If they don’t report takeover attempts from abroad that could pose a risk to the country’s security, company directors in Britain could face the prospect of jail time. According to a new law, disqualification, penalties and prison terms could also be in effect for executives who don’t report possible takeovers or adhere to government conditions, Yahoo! Finance reported.
In December of 2019, the administration of Prime Minister Boris Johnson included a “national security and investment bill” in the Queen’s Speech. Government documents cited by the report note that the goal of the legislation is to “strengthen the government’s powers to scrutinize and intervene in business transactions to protect national security.”
The move comes amid increased worries regarding takeovers from abroad, which could be more appealing as the pandemic has impacted British companies and has hit share prices. A number of conservative lawmakers are especially worried about Chinese takeovers, but there are concerns that new dictates could increase tensions.
In 2019, the government reportedly confirmed intentions for a “notification system” in which companies would highlight transactions with possible security concerns for “quick, efficient screening.” It has also noted that the legislation would provide increased powers to the government to tack on conditions or stop transactions, as well as “sanctions” for non-compliance and methods for appeal by companies.
The news comes as Chinese technology investments in the United States have fallen precipitously. Jack Ma’s Alibaba began funding American startups in 2013 and put money into firms such as Snap and Lyft before their initial public offerings (IPOs).
Investments by Tencent, Alibaba and Baidu plummeted by 84 percent as of 2018 to below $560 million, per a PitchBook analysis, but investments had peaked in 2015 at an overall $4.7 billion.
With the ratification of a 2018 reform act, the Committee on Foreign Investment in the U.S. was provided with increased supervision over foreign, minority investments in “critical technology” in addition to “emerging” and “foundational” technologies.