UK government plans tougher rules on foreign takeovers within weeks
UK company directors could be threatened with prison if they fail to report foreign takeover attempts with potential national security risks, according to reports.
Fines, disqualification and even jail terms are said to be planned under imminent national security legislation, and could hit business leaders who fail to refer potentially relevant takeovers or abide by government conditions for approval. Academic and research partnerships may also fall under the scope of the new rules.
The announcement comes as Huawei used full-page newspaper ads to highlights its commitment to Britain on Monday. UK cyber-security chiefs announced a fresh review of the telecoms’ firm’s role in Britain’s 5G rollout last month.
READ MORE: Huawei launches open letter to UK amid review over 5G role
Prime minister Boris Johnson’s government included a new ‘national security and investment bill’ last December in the Queen’s Speech, which sets out its legislative agenda. Official papers said the aim of the bill is to “strengthen the government’s powers to scrutinise and intervene in business transactions to protect national security.”
The government confirmed plans last year for a “notification system,” with firms flagging transactions with potential security concerns for “quick, efficient screening.” It has also said the bill would give the government greater powers to add conditions to or even block transactions, with “sanctions” for non-compliance as well as ways for firms to appeal.
Reports in the Times on Monday suggest the legislation will be tabled in parliament “within weeks.”
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It comes amid heightened recent concerns over foreign takeovers, which may be increasingly attractive to both parties as the coronavirus has hobbled UK firms and knocked share prices. Many backbench Conservative MPs are particularly concerned about Chinese takeovers, though there are also fears new legislation may inflame tensions with Beijing.
Sources told the paper firms will have to declare potentially dangerous attempts to not only buy more than a quarter of their shares, but also to purchase “significant influence,” assets or intellectual property. The government has previously highlighted its desire to ensure “hostile parties cannot circumvent the law” by buying assets rather than companies themselves.
Downing Street referred Yahoo Finance UK to Johnson’s comments in prime minister’s questions (PMQs) on 20 May.
Johnson was asked by Conservative backbench MP Richard Drax at the time about “concerns China is buying up defence-related companies that are going bust” in France during the pandemic. Drax urged his party leader to review Britain’s defence supply chain, and Huawei’s involvement in Britain’s 5G network.
Johnson said the MP was right to be concerned about countries buying UK technology that “may have ulterior motives.” He said the government would soon unveil plans to “protect our technological base.”
Conservative MP Tom Tugendhat, chair of the foreign affairs select committee, told the Times a recession left Britain at greater threat of foreign takeovers. “The UK has some of the weakest protections against foreign takeovers of any nation. There is a danger that if we do not keep pace then our companies will be naked when everyone else is wearing armour.”
A government spokesperson also told Yahoo Finance UK: “The National Security and Investment Bill will strengthen the government’s powers to scrutinise and intervene in takeovers and mergers to protect national security. Further details will be announced in due course.”
