the balance of probabilities the transaction would give rise to a SLC.

If, following a Phase 2 reference, the CMA concludes that a merger has resulted or may result in a SLC then the CMA is required to decide whether action should be taken to remedy, mitigate or prevent the SLC or any adverse effect resulting from the SLC. This could take the form of an absolute prohibition of the transaction (or an unwinding of a completed merger) or structural remedies (eg, divestiture of part of the acquired business). The CMA may also impose behavioural remedies (eg, IP licences, price caps) but these are less common in practice.

Timetable

The timetable is as follows.

• Phase 1 decision – 40 working days, commencing when the CMA confirms the Merger Notice is complete or (if no Merger Notice) that it has sufficient information to start its investigation.
• Consideration of UILs – if the transaction will be referred to Phase 2, the parties have five working days to offer UILs and the CMA has 10 working days (running in parallel) to decide if UILs are acceptable in principle. Any UILs must be agreed within 50 working days of the Phase 1 decision (extendable by up to 40 working days). The transaction is otherwise referred to Phase 2.
• Phase 2 decision – 24 weeks (extendable by up to eight weeks).
• Implementation of remedies – 12 weeks (extendable by up to six weeks).

The CMA can “stop the clock” and extend the time limits where responses to statutory information requests are outstanding.

The DMCC Act introduced a statutory framework for the parties to request a “fast track” reference to Phase 2 (without having to admit that the transaction could lead to competitive harm), potentially shortening the Phase 1 review period. Where the CMA has accepted a “fast track” reference request and referred a transaction to Phase 2, the CMA has the power to extend the Phase 2 deadline by 11 weeks, rather than the usual eight weeks. In addition, changes introduced by the DMCC Act now enable the parties and the CMA to mutually agree, more than once, extensions to the Phase 2 timetable without limit.

The CMA’s assessment of a transaction is separate from any review under the NSIA. However, the ISU and CMA have an information-sharing arrangement in place through which each agency can become aware of non-notified transactions. In addition, the UK and EU have recently concluded technical negotiations on a Competition Co-operation Agreement which, once ratified, will facilitate co-operation between the CMA, European Commission and national competition authorities of EU member states in respect of mergers and other areas of competition law.

The term “substantial lessening of competition” is not defined in the EA02 but the CMA will consider whether the merger is expected to weaken rivalry to such an extent that customers or suppliers would be harmed as a result. The CMA’s Merger Assessment Guidelines provide more detail as to how the CMA will apply the SLC test. A variety of different factors will be considered, including the parties’ market shares, any efficiencies that may result from the merger, and the likely effect of the merger on entry and exit from the relevant market.

In the case of a PIIN, the Secretary of State will commission the CMA (or relevant concurrent regulator such as Ofcom in the case of media mergers) to investigate the potential public interest implications of the transaction. For public interest mergers, the Secretary of State is the ultimate decision-maker, but the CMA carries out its review as to whether a SLC may arise in line with its usual statutory test. The Secretary of State may intervene to impose additional conditions on mergers to address public interest concerns (irrespective of whether conditions are imposed to address competition concerns) and may also decide to clear a transaction even if the CMA concludes that there is a SLC.

Merger remedies may be structural or behavioural in nature. In most cases, the CMA will prefer structural remedies.

As noted in 6.1 Applicable Regulator and Process Overview, the CMA may prohibit a transaction at Phase 2. Decisions of the CMA can be appealed to the UK’s specialist competition court, the Competition Appeal Tribunal (the “CAT”). As the UK regime is voluntary, there are no penalties for failing to notify a relevant merger situation.

Interim Measures

The CMA has powers to suspend integration while it is reviewing a transaction; it does so via the imposition of an initial enforcement order (IEO), which usually takes the form of a standard template. An IEO will typically require that the parties are held separate from completion, or immediately in the event the transaction has already completed.

An IEO will also typically impose restrictions on the conduct of the parties’ businesses, such as preventing key staff changes, certain disposals, significant organisational changes, and similar. IEOs are imposed as a matter of course where the CMA investigates completed transactions.

Parties may seek to negotiate derogations from an IEO. However, the CMA expects requests for derogations to be fully justified.

An IEO can, but typically does not, prevent completion of a transaction if it has not occurred already. The CMA has stated that it may impose an IEO preventing completion where it has concerns that completion will give rise to pre-emptive action that is difficult or costly to reverse.

Under its interim measures powers, the CMA can require parties to reverse integration steps already taken. Penalties of up to 5% of aggregate turnover of the party in breach can be imposed for breach of these interim measures. The CMA has recently significantly stepped up its enforcement activity in this regard.

The NSIA applies equally to foreign and domestic investors. Transactions are within the scope of the NSIA where a “trigger event” (eg, an acquisition) occurs in respect of a “qualifying entity” (broadly, any entity incorporated in the UK) or “qualifying asset” (see 7.2 Criteria for Review for further details).

Certain “trigger events” involving qualifying entities that carry out “specified activities” in the UK in one or more sectors specified in the NARs must be notified to the ISU and clearance obtained prior to completion. The mandatory sectors specified under the NARs are:

• advanced materials;
• advanced robotics;
• AI;
• civil nuclear;
• communications;
• computing hardware;
• critical suppliers to government;
• cryptographic authentication;
• data infrastructure;
• defence;
• energy;
• military and dual-use;
• quantum technologies;
• satellite and space technology;
• suppliers to the emergency services;
• synthetic biology; and
• transport.

It is also possible to submit a voluntary notification for transactions not subject to the mandatory regime (eg, where a target does not perform a “specified activity” under the NARs). Detailed lists, definitions and guidance on each “specified activity” within these sectors are available to assist parties in assessing whether a transaction is in scope of the NSIA.

Call-In Power

The Secretary of State has the power to issue a “call-in notice” to review any transaction in which a “trigger event” has taken place (or will take place) where the Secretary of State reasonably considers that this may give rise to a risk to national security. This power is exercisable at any time up to six months after the Secretary of State becomes aware of the transaction, provided that this is also within five years of the relevant “trigger event”.

The Secretary of State has published a statement of policy intent (known as the “Section 3 Statement”) on the scope and use of the call-in power. This states that the 17 sectors specified in the NARs are also sectors that the government considers to be generally more sensitive in terms of national security. As such, even when mandatory filings are not triggered (eg, because the control thresholds are not met for a “trigger event” or the target does not carry out “specified activities”), transactions in these sectors and related sectors are more likely to be called in for review.

Review Process

Notifications are made to the ISU via its online portal. Where a transaction is notified to the ISU (on a voluntary or mandatory basis), the Secretary of State must decide whether to issue a call-in notice or clear the transaction within 30 working days of the notification being accepted (which typically occurs within one week of submission).

Where the Secretary of State issues a call-in notice, the ISU has a further 30 working days in which to review the national security implications of the transaction, extendable by up to a further 45 working days (or longer with the agreement of the purchaser). This period will usually be used to assess what, if any, remedies are appropriate and to seek representations from the parties. If the Secretary of State considers that a transaction gives rise to national security risks and that it is necessary and proportionate to make a final order for the purpose of preventing, remedying or mitigating that risk, they may issue a final order.

In addition, the NSIA grants the ISU extensive information gathering powers, enabling it to request any information necessary to inform an assessment of the national security risks of a transaction. This may include requesting information where no notification has been submitted to enable the Secretary of State to determine whether to exercise the call-in power.

As noted in 7.1 Applicable Regulator and Process Overview, the NSIA applies to “trigger events” in respect of a “qualifying entity” or “qualifying asset”.

“Qualifying Entity”/“Qualifying Asset”

For the purposes of the NSIA, the following definitions apply.

• A “qualifying entity” means, broadly, any entity that is not an individual and is:
1. formed or recognised within the UK; or
2. formed or recognised outside of the UK and either carries out activities in the UK or supplies goods or services to persons in the UK.
• A “qualifying asset” means land, tangible movable property, or ideas, information or techniques that have industrial, commercial or other economic value, provided that the asset is:
1. situated within the UK (in the case of land or moveable property only);
2. situated outside of the UK and used in connection with activities carried out in the UK; or
3. situated outside of the UK and used in connection with the supply of goods or services to persons in the UK.

“Trigger Event”

A “trigger event” includes any of the following events (which are considered in the NSIA to constitute acquisitions of control).

• In respect of a “qualifying entity”, a “trigger event” refers to:
1. an increase in the percentage of shares or voting rights held by the acquirer from 25% or less to more than 25%, 50% or less to more than 50%, or less than 75% to 75% or more;
2. an acquisition of voting rights in the “qualifying entity” that, whether alone or in aggregate with voting rights already held, enable the acquirer to secure or to veto any class of resolution governing the affairs of the “qualifying entity”; or
3. an acquisition of rights or interests that, whether alone or in aggregate with rights or interests already held, enable the acquirer to materially influence the policy of the “qualifying entity” (unless the acquirer already held interests or rights that enabled it to do so). This may capture minority stakes, including acquisitions of holdings less than 15%.
• In respect of a “qualifying asset”, a “trigger event” refers to an acquisition of rights or interests in relation to the asset that enable the acquirer to:
1. use the asset (or use it to a greater extent than prior to the acquisition); or
2. direct or control how the asset is used (or to do so to a greater extent than prior to the acquisition).

Intra-Group Reorganisations

It is also notable that intra-group reorganisations are within the scope of the NSIA. Any transaction in which an immediate controlling interest over an entity or asset changes hands might be reviewable, or even trigger a mandatory filing requirement (if the entity performs a specific activity), even if the transaction is entirely intra-group and does not result in any change in the ultimate ownership of the entity or asset. However, the ISU guidance recognises that it is rare in practice that these transactions will raise substantive national security risks.

Extraterritoriality

The NSIA captures acquisitions outside the UK if the target meets the criteria of a “qualifying entity” or “qualifying asset”. These criteria require a connection to the UK but do not require any physical presence.

Remedies orders, where relevant, may apply to a person’s conduct outside the UK if they are a UK national, an individual ordinarily resident in the UK, a body incorporated or constituted under the law of any part of the UK, or carrying out business in the UK.

The UK government considers that acquisitions of entities or assets outside the UK are generally less likely to give rise to national security risks than those located within the UK and are therefore less likely to be called in. The level of national security risk will generally be linked to the strength of the connection of the asset or entity to the UK.

Substantive Review

The ISU’s review process is not public. However, guidance is clear that the ISU consults across the UK government in relation to transactions that it reviews. In particular, the ISU will consult with the government departments relevant to the potential national security interests at hand (eg, the Ministry of Defence may be consulted where a transaction in the defence sector is under review).

As noted in 7.1 Applicable Regulator and Process Overview, the Secretary of State can impose remedies to address any identified risks to national security. The NSIA allows for a broad range of remedies, but in practice the specific remedies will be calibrated to the national security concerns identified in respect of a given transaction.

To date, there have been 23 conditional clearances issued under the NSIA. Example remedies include:

• information requirements (eg, implementing enhanced controls to protect sensitive information, prohibitions on transferring intellectual property and limiting information flows);
• prohibitions on future acquisitions in entities engaged in certain activities;
• governance requirements (eg, appointing a UK government-approved auditor, a chief information officer, or appointing a UK government-appointed board observer); and
• maintaining R&D/manufacturing capabilities in the UK post-transaction.

Completion without clearance (where the mandatory regime applies) or failure to comply with an interim or final order can result in fines of up to 5% of worldwide group turnover or GBP10 million (whichever is the greater), imprisonment of individuals for up to five years, and disqualification of directors for up to 15 years.

As noted in 7.1 Applicable Regulator and Process Overview, decisions under the NSIA are taken by the Secretary of State. These decisions are subject to judicial review before the UK courts. At the time of writing, only one judgment has been handed down in respect of challenges of decisions made under the Act following a judicial review application made by the LetterOne Group appealing an Order requiring it to divest its shareholding in Upp, a fibre broadband start-up company.

Exchange Control and Sanctions

In the UK, there are no exchange control or currency regulations affecting inward or outward investment, the repatriation of income or capital, the holding of currency accounts, or the settlement of currency trading transactions. However, there are separate restrictions relating to the provision of funds/dealing with the assets of sanctioned individuals and entities. For example, financial and trade sanctions, which can either be regime-specific (ie, designations of specific individuals and entities) or non-regime-specific (ie, designations of individuals and entities relating to terrorism and specific terrorist organisations).

Regulated Businesses

Additional specific filings, clearances or consents may be required in order to acquire a company, depending on the nature of the company and the sector in which it operates. For example, there are specific rules governing acquisitions of companies operating in regulated business areas, such as financial services, banking, media, broadcasting, telecommunications, energy and utilities. Specific advice should always be sought.

Applicability of Merger Control and FDI in Other Jurisdictions

For acquisitions of businesses that operate both within and outside of the UK, it will be necessary to screen for merger control and FDI restrictions in other jurisdictions. This includes the EU, which operates a separate merger control regime to the UK.

Direct Tax

Corporation tax is a direct tax levied on the profits of companies. The current main rate is 25% for businesses with profits of more than GBP250,000. Companies with profits of less than GBP50,000 pay tax at 19%, whereas those with profits between GBP50,000 and GBP250,000 pay at a tapered rate.

All companies resident in the UK are subject to corporation tax on their worldwide profits, which include trading profits, investment profits, and capital gains (known as “chargeable gains”). Non-UK resident companies are only taxed on trading profits attributable to their UK permanent establishment and on capital gains from the disposal of UK property and shares in land-rich vehicles and certain other assets.

Businesses organised as partnerships are generally transparent for tax purposes, meaning that each partner is taxed on their share of the partnership’s income or gains.

There are also various specific regimes and surcharges for certain industries. For example, banking companies pay an additional surcharge (currently 3%) chargeable on the same profits as corporation tax, and the oil and gas industry has a separate ring fence corporation tax regime with a main rate of 30% and various additional supplementary charges and levies.

VAT

VAT is charged on supplies of good and services. The standard rate is 20%. However, a reduced rate of 5% applies to certain goods and services, and a zero rate applies to others. Certain supplies are also exempt from VAT, including supplies relating to education, finance and land and buildings (although it is possible for a taxpayer to exercise an option to tax supplies of commercial property, in which case, VAT would be chargeable at the standard rate).

Businesses with taxable turnover above the VAT registration threshold (currently GBP90,000) must register for VAT. Once registered, they must charge VAT on their taxable supplies and they can recover input VAT that they incur on costs attributable to the taxable supplies they make. Input VAT attributable to exempt supplies is irrecoverable.

VAT applies equally to UK and foreign companies that make supplies in the UK. However, special rules apply to cross-border transactions, and non-UK established businesses may be required to register for VAT under different rules.

Stamp Duties

Stamp taxes are documentary/transactional taxes relating to the transfer of land and securities. The three main types are stamp duty, Stamp Duty Reserve Tax (SDRT) and Stamp Duty Land Tax (SDLT).

Stamp duty is charged on documents (ie, paper transactions) effecting the transfer of shares and securities, as well as interests in partnerships that hold shares and securities. SDRT is charged on agreements to transfer shares and securities (including paperless transactions). In each case, the rate is 0.5% of the purchase price.

SDLT is charged on purchases of land and property in England and Northern Ireland (with local equivalents in Scotland and Wales). The rate depends on the price and type of property and whether the purchaser is a private individual or a company. Companies generally pay a higher rate and an additional surcharge (5% with effect from 31 October 2024) is charged on the purchase of additional residential properties. An additional 2% rate applies to non-residents purchasing residential property. In each case, a number of exemptions are available.

Dividends

The UK does not impose withholding tax on dividends (other than on certain distributions paid by UK REITs). This applies regardless of whether the recipient is a UK resident or a foreign investor. Therefore, dividends paid by a UK company can be paid gross, without the deduction of tax.

Property Rental Income

Property rental income paid to non-residents is subject to a withholding tax of 20%. However, this may be relieved if the non-resident registers with His Majesty’s Revenue and Customs (HMRC) and makes appropriate tax returns in respect of that income.

Interest and Royalties

Interest and royalties paid by a UK company to a foreign investor are generally subject to withholding tax at the basic rate of income tax (currently 20%). However, there are several exceptions to this rule.

In both cases, the rate of withholding tax can be reduced or eliminated under a double-tax treaty. The UK has an extensive network of double-tax treaties, many of which reduce the rate of withholding tax to a lower rate or to 0%.

However, the availability of treaty benefits can be subject to “treaty shopping” or similar limitations. The UK’s treaties generally include a “beneficial ownership” condition, which means that the recipient of the interest must be the beneficial owner of the income and not just a conduit or nominee. Some treaties also include a “principal purpose test” or “limitation of benefits” clause, which can deny treaty benefits where one of the main purposes of an arrangement or transaction was to obtain a treaty benefit.

When acquiring a UK business, the structure of the acquisition can have a significant impact on the future tax liabilities. By way of example, acquiring the assets of a business (rather than the shares) can provide a “step up” in the base cost of the assets for capital gains and/or capital allowances (depreciation) purposes. This can result in higher tax deductions in the future. However, asset purchases can have other tax implications (such as VAT and SDLT), as well as chargeable gains for the seller, which need to be considered.

UK businesses can reduce taxable profits by introducing interest-bearing debt to obtain tax deductions, subject to the application of the corporate interest restriction rules and certain other anti-avoidance rules (see 9.5 Anti-Evasion Regimes).

Expenditure on certain items of qualifying capital expenditure can be fully expensed in the period the expenditure is incurred, thus reducing taxable profits.

The UK does not have a system of tax consolidation for corporation tax purposes. However, it does allow group relief for losses between UK-resident companies and certain non-resident companies in the same group. This can reduce the group’s overall tax liability. Losses can also be carried forward indefinitely and used to offset future profits (subject to certain annual limits and other restrictions, including on a change of ownership). However, a company’s available losses may be disallowed if there is a major change in the nature or conduct of its trade three years preceding or five years following a change of ownership.

Capital gains derived by non-UK residents from the disposals of assets are not subject to tax unless:

• they are carrying on the trade, profession or vocation in the UK through a branch or agency and the asset used for those purposes is situated in the UK;
• it is a disposal directly or indirectly of an interest in UK land, subject to non-resident capital gains tax (NRCGT). This includes disposals of assets that that derive at least 75% of their value from UK land where the person making the disposal has a substantial indirect interest in the land (broadly, at least 25%) (certain other disposals related to UK land may be subject to tax under anti-avoidance rules); or
• it is a disposal of assets that are or derive their value from UK oil and gas assets.

Exemptions and Reliefs

For corporate foreign investors who are subject to corporation tax, there are a number of exemptions and reliefs which may be available. Certain foreign investors are eligible to make elections that provide an exemption from NRCGT (broadly, if the ultimate beneficial owners are at least 70% tax-exempt). The use of a UK holding company as a “blocker” vehicle can also provide benefits in terms of accessing the UK’s generous exemption regime for dividends and substantial shareholding regime for chargeable gains, subject to certain conditions.

Additional tax-advantaged structures are available for foreign investment via collective investment vehicles and funds. Each of these depend on a number of conditions being satisfied and are generally subject to a requirement that profits that are not taxed in the structure are distributed to and/or treated as received by the investors.

There are several anti-avoidance rules that may be applicable to multinational transactions, arrangements or groups.

Transfer Pricing Rules

The UK’s transfer pricing rules require transactions between connected parties, whether domestic or international, to be conducted on arm’s length terms. This means that the terms should be the same as they would be between independent parties in comparable circumstances. If not, the UK tax authorities (HMRC) can adjust the taxable profits to reflect arm’s length terms.

The rules apply to all types of transactions, including the sale and purchase of goods and services, loans, and the use of intangible assets. Companies are required to keep documentation to demonstrate that their transfer pricing complies with the arm’s length standard.

Diverted Profits Tax

The diverted profits tax aims to prevent multinational entities from using aggressive tax-planning techniques to divert their profits and reduce their UK tax liability. The diverted profits tax (31% of taxable diverted profits) is levied when arrangements are intended to avoid a UK permanent establishment or when an entity enters into an arrangement with a connected party that lacks economic substance such that taxable profits of the UK entity are reduced.

Anti-Hybrid Rules

The anti-hybrid rules address tax mismatches that may arise due to the differences in the tax treatment between the UK and other jurisdictions where there are hybrid entities, hybrid transfers, hybrid financial instruments, or from arrangements that involve permanent establishments. The anti-hybrid rules can deny a tax deduction or bring an amount into charge in order to counteract the tax mismatch.

Pillar Two

Pillar Two establishes a global minimum tax regime applicable to multinational groups whose consolidated revenue exceeds a certain threshold (currently EUR750 million). It applies to accounting periods commencing on or after 31 December 2023. This aims to ensure that multinational groups operating within the UK pay a global minimum of tax (at 15%). As such, a top-up tax on a UK parent is imposed when a subsidiary is located outside the UK and the profits of the group in that jurisdiction are taxed below the minimum rate of tax. The UK has implemented, for accounting periods commencing on or after 31 December 2023, a domestic top-up tax applicable to UK companies that meet certain revenue and other conditions (and whose effective tax rate is less than 15%).

General Anti-Abuse Rule and Mandatory Disclosure Rules

The UK’s General Anti-Abuse Rule (the “GAAR”) aims to counter tax avoidance arrangements that, despite being permitted by the letter of law, were not intended by the legislation. The GAAR applies to arrangements that aim to obtain a tax advantage and do not constitute a reasonable course of action. HMRC can make a just and reasonable adjustment by issuing or amending assessment or disallowing a claim.

The UK has also enacted Mandatory Disclosure Rules (MDR), which require disclosure of arrangements involving an offshore opaque structure or if the arrangement circumvents reporting under the common reporting standard.

In the UK, the employment relationship is governed by a contract of employment (including express and implied terms and terms set by collective bargaining), subject to minimum employment protections set out in legislation and common law (in the form of judicial decisions applying and interpreting the law). Much of UK employment law comes from EU legislation and this has largely been preserved post-Brexit. There are also more limited protections available to “workers” (who are neither employees nor self-employed but have a contract for personal service).

Notice of termination is set by the contract, subject to a statutory minimum (depending on length of service and subject to a maximum of 12 weeks). Any employees with two or more years of continuous service will have the right to claim unfair dismissal if an employer cannot show that it acted reasonably in dismissing for one of five statutory fair reasons and that it followed a fair process. Workers can bring unlawful discrimination (in relation to nine protected characteristics) or whistle-blowing claims for dismissal or detriment from day one of their employment. While compensation for loss of earnings due to unfair dismissal is capped at the lower of one year’s salary or roughly GBP115,000, compensation for discrimination or whistle-blowing is uncapped.

Trade Unions

Employees have the right to join an independent trade union and employers can be required to recognise a union for collective bargaining rights in relation to pay, hours and holidays if a majority of employees support it. Trade union membership has been generally declining in the UK, although mainly in the private sector. According to Department for Business and Trade statistics, 22.4% of employees in the UK were trade union members as of 2023.

A few UK-based multinational companies have European Works Councils (EWCs). Due to Brexit, employers have relocated these to an EEA member state thereby potentially removing UK operations from scope (although in relation to a statutory EWC imposed by default, rather than through agreement, the UK-based EWC will continue to exist in parallel). Employees with sufficient support can also request the creation of a domestic works council or information and consultation process, but this remains rare.

Other Regulations

There are obligations to inform and consult employee representatives (even if there are no recognised unions) on collective redundancies (proposals to make 20 or more employees redundant within a period of 90 days) and business transfers (see 10.2 Employee Compensation). Penalties for breach are financial (up to 13 weeks’ pay per employee) and the employer cannot be prevented from going ahead with the redundancies or transfer.

The new Labour government has promised “the biggest upgrade to rights at work for a generation” and has introduced an extensive Employment Rights Bill to Parliament. Key changes include making unfair dismissal protection a day one right, substantially restricting “fire and rehire” (a means of changing terms of employment), changing collective redundancy consultation obligations and enhancing trade union protections. The government anticipates that most of the reforms will take effect no earlier than 2026.

Employers use a range of different remuneration arrangements to compensate their employees, including, but not limited to, a base salary (which is subject to a national minimum wage rate, set at GBP12.21 per hour for those aged 21 and over from 1 April 2025), variable remuneration (eg, bonuses and/or commission), employee share schemes, and carried interest. Some employers also offer a range of workplace benefits such as car allowance, private medical insurance or long-term sickness insurance. There are additional statutory rights such as paid holiday, statutory sick and family-related leave and pay, minimum pension contributions, and statutory redundancy pay.

Employee Compensation in an Acquisition, Change-of-Control or Other Investment Transaction

A share sale will not itself affect the terms of the employment contract (including compensation terms), as the identity of the employer is unchanged. Similarly, where the transaction is by way of a business or assets sale and the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) apply, employees assigned to work in the business sold automatically transfer to the buyer on their existing terms of employment (other than some occupational pension rights) with continuity of service. Rights in relation to an existing share award will depend on the terms of the plan. An employee’s right to participate in a share plan will also transfer under TUPE (subject to the terms of the scheme and any ability to terminate it) and the buyer must offer a “substantially equivalent” scheme.

Senior employees may have agreed terms entitling them to a one-off bonus on successful completion of the transaction. They may also have change-of-control clauses contained in their contract, entitling them to enhanced notice or a lump sum payment in the event their employment is terminated other than for cause within a short period following a share sale.

As set out in 10.2 Employee Compensation, an employee’s employer does not change on a share acquisition so the employee’s terms of employment (including any change-of-control clauses) continue to apply.

Similarly, where TUPE applies, employees assigned to work in the business sold automatically transfer on their existing terms of employment (other than some occupational pension rights). Generally speaking, any dismissals by reason of a TUPE transfer will be automatically unfair (and employees with two years’ service can bring claims) and any variation to the terms and conditions of employment contracts will also be void (even if agreed with the employees) if the reason is the transfer. TUPE imposes obligations on both the seller and buyer to inform and consult with representatives of affected employees in advance of the transfer (which must include any relevant union representatives), save that, in the case of small employers or where fewer than ten employees are transferring, the individual employees can be informed and consulted if there are no appropriate representatives.

There may be additional consultation obligations on share or asset acquisitions where the employer has a works council or collective bargaining agreement with a recognised union.

The application of the NSIA should be considered for transactions involving IP assets, as they have significant potential to be in scope for a mandatory or voluntary notification.

As noted in 7.2 Criteria for Review, under the NSIA, a “trigger event” includes the acquisition of a “qualifying asset” and this includes “ideas, information or techniques which have industrial, commercial or other economic value”. The NSIA then sets out examples of IP assets falling within this (namely, trade secrets, databases, source codes, algorithms, formulae, designs, plans, drawings and specifications and software).

In addition, for the mandatory notification regime, some of the specified sectors under the NARs include IP-rich sectors. For example, advanced materials, advanced robotics, AI, computing hardware and synthetic biology. Transactions in these sectors may require mandatory notification or may be subject to call-in risk.

The UK is generally considered a well-respected jurisdiction for enforcing IP rights. The key IP rights in the UK are copyright (unregistered), patents (registered), designs and trade marks (in both cases, registered and unregistered). Specialist courts have been established to hear IP disputes. These are the Patents Court in the High Court Chancery Division and the Intellectual Property Enterprise Court.

Similar to other jurisdictions, there are some sectors or circumstances in which it is more difficult to obtain IP protection, for example, as follows.

• AI and software – the Supreme Court has held that, under current UK law, inventions which are created by AI without any human inventor are not patentable in the UK. The law on the extent to which other IP rights (namely copyright) can subsist in AI-generated works is a developing area. In addition, although it is possible to obtain patent protection for some software-based inventions, the UK approach is not as liberal as that in other jurisdictions (such as the USA). Under UK patent law, competitor programmes are excluded subject matters. Other forms of IP may, however, be used to protect software (namely, copyright and know-how/confidential information).
• Excluded subject matter – as well as computer programs, under UK patent law, the following matters are not patentable:
1. a discovery;
2. scientific theory or a mathematical method;
3. a scheme, rule or method for performing a mental act and the presentation of information (although other forms of IP may be relevant, for example, a database right).
• Crown use – under the UK’s Crown use defence, any government department or any person authorised in writing by a government department can conduct acts that would otherwise constitute patent infringement. There is a non-exhaustive list of the acts that can be done, which includes use of a patent for a specified drug or medicine, or the sale of or the offer to sell of a drug or medicine. In times of emergency, the Crown use defence is more flexible.
• Compulsory licensing ‒ the UK patent system also provides for compulsory licensing to restore competition (for any invention save for in the field of semiconductor technology). Historically it has been difficult to obtain a compulsory licence under UK patent law.

Furthermore, the UK courts consider and set global “fair, reasonable, and non-discriminatory” (FRAND) royalty rates and, as such, have become a leading forum for considering standard essential patents (SEPs). SEPs are patents relating to standards and they are particularly relevant in the telecommunications industry. Any competitor that produces a product that complies with the relevant standard will infringe the SEP and so SEP-holders will typically undertake to license their SEPs to third parties.

The principal piece of data protection legislation in the UK is the UK’s version of the EU General Data Protection Regulation (the “UK GDPR”), which forms part of retained EU law. The UK GDPR is then supplemented in places by the Data Protection Act 2018 (the “DPA 2018”). There are currently proposals going through the UK Parliament (in the form of the Data (Use and Access Bill), which will (if enacted) make some amendments to the UK GDPR. However, broadly speaking, the UK regime will continue to align with the EU GDPR.

Organisations in the UK that process personal data must comply with the full suite of obligations under the UK GDPR and the DPA 2018. In addition, the legislation has extraterritorial effect, meaning that organisations located outside of the UK are also subject to the legislation if they are offering goods and services to individuals in the UK or monitoring their behaviour.

The UK’s data protection legislation is enforced by the Information Commissioner’s Office (the “ICO”), which is the independent regulator. The ICO is an active regulator and has a range of enforcement powers at its disposal, including the ability to impose fines against organisations in breach of their obligations. The maximum fine that can be imposed is GBP17.5 million or 4% of annual worldwide turnover of the “undertaking” (whichever is greater). There is no formal multiplier on penalties linked to economic loss but the ICO has published guidance on how it calculates fines and the mitigating and aggravating factors it will take into account.

The ICO’s most recent Data Protection Fining Guidance was published in March 2024 and makes it clear that the term “undertaking” (the turnover of which acts as the base unit for calculating the maximum amount of the fine), refers to any entity that is engaging in “economic activity”. An “undertaking” may therefore comprise of one or more entities forming a “single economic unit”, rather than just a single legal entity and the ICO will calculate the fine based on the turnover of the “undertaking” as a whole.

Assessing which entities form that “undertaking” broadly rests on whether the non-complying entity can act autonomously or whether another entity (eg, a parent company) exercises decisive influence over it. The Guidance also confirms that as well as using the concept of an “undertaking” for determining the relevant maximum amount of fine that applies, the ICO may also hold a parent company jointly and severally liable for the payment of a fine.

Individuals who suffer “material or non-material damage” (such as distress) as a result of non-compliance by an organisation can also claim compensation from that organisation.

The DPA 2018 contains some limited criminal offences of unlawfully obtaining personal data, re-identifying de-identified data, and altering personal data. In addition, where an offence has been committed by a corporate body under the DPA 2018, there can be individual liability for directors of that organisation if:

• the offence was committed with their consent or connivance; or
• the offence can be attributed to neglect on the part of the individual director.