UK Law and Practice Contributed by: Fergus Wheeler, Paul Yin, Tracy Liu and Medha Vikram, Latham & Watkins
National Security and Investment Act The National Security and Investment Act 2021 (NSIA) grants the UK government extensive powers to scru - tinise acquisitions that may pose national security risks. The NSIA impacts secured creditors taking or enforcing security over certain assets within the scope of the NSIA regime. A mandatory notification require - ment is triggered for share security involving legal title transfer or the acquisition of voting rights above defined thresholds in an entity carrying out activities in certain specified sectors subject to the mandatory notification regime under the NSIA. Without prior gov - ernment clearance, these changes of control are void. The government can also issue a call-in notice if it reasonably suspects a change of control may pose a risk to national security. Hardening Periods English law includes several hardening periods before insolvency. • Transactions at an undervalue – two years. • Preferences (preferential treatment to one creditor) – six months, extending to two years for connected parties. • Floating charges for insufficient value – 12 months, extending to two years for connected parties. • Transactions defrauding creditors (ie, transactions entered into at an undervalue with the intention of putting assets beyond the reach of creditors) – no time limit. Claims against such transactions can be brought by any “victim” and not just administrators or liquidators. 5.6 Release of Typical Forms of Security The principle of equity of redemption gives security providers the right to recover a secured asset upon satisfaction of the debt. The terms for releasing secu - rity are usually outlined in the security agreement or the intercreditor agreement, with the release of secu - rity documented in a deed of release executed by the security taker. Upon release, the relevant registers, such as Compa - nies House or the Land Registry, are also updated to note the release of the relevant security. These filings are generally straightforward and not costly.
In private credit deals, term and revolving facilities and ancillary facilities under the RCF, typically share a common security and guarantee package. This can include permitted secured hedging if hedge counter - parties join the intercreditor agreement. A notable feature of many private credit deals is the super senior ranking of the RCF and certain permit - ted hedging. This arrangement allows RCF lenders and hedge counterparties to receive security enforce - ment proceeds before term lenders. This is a hallmark of the UK and European private credit markets. This structure is crucial for attracting RCF lenders, as most private credit funds are not equipped to offer revolving loans and associated clearing facilities. 5.4 Restrictions on the Target Under the Companies Act 2006 (the “CA06”), public limited companies and their subsidiaries (public lim - ited company or otherwise) are restricted from provid - ing financial assistance for acquiring or refinancing the acquisition of shares in that public limited company, whether listed or unlisted. This includes guarantees, security, indemnities and any other assistance from a target company or its UK subsidiaries. Additionally, a UK public company cannot offer financial assistance for acquiring shares in its UK limited parent company. Since this prohibition does not apply to private limited companies, lenders financing acquisitions of public limited companies typically require relevant public companies in the target group to re-register as pri - vate companies after the acquisition is completed and before providing any financial assistance. 5.5 Other Restrictions Third-Party Consents Third-party consents are necessary when there are restrictions on charging or assigning assets such as contractual rights, receivables or leasehold property. For small and medium-sized enterprises, the Business Contract Terms (Assignment of Receivables) Regula - tions 2018 facilitate access to financing by allowing the assignment of receivables governed by English law to finance providers and nullifying any terms that restrict these assignments in business contracts.
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