The UK government is planning to amend laws to allow greater scrutiny of foreign takeovers in efforts to prevent overseas companies from exploiting businesses that are playing a critical role in fighting the spread of coronavirus pandemic in the country.
Today, the government will put before the Parliament proposals to change the Enterprise Act 2002, seeking more power to intervene if struggling British firms become targets of foreign takeovers.
"These powers will send an important signal to those seeking to take advantage of those struggling as a result of the pandemic that the UK government is prepared to act where necessary to protect our national security," Business Secretary Alok Sharma said in a statement.
The government already has the power to review foreign takeovers for various reasons, including financial stability or national security. It can also block a deal or seek assurances from the buyer about their future plans for the company.
But, the government says some businesses have become more susceptible to takeovers in recent months due to the damaging impact of coronavirus outbreak.
The new legislation will initially protect British firms working on the front line in fight against Covid-19, such as personal protective equipment makers or vaccine research firms, or firms working on important technologies, like including artificial intelligence (AI), cryptographic authentication and advanced materials.
In coming months, the law will be expanded to guard all companies that are considered significant to national security.
"These measures will strike the right balance between the UK's national security and resilience while maintaining our world-leading position as an attractive place to invest - the UK is open for investment, but not for exploitation," Sharma said.
After the government proposals turn into law, Alok Sharma will get more powers to impose conditions on foreign takeover deals.
The move comes more than two months following an alleged attempt by a Chinese state-owned business to take control of the board of British chipmaker Imagination Technologies.
In April, many media reports claimed that China Reforms Holdings was trying to seize control of the board of the British firm and to redomicile it to China.
The chairs of four select committees then wrote a letter to Prime Minister Boris Johnson, urging him to intervene in the matter on the grounds of potential risks to national security.
The MPs said that after taking control of Imagination's board, the Chinese company could look to move Imagination's intellectual property to China.
Following the controversy, three senior executives resigned from the company, citing concerns about the future direction of the company.
In a statement, Imagination said that it was "fully committed to the UK" and was planning to increase investment in the country.
Tory MPs later said that had Chinese firm's plans succeeded, it would have effectively handed a vital business into the hands of China.
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