Guidance

National Security and Investment Act: guidance for the higher education and research-intensive sectors

Updated 6 February 2024

This guidance helps Higher Education Institutions, other research organisations and investors in this area to understand the scope of the National Security and Investment Act 2021 (NSI Act).

It covers:

  • where to go for help to inform your decisions on whether to notify
  • a summary of the NSI Act
  • examples of assets and entities within the scope of the NSI Act (qualifying assets and entities) within the higher education and research-intensive sectors
  • how you may be required to notify the government about an acquisition of a qualifying entity in one of the specified 17 sensitive areas of the UK economy, and get approval from the government before you can complete it
  • when you can voluntarily notify the government about other qualifying acquisitions
  • hypothetical scenarios of qualifying acquisitions of entities and assets in the higher education and research-intensive sectors.

Higher Education Institutions and other research organisations should be aware of the NSI Act when collaborating with other parties to acquire, sell or develop qualifying entities or assets.

Help for higher education institutions to decide whether to notify

The government has created a dedicated team, the Research Collaboration Advice Team (RCAT) to help ensure researchers’ work is protected, and that the UK research sector remains open and secure. This includes increasing understanding among academics of the laws and regulations they need to follow as they work internationally.

Researchers or higher education institutions who believe their work may be of relevance to the NSI Act and would like further advice can contact their assigned RCAT point of contact in advance of, or alongside, contacting the Investment Security Unit. If you do not already have an assigned point of contact, you should contact the Investment Security Unit on investment.screening@cabinetoffice.gov.uk. Read further information about the RCAT.

Summary of the NSI Act

The government can scrutinise and intervene in certain acquisitions made by anyone, including businesses and investors, that could harm the UK’s national security. The government can impose certain conditions on an acquisition, or, if necessary, unwind or block it, although the government expects to do this rarely.

These rules fall under the National Security and Investment (NSI) Act which came into force on 4 January 2022.

The rules cover qualifying acquisitions of certain entities and assets, known as qualifying entities and assets, and examples for the higher education and research-intensive sectors are given in this guidance.

The government can call in an acquisition for assessment if it reasonably suspects that it is a qualifying acquisition that has given rise to, or may give rise to, a risk to national security. This applies whether the acquisition has been completed or is still in progress or contemplation. However, it is not possible to call in and assess acquisitions completed before 12 November 2020.

How the rules work

The rules only apply to qualifying acquisitions. These are referred to as trigger events in the National Security and Investment Act.

Your acquisition is a qualifying acquisition if all of the following apply:

  • the acquisition is of a right or interest in, or in relation to, a qualifying asset or qualifying entity (these terms are explained below)
  • the entity or asset you are acquiring is from, in, or has a connection to the UK
  • the level of control you acquire over the qualifying entity or qualifying asset meets or passes a certain threshold (for example, your stake or voting rights in a qualifying entity becomes higher than 25%)

Read the guidance on how the NSI Act will work and what these thresholds are.

If you are planning an acquisition of a qualifying entity in one of the defined sensitive areas of the UK economy, you may be legally required to get approval from the government before you can complete it. This is called a notifiable acquisition, and Higher Education Institutions and other research organisations work within many of these areas. Completing a notifiable acquisition without approval will mean the acquisition is void and may mean that the acquirer is subject to civil or criminal penalties.

There is no legal requirement to notify the government of acquisitions of control over assets. However, the government can assess qualifying asset acquisitions if it is reasonably suspected that the acquisition gives rise to, or may give rise to, a risk to national security. All cases will be considered on an individual basis.

You can submit a voluntary notification if you are a party to a completed or planned qualifying acquisition that is not covered by mandatory notification and want to find out if the government is going to call it in.

What is a qualifying entity and qualifying asset?

Entities and assets might be qualifying entities and qualifying assets if they are from, in or have a connection to the UK.

Read further guidance on the acquisition of entities or assets outside the UK.

A qualifying entity is any entity other than an individual, including a company, a limited liability partnership, any other body corporate, a partnership, or an unincorporated association or trust.

In the higher education and research-intensive sectors, a qualifying entity could include, but is not limited to, a foreign or UK:

  • university, which is registered as a charitable organisation
  • private university
  • trust
  • university spin-out
  • university subsidiary (for example a company that a university has incorporated and carries out specific activities that the university operates)
  • research organisation
  • private company or corporation doing contractual work with a higher education institution or research organisation.

Qualifying assets include land, tangible, moveable property, and ideas, information or techniques which have industrial, commercial or other economic value (‘intellectual property’).

In the higher education and research-intensive sectors a qualifying asset could include but is not limited to:

  • designs
  • plans, drawings and specifications
  • software
  • trade secrets
  • databases
  • source code
  • algorithms
  • formulae
  • land
  • tangible moveable property, such as laboratory equipment

The level of control you have acquired, or will acquire, over the qualifying entity or asset

Your acquisition is a qualifying acquisition if you acquire a right or interest in, or in relation to, a qualifying entity or asset, and the level of control you acquire meets any of the following thresholds:

  • your shareholding stake or voting rights in a qualifying entity meets or crosses certain percentage thresholds (for example, it becomes higher than 25%)
  • you acquire voting rights in a qualifying entity that allow you to pass or block resolutions governing the affairs of the entity
  • you are able to materially influence the policy of a qualifying entity, for example by acquiring the right to appoint members of the board of the entity that enables you to influence the strategic direction of the entity
  • you are able to use a qualifying asset, or you are able to direct or control its use, or you are able to do so more than you could prior to the acquisition

Read the guidance on how the NSI Act will work for further details of each threshold.

Mandatory notification

If you are a party acquiring a qualifying entity, you are legally required to tell the government about certain acquisitions in 17 sensitive areas of the economy as these areas are considered more likely to give rise to national security risks.

Acquisitions of entities in these areas which meet certain thresholds of control and other conditions (to be specified in notifiable acquisition regulations) are called notifiable acquisitions and need to be notified, and approved, before proceeding.

Acquisition of assets are not subject to mandatory notification.

The areas of the economy are:

  • 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
  • Transport

Read further guidance for each of these areas.

The regulations specifying the acquisitions within the 17 areas of the economy listed above which will be subject to mandatory notification were published in 2021. Read the regulations on legislation.gov.uk.

You will need to tell the government about a notifiable acquisition by submitting a notification online.

If you complete a notifiable acquisition without gaining approval from the government, the acquisition is void. There are civil and criminal penalties for proceeding with a notifiable acquisition without gaining the necessary approval.

Mandatory notification only applies to the acquisition of entities and not assets (such as intellectual or tangible movable property).

Voluntary notification

You can submit a voluntary notification if you are a party to a qualifying acquisition that is not covered by mandatory notification and want to gain clarity as to whether the government is going to call in the acquisition. You are not legally required to tell the government about your qualifying acquisition. However, if the government reasonably suspects it may give rise to a national security risk it may still be called in.

Once a complete notification has been accepted, the government has 30 working days to review the acquisition and provide clearance or call in the acquisition for a national security assessment. If the acquisition is called in, the government has 30 working days to complete its national security assessment, although this can be extended by a further 45 working days if more time is needed. After this, any further extensions must be agreed by the acquirer. If the government clears your acquisition, it cannot investigate it again, unless you have submitted false or misleading information.

In deciding whether to voluntarily notify, parties may be assisted by the NSI Section 3 Statement which provides further information on how the government expects to use its call-in power and assess qualifying acquisitions.

Market guidance notes will also be published within 6 months of commencement of the Act and will draw on analysis of notifications received over time, as well as market monitoring intelligence, to help parties in deciding whether to voluntarily notify.

You can contact the Investment Security Unit (ISU) for general enquiries or advice about the Act on investment.screening@cabinetoffice.gov.uk.

If the government decides to assess your qualifying acquisition for a national security risk (calling in)

You will be told by the government if it is assessing your acquisition for a national security risk. This is known as ‘calling in’ the acquisition. A qualifying acquisition may be called in after you have submitted a notification or because it comes to the attention of the government through market monitoring. The government is only able to do this if it has a reasonable suspicion that the acquisition may pose a risk to national security.

Scenarios of acquisitions

The hypothetical examples below show qualifying acquisitions which the government will be able to call in for assessment if it reasonably suspects the acquisition has given rise, or may give rise, to a national security risk.

The NSI Section 3 statement provides further information on how the government expects to use its call-in power and assess qualifying acquisitions.

Involvement in university research

Private companies, governments and other organisations are frequently involved in universities’ and other organisations’ research at early stages, often at a pre-commercial stage.

This can be done through a collaborative, or other, agreement involving:

  • contract or sponsored research
  • sponsoring a research position (for example, a chair)
  • sponsoring a research theme

If through these agreements a person gains control over a university or research organisation’s qualifying assets, which can include both tangible moveable and intellectual property, for example where such assets are licensed out (exclusively or non-exclusively) by a university, then this is a qualifying acquisition under the NSI Act.

It is also a qualifying acquisition if a party gains control over a qualifying asset generated by the research it has funded. Any agreement that provides for this is also in scope of the NSI Act as a contemplated qualifying acquisition.

Qualifying asset acquisitions do not have mandatory notification requirements and the government can only call in a completed or contemplated qualifying acquisition for assessment if it reasonably suspects the acquisition has given rise, or may give rise, to a national security risk.

Example 1

A foreign corporation provides funding for a UK university to carry out a research project on the foreign corporation’s behalf. The foreign corporation sits on the steering board for the research project. The foreign corporation will also be entitled to all intellectual and tangible moveable property generated from the research.

The government may be able to call in this contemplated acquisition for assessment if it reasonably suspects the acquisition may give rise to a risk to national security. This is because this scenario is a contemplated qualifying asset acquisition as the funding gives the corporation control over any intellectual or tangible moveable property generated through this project.

You are not legally required to notify the government in this scenario as the research project is not a qualifying entity and mandatory notification only applies to certain acquisitions of qualifying entities.

Example 2

A private company acquires 30% of the shares in a university subsidiary which undertakes research work in one of the 17 sensitive areas of the economy and is specified in the notifiable acquisition regulations.

This scenario is a notifiable acquisition of a qualifying entity.

If you are the private company (the acquirer) you are legally required to notify the government of your planned investment and obtain approval before proceeding, otherwise your acquisition will be void. You may also be liable to criminal or civil penalties if the acquisition is completed without prior approval.

Example 3

A company sponsors a professorship in a UK university. The company can influence the direction of the research the professor leads but has no agreed access to any assets.

This scenario is not a qualifying acquisition and not in scope of the NSI Act as the company has not gained control over any qualifying entity or asset.

Example 4

Academic Institution A acquires the right to use the background intellectual property of Academic Institution B through a collaborative agreement.

The government may be able to call in this acquisition for assessment if it reasonably suspects the acquisition has given rise, or may give rise, to a national security risk. This is because this scenario is a qualifying asset acquisition as Academic Institution A has acquired control over Academic Institution B’s intellectual property.

You are not legally required to notify the government in this scenario because mandatory notification requirements do not apply to acquisitions of intellectual property.

Example 5

A private company enters a collaborative research project with an academic institution in the UK. The collaborative agreement stipulates an option for the private company to enter into a non-exclusive license agreement for any intellectual property generated by the project. The private company decides to exercise this option and enter into a non-exclusive license agreement to use the intellectual property which has been generated by the academic institution and is being used to conduct further research.

The government may be able to call in this qualifying acquisition for assessment if it reasonably suspects the acquisition has given rise, or may give rise, to a risk to national security. This is because the granting of the license is an acquisition of control over a qualifying asset. Through the licence the private company has acquired control over intellectual property.

You are not legally required to notify the government in this scenario as intellectual property is not a qualifying entity and mandatory notification only applies to certain acquisitions of qualifying entities.

Developing or forming research centres

Research centres are often collaborative projects between different research organisations and public and private partners.

If, in the development or founding of a research centre, control over qualifying assets or entities is acquired, the government can call in such a qualifying acquisition for assessment if it reasonably suspects the acquisition has given rise, or may give rise, to a risk to national security.

Example 1

A foreign research centre, which is a collaboration of private and public partners, acquires 50% of the shares in a UK research organisation which will become part of the centre. The acquired research organisation conducts research in one of the 17 sensitive areas of the economy that are specified in the notifiable acquisition regulations.

The foreign research centre (the acquirer) is legally required to notify the government of its planned acquisition and obtain approval before proceeding, otherwise the acquisition will be void. This is because this acquisition is a notifiable acquisition of a qualifying entity which is specified in the notifiable acquisition regulations.

The foreign research centre and certain employees may also be liable to criminal or civil penalties if the acquisition is completed without prior approval.

Example 2

A UK research organisation partners with a UK research centre (which is owned by a foreign research organisation and a private UK company) and carries out research in one of the 17 sensitive areas of the economy specified in the notifiable acquisition regulations. Through the terms of the partnership, the research centre gains control over the laboratory equipment and software of the UK research organisation.

The government may be able to call in this acquisition for assessment if it reasonably suspects the acquisition has given rise, or may give rise, to a national security risk. This is because this acquisition is an acquisition of control over a qualifying asset. The research centre can now use the UK research organisation’s laboratory and software.

You are not legally required to notify the government in this scenario because mandatory notification requirements do not apply to acquisitions of assets such as the laboratory equipment and software. This applies even if the assets are held by a qualifying entity that operates in areas of the economy specified in the notifiable acquisition regulations, such as in this scenario.

Developing university or research organisation spin-out companies

A university or research organisation spin-out company is a company which is created to develop a university’s research for commercial application. The spin-out is a private company but often the university will retain shares in the company or retain some ownership of the intellectual property.

If a spin-out company is acquired or the spin-out gains control of qualifying assets of a university or research organisation, this could be called in by the government for assessment if it reasonably suspects this has given rise, or may give rise, to a risk to national security.

If an established spin-out is subsequently acquired by another party, for example by trade sale, merger, or investment, this could also be in scope of the NSI Act. If the spin-out operates in one of the 17 sensitive areas of the economy specified in notifiable acquisition regulations, there may be a legal requirement to notify the government of the acquisition.

Example 1

A number of investors establish a university spin-out in the UK in order to commercialise a UK university’s patented technology. The investors and the university receive equity stakes in the spin-out and the technology is licensed to the spin-out through the university’s Technology Transfer Office.

The government may be able to call in this acquisition for assessment if it reasonably suspects the acquisition has given rise, or may give rise, to a risk to national security. This is because in this scenario there is a qualifying acquisition of a qualifying asset as the spin-out has gained control over the use of the technology as a licensee.

You are not legally required to notify the government of the grant of the licence as intellectual property is not a qualifying entity and mandatory notification only applies to certain acquisitions of qualifying entities.

Example 2

A venture capital fund that is backed by multiple investors invests in an established university spin-out, in return for a 27% equity stake. The university spin out carries out research and produces goods in one of the 17 sensitive areas of the economy that are specified in the notifiable acquisition regulations.

The venture capital fund (the acquirer) is legally required to notify the government of its planned acquisition and obtain approval before completing it, otherwise the acquisition will be void. This is because this investment is a notifiable acquisition of a qualifying entity which is specified in the notifiable acquisition regulations.

The fund and certain employees may also be liable to criminal or civil penalties for completing the acquisition without approval. Within the notification form the venture capital fund is asked to provide the ownership details of the fund.

Funding employees or students in university programmes

Funding for PhDs and other academic placements can come from various sources including industry, academic institutions and public and charitable funders. Companies fund employees or students to carry out research projects including PhDs at universities.

The ownership of the intellectual property generated in academic placements can vary depending on the agreement, and can include the following scenarios:

  • the student has rights over the intellectual property generated
  • the intellectual property rights reside with the university
  • the intellectual property generated is assigned to the company who is funding an employee to do research at a university and the terms are stipulated through the employee’s contract

If a company or other person acquires control over intellectual property generated in the UK, for example the right to use the intellectual property, this is a qualifying acquisition under the NSI Act. Any agreement that provides for control to be acquired over any future intellectual property generated in the UK is also in scope of the NSI Act as a contemplated qualifying acquisition. However, the government is only able to call in a completed or contemplated qualifying acquisition if it reasonably suspects the acquisition has given, or may give, rise to a national security risk.

Example 1

A private foreign company funds an employee through an academic placement which results in a PhD. As part of the employee’s contract, all intellectual property generated is assigned to the company.

The government may be able to call in this contemplated acquisition for assessment if it reasonably suspects the acquisition may give rise to a risk to national security. This is because this scenario is a contemplated acquisition of control over a qualifying asset because the private company has contractual rights over any intellectual property generated by the employee during their PhD.

You are not legally required to notify the government in this scenario as no party has acquired a qualifying entity and mandatory notification only applies to certain acquisitions of qualifying entities.

Donating to an academic institution

Many alumni and other parties donate to universities and related organisations. Universities have due diligence processes for accepting donations, which are often stated publicly.

Donations differ and may include a grant or sponsorship. They generally must meet the following criteria: the donation will result in no commercial value for the donor, and the initiative for the project is driven by the recipient university which will retain ownership of any research or IP that is generated.

Donations and donations for research are not covered by the NSI Act as no control is gained over a qualifying asset or entity. It is for universities to ensure robust and transparent procedures for accepting donations.

Example 1

A private company donates a large sum to a university for the development of a new research laboratory. The private company is later awarded contracts as an equipment supplier at the same university in line with the necessary contracts regulations.

This scenario is not a qualifying acquisition and is not in scope of the NSI Act as the private company has not gained control over the use of the laboratory or any intellectual property. The company has won contracts through the university’s standard tender process.

Other resources to ensure best practice in your approach to protecting your research

The Centre for the Protection of National Infrastructure (CPNI) and the National Cyber Security Centre (NCSC) have produced guidance on how to collaborate securely with international research partners. The guidance includes checklists and a strategic guide for senior leaders.

Universities UK (UUK) has published detailed guidance for institutions on the considerations and measures they should take to guard against hostile interference and promote academic freedom.