Energy sector warned over strict legal investment rules
Businesses or individuals looking to invest in the energy industry are being warned about strict Government rules which mean their acquisitions can be scrutinised or even blocked as a matter of national security if they don’t obtain the correct permissions.
The warning comes from solicitor and sector specialist Beth Margetson who says that those who complete an energy-related acquisition without correctly notifying the Government also face severe civil and criminal penalties under the National Security and Investment (NSI) Act.
Beth, a partner in the Renewables team at Midlands-based mfg Solicitors, urged potential investors across the industry to be aware of their obligations under NSI and seek legal advice to avoid falling foul of the law.
She said: “The NSI Act was introduced in January 2022 to address concerns around the change of ownership of assets in sensitive industry sectors and businesses - including energy and electricity storage.
“Under the Act, the Government can intervene in certain acquisitions that may give rise to a risk to national security. They can impose certain conditions on an acquisition, or even unwind or block it completely.
“Buyers who fail to give a correct notification of an energy-related transaction also face severe civil fines of up to 5 per cent of their global turnover, or £10 million - depending on the greater amount - as well as five years in prison.
The renewables expert and her team recently exhibited at the Solar and Storage Live show at Birmingham’s NEC and said many people in the industry had questions about their legal obligations under NSI.
She added: “The NSI has in many ways been a game-changer for those looking to enter into, or expand within, the energy industry.
"The acquisition of substantial generators or aggregators of electricity can fall within the mandatory notification requirements of the NSI, mainly because the Government considers the energy sector to be essential to the country’s economic growth and stability.
“Due to this seriousness from a central government level, it means that a mandatory online notification may be required for certain transactions, including the purchase of a business or certain assets.
“Aside from the heavy penalties faced for approaching a deal incorrectly, there’s absolutely no doubt that investments into the right energy businesses are proving to be extremely lucrative in recent years. But transaction success only comes if the right advice is taken, and if the correct steps and processes have been followed.”
Investors are being advised that if the business they are acquiring carries out activities within the energy sector, and their shareholding or voting rights increase to more than 25%, 50% or 75% - or they acquire voting rights which enable them to secure or prevent a resolution governing the affairs of the business - then a mandatory notification may be needed.
Activities within the energy sector which fall under the Act include onshore and offshore generation, aggregation, the transmission or distribution of electricity and storage.
For further information, or advice around the National Security and Investment Act 2021, readers can contact Beth through beth.margetson@mfgsolicitors.com
mfg Solicitors has offices in Birmingham, Kidderminster, Worcester, Bromsgrove, Ludlow and Telford.
