Clause 8 - Control of entities

National Security and Investment Bill – in a Public Bill Committee at 4:30 pm on 1st December 2020.

Alert me about debates like this

Photo of Stephen Kinnock Stephen Kinnock Shadow Minister (Foreign and Commonwealth Affairs) 4:30 pm, 1st December 2020

I beg to move amendment 7, in clause 8, page 6, line 38, at end insert—

“(10) The fifth case is where the acquisition involves state-owned entities or investors originating in a country of risk to UK national security and creates any change of influence.”

This amendment would mean that any acquisition involving state-owned entities or investors originating in a country of risk to UK national security and creating a change of influence would count as a person gaining control of a qualifying entity.

Photo of Graham Brady Graham Brady Chair, Conservative Party 1922 Committee

With this it will be convenient to discuss amendment 8, in clause 8, page 6, line 38, at end insert—

“(10) The fifth case is where the acquisition involves changes to material influence in industries critical to the UK’s capability and capacity to maintain national security, including economic security.”

This amendment would mean that any acquisition which involves changes to material influence in industries critical to national security would count as a person gaining control of a qualifying entity.

Photo of Stephen Kinnock Stephen Kinnock Shadow Minister (Foreign and Commonwealth Affairs)

I am very happy to have the opportunity to set out what we are trying to achieve with this amendment. While the previous amendment was very much about protecting our assets, this one focuses on the characteristics of the acquirer. It is absolutely clear that any successful screening regime has to be based on a solid understanding of both aspects—both the asset and the acquirer—and that both are equally vital to the successful implementation of the regime.

Harking back to the debate we had about an earlier amendment, the objective here has to be smart regulation. What do we mean by that? If we try to catch everything, we end up catching nothing. We have to prioritise. We have to have a screening system that has a smart, nuanced and well-informed understanding of risk, both in terms of the prioritisation of our assets and the prioritisation of understanding the characteristics of the acquirer. It is on that basis that we prioritise action, and when our investment security unit needs to intervene.

The amendment is focused very much on the characteristics of the acquirer. It is about ensuring that we guard ourselves against the influence of foreign powers that wish to do harm to our country—those that have an agenda. The Minister said earlier that companies get a bit worried when we use the term “political”, but national security is a fundamentally political consideration, because it is about our political analysis of the threat from hostile foreign actors and our understanding of what the national interest is in a holistic sense. We have to give that political leadership. We cannot expect the business community to take that decision for us; we have to give a lead on understanding where the investment is coming from and what the characteristics of the company or investment vehicle are. Fundamentally, going by the old adage that he who pays the piper chooses the tune, where there are state-owned and state-backed entities, it is absolutely clear who is paying the piper and who is choosing to the tune.

The amendment we have tabled would mean that any acquisition involving state-owned entities or investors originating in a country of risk to UK national security—a fundamentally political calculation—and creating a change of influence would count as a person gaining control of a qualifying entity. By including state-owned enterprises explicitly on the face of the Bill, we would be ensuring particular regard to the issue even where shareholding levels are low.

We understand the thresholds for trigger events, but what we are saying is that when the characteristics of the acquirer ring particular alarm bells, that should apply regardless of the shareholding level that is being considered by the acquirer. We know the threat from state-owned enterprises is disproportionate; that is why we are recommending a kind of disproportionate action in this amendment, to address the reality of the characteristics and to ensure that we are carefully guarding against potentially malign actors.

Again, this is not a new concept. Other countries use it in their regimes, and we are simply proposing that we follow suit and have a smarter strategy and approach to regulation at the moment. The clarity that we need, of course, is from understanding that where allied states are involved and the transactions are efficiently screened for approval there is little cause for concern, but with this amendment, even small and discrete investments from hostile states and from state-backed entities within those states would be fully captured.

Let us turn to the expert evidence that we received, particularly from Michael Leiter, the legal expert and lawyer, who said:

“With respect to sovereign wealth funds or state-controlled investments, there is a perfectly good argument that yes, the standard of review might be…more rigorous.”—[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 48, Q54.]

Let us be absolutely clear: we do sometimes see so-called private takeovers, where often the state-backed entity is rather obscured within the ownership structure. They are carried out by companies and investment vehicles that are in fact a front for authoritarian state actors, who have wider political, national security and geopolitical agendas and whose values are frequently at odds with ours.

A recent obvious example is the attempt by an investment vehicle backed by the Chinese state to take over Imagination Technologies. The company was the target of a hostile foreign takeover attempt, and that investment vehicle had direct links to the Chinese state. Then there are even more obvious examples, to which my hon. Friends the Members for Newcastle upon Tyne Central and for Southampton, Test have referred, particularly around Hinkley and Bradwell, where there is a clear ownership structure coming directly from the Chinese state.

We must also recognise the broader agenda with things such as China’s belt and road initiative, which is about creating debt-trap diplomacy. It is about building influence by entering other economies in such a major way that those economies effectively become dependent on the Chinese state. Of course, that comes with lots of strings attached, and it is part of the deal that those countries are not able or permitted to speak out when the Chinese state behaves in ways that we would not find acceptable. I hope that the Government and the Minister will seriously consider the amendment, because the characteristics of the acquirer must be taken into account if we are to have a smart regulation system that prioritises and does what the Bill sets out to do.

Photo of Nadhim Zahawi Nadhim Zahawi Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), The Parliamentary Under-Secretary for Health and Social Care

This group of amendments would provide for certain cases to count as a person gaining control of a qualifying entity. The amendments are to clause 8, which defines the circumstances in which a person gains control of a qualifying entity for the purpose of the Bill.

Amendment 7 would ensure, as the hon. Member for Aberavon mentioned, that any acquisition involving state-owned entities or investors originating in a country of risk to UK national security and creating a change of influence would count as a person gaining control of a qualifying entity for the purposes of the Bill. I welcome the hon. Gentleman’s intention to ensure that national security is comprehensively protected. I reassure him that the Bill provides no carve-out or special treatment for state-owned entities or overseas investors where they acquire control of a qualifying entity or asset. They will be subject to the mandatory notification requirements in the same way as any other acquirer, and the Secretary of State will have the power to scrutinise any acquisition of control by such parties where the legal test for call-in is met. That includes the acquisition of material influence over the policy of the entity.

However, the Government have been clear that the regime is nationally agnostic, and that each acquisition will be considered on a case-by-case basis. The draft statement of policy published alongside the Bill simply states that the regime will not

“regard state-owned entities, sovereign wealth funds—or other entities affiliated with foreign states—as being inherently more likely to pose a national security risk.”

I strongly believe that this is the right approach. We must recognise that many such organisations have full operational independence in pursuing long-term investment strategies with the objective of economic return, raising no national security risks.

Moreover, the clause already sets out the circumstances that constitute control of an entity based on levels of shareholding and voting rights and material influence. Amendments such as this could, for example, capture increases of equity stakes at any level, even though many could not realistically be expected to give rise to a national security risk. Developing a list of countries of risk would likely be a moving feast that would quickly become out of date in response to changing geopolitics and would most likely harm Britain’s diplomatic relations and place in the world, giving rise to a chilling effect on investment in these shores.

Amendment 8 would create a new case of a person gaining control of a qualifying entity for “changes to material influence” in industries critical to the UK’s capability and capacity to maintain national security, including economic security. Once more, I welcome the emerging cross-party consensus that the Bill must capture more subjective acquisitions of control, rather than solely levels of shares and voting rights. I reassure the hon. Gentleman that acquisitions of material influence over the policy of an entity are very much in the scope of the Bill. That applies within the 17 sectors but also to the wider economy. Parties can notify the Secretary of State of a trigger event concerning the acquisition of a material influence, and he will have the power to proactively call in such a case if the legal test is met.

I should clarify that material influence is not a scale. It is the lowest level of control that can be acquired over a qualifying entity, which captures acquisitions of smaller stakes or other rights or interests in entities, such as board representation rights. As such, it is not immediately clear to me what circumstances such an amendment would bring into the scope of the Bill, given that it would capture changes to material influence. None the less, I admire the ingenuity of the hon. Gentleman’s seeking, at least in part, to define national security through the amendment and its explicit reference to economic security. As he will know, the Bill does not define national security, and, as I said on Second Reading, I think that is a real strength, not a weakness.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (Digital, Culture, Media and Sport)

The Minister says that this Bill is not country specific. I know he does not want to define national security in the Bill, but does he think that our national security can be country specific?

Photo of Nadhim Zahawi Nadhim Zahawi Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), The Parliamentary Under-Secretary for Health and Social Care 4:45 pm, 1st December 2020

I think that the Bill is proportionate and I think that national security is not dependent on a particular country. Malignant actors come from different nationalities. The Committee heard from a number of experts last week the reasons for not defining national security, not least because it might limit the Secretary of State from being able to respond to new and emerging threats that did not fall within the definitions set out in statute. For these reasons I cannot accept these amendments, and I would gently encourage the hon. Member for Aberavon to withdraw them.

Photo of Stephen Kinnock Stephen Kinnock Shadow Minister (Foreign and Commonwealth Affairs)

I thank the Minister for giving way—sort of. One of the key sentences in the Government’s statement of policy intent is in the section on acquirers, which says:

“Clearly, national security risks are most likely to arise when acquirers are hostile to the UK’s national security, or when they owe allegiance to hostile states or organisations.”

I recognise that the statement of policy intent is a draft, but clearly somebody in government thought it a good idea to put that sentence in there, and I absolutely agree with it. It is therefore very difficult to understand the disconnect that appears to exist between the Bill, which is agnostic on different national actors, and the statement of policy intent, which explicitly talks about when acquirers

“owe allegiance to hostile states or organisations.”

On that basis, the amendment touches on a crucial issue and we shall be pushing it to a Division.

Photo of Nadhim Zahawi Nadhim Zahawi Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), The Parliamentary Under-Secretary for Health and Social Care

I do not wish to keep repeating myself, but I have set out the reasons why I cannot accept these amendments. I would again gently encourage the hon. Member to withdraw the amendment, but I suspect we will be heading to a Division.

Photo of Stephen Kinnock Stephen Kinnock Shadow Minister (Foreign and Commonwealth Affairs)

We are moving back and forth here. As I set out, the issues around the characteristics of the acquirer are so important to ensuring that we have a smart approach and the sentence within the statement of policy intent is so absolutely spot on that we will push the amendment to a Division to show our support for that section of the statement.

Question put, That the amendment be made.

Division number 7 National Security and Investment Bill — Clause 8 - Control of entities

Aye: 5 MPs

No: 10 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

The Committee divided: Ayes 5, Noes 10.

Question accordingly negatived.

Photo of Sam Tarry Sam Tarry Labour, Ilford South

I beg to move amendment 12, in clause 8, page 6, line 38, at end insert—

“(10) The fifth case is where a person becomes a major debt holder and therefore gains influence over the entity’s operation and policy decisions.

(11) For the purposes of subsection (8A), a major debt holder is a person who holds at least 25% of the entity’s total debt.”

This amendment would mean that a person becoming a major debt holder would count as a person gaining control of a qualifying entity.

Photo of Graham Brady Graham Brady Chair, Conservative Party 1922 Committee

With this it will be convenient to discuss amendment 14, in clause 8, page 6, line 38, at end insert—

“(10) The fifth case is where a person becomes a major debt holder and therefore gains influence over the entity’s operations and policy decisions.

(11) For the purposes of subsection (8A), a major debt holder is a person who holds at least 25% of the entity’s total debt.

(12) The sixth case is where a person becomes one of the entity’s top three suppliers of goods, services, infrastructure or resources and therefore gains influence over its operations and policy decisions.”

This amendment would mean that a person becoming a major debt holder or a major supplier would count as a person gaining control of a qualifying entity.

Photo of Sam Tarry Sam Tarry Labour, Ilford South

Amendment 12 is about where a person becoming a major debt holder would count as a person gaining control of the qualifying entity. I know there is some debate about the technicalities of this, but Admiral Mike Mullen, former chair of the US joint chiefs of staff, famously said of the US:

“The single greatest threat to our national security is our debt.”

This is an important point, because there is a substantial body of evidence to show that the debt holding of bondholders can indeed exert influence over companies. A particular feature of our current economic circumstances is extremely low, or zero, interest rates, so companies have drawn heavily on debt, not just equity, to fund themselves. In that context, it would be a major loophole for this Bill not to put debt investments under scrutiny in protecting our national security. This amendment would simply change that by bringing it into scope.

The amendment would ensure that an entity holding more than a quarter of a company’s debt became a qualifying entity, bringing transactions into the scope of the national security screen. We think this is really important, because we would want that level of scrutiny. We also know that a number of states use this kind of leverage in some of the companies that they are taking over or, indeed, taking the debt from. Without it, hostile actors can be expected to exert explicit influence by buying up UK companies’ debt, and that is something that should worry us all of us. Indeed, the Parliamentary Commission on Banking Standards talked about the importance of how debt can be used to exert influence. It said that,

“while a bank remains solvent, the formal powers of other creditors, such as bondholders, are much more limited.”

However,

“The terms of some bond issuances may have provisions in situations when the security of the bond may be affected”,

secured against

“creditors, such as securitised or covered bond holders”.

So in practice, the scale of the funding provided by bank creditors means they simply have more influence over companies. If debt was bought in that way, we could indeed have a situation where a loophole was used to bring in hopefully benign, but potentially troubling influence within a company which could impact our national security.

There is considerable research showing that, in some companies, there is a strategy of using a negative relationship between debt investments in research and development that has actually stopped innovation, so we want to tackle all those things, but most importantly simply focus on closing the loophole that is here. There may be some pushback from the Government side of the Committee to say that, legally, debt holders have no operational control over a company. Of course, technically that is correct, but in practice companies’ executives pay huge attention to bondholders and are materially influenced by them in substantive practice. There are a number of examples of that. From our point of view, we would like to push forward this amendment so that we bring into scope something that is otherwise a major loophole.

Photo of Stephen Flynn Stephen Flynn Shadow SNP Deputy Spokesperson (Treasury - Financial Secretary)

I will be brief, as our amendment 14 is incredibly similar to the amendment moved by the hon. Member for Ilford South—not the hon. Member for Southampton, Test; I know that much. In any case, it is indeed very similar; I would just add that we must be clear about the fact that power does not just lie in ownership and investment, but also in debt and, indeed, in suppliers too. If we are standing blind to that, then I am not quite sure where we are at, particularly in terms of national security. Surely, it is an issue that we should be giving cognisance to, and the amendment certainly seems like a constructive proposal for the Minister to take forward.

I also have a fear that, as we approach anything to do with national security and investment, the bad guys, as they are often portrayed—and rightly so—will look for ways to get around things. If there is potentially a way to get around things, particularly by buying up debt or buying up the supply chain into an organisation, then I have absolutely no doubt they will do that. As we know, they will seek to exploit every opportunity available to them to wreak the damage they want to cause. We need to be mindful of that.

Photo of Mark Garnier Mark Garnier Chair, Committees on Arms Export Controls, Chair, Committees on Arms Export Controls

I am very sympathetic to the amendment tabled by the hon. Member for Ilford South. He refers to the Parliamentary Commission on Banking Standards, on which I sat. There is no question whatever that the bondholders of banks have a huge amount of influence on a bank—more so than the equity holders. I am worried about a couple of things with the amendment. The first is that it is very difficult to define what level of debt ownership constitutes control, because technically there is no control in law. It is possible to have an influence, but we cannot define what control is.

The second point is that tradeable debt, as in bond market debt, is something that is usually stuck to quite a sophisticated company. Most companies will have bank debt. Of course, if we start talking about bank debt, we introduce the tricky concept of where the bank is domiciled. For example, someone can borrow money from Barclays Bank, or they can go to a Russian, Chinese or Hong Kong-based bank. The sentiment behind the amendment is really important, because there is a lot of control by debt owners, be they banks or bond holders. However, it is too complicated to support at this level, because it needs much more debate and scrutiny, and we would need a much more cleverly worded amendment to support this. I do think it is a very important point, and I support the principle behind it.

Photo of Nadhim Zahawi Nadhim Zahawi Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), The Parliamentary Under-Secretary for Health and Social Care

These amendments would ensure that a person becoming a major debt holder would count as a person in control of a qualifying entity. Amendment 14 would go further and ensure that a person becoming a top 3 supplier to an entity also counted as a person gaining control of a qualifying entity. I acknowledge that the hon. Members for Ilford South and for Aberdeen South are right to highlight that there are, in a small number of cases, national security risks that can be posed through debt.

Access to finance is crucial for so many businesses. In order to grow and succeed, they will often take out loans that are secured against the businesses and assets that they have fought so hard to build. That is why the Bill allows the Secretary of State to scrutinise acquisitions of control that take place where lenders exercise rights over such collateral, which goes to the point made by my hon. Friend the Member for Wyre Forest. Such an approach will prevent hostile actors from artificially structuring acquisitions in the form of loans, which, following a swift and convenient default, might otherwise allow them to evade scrutiny.

I can provide further reassurance to the Committee that the acquisition of any right or interest that enabled a person to exercise material influence over the policy of a qualifying entity, including by creditors through debt arrangements, would be in scope of the Bill. It was noted by Christian Boney, partner of Slaughter and May, that the Bill strikes an acceptable balance by not having debt providers specified as a separate case. Depending on the facts of the individual case, that might capture the acquisition of rights by the lender to appoint members of the entity’s board. That is a common approach by lenders when striking an agreement to provide significant amounts of finance, particularly for big infrastructure projects, in order to safeguard their funds. The Bill would cover a scenario where that provided material influence over the policy of the entity, but the amendments would go further still and stipulate that any person becoming the holder of 25% or more of an entity’s debt was a trigger event in itself.

The Government do not believe that the provision of loans and finance is automatically a national security issue—indeed, it is part of a healthy business ecosystem that enables businesses to flourish in this country. I fear that such an approach would likely create a chilling effect on the appetite of lenders to support otherwise attractive and viable projects. Lenders need confidence that they can see a return on ordinary debt arrangements in order to provide that service. I believe that such a chilling effect would have a detrimental impact on the range and extent of finance that is available to UK businesses, particularly SMEs, and their future prospects would suffer as a result. That is the very opposite of the Government’s intention. We must support our innovators and entrepreneurs as we seek to build back better from covid, rather than limit their opportunities to succeed.

Amendment 14 would create an additional case for any person who became a top 3 supplier to an entity. In effect, it would be a new trigger event. I share the desire of the hon. Member for Aberdeen South to ensure that business within our most sensitive supply chains can be protected. I believe the Bill does that already by allowing the Secretary of State to call in trigger events across the economy, when he reasonably suspects they may give rise to national security risks. That includes key suppliers.

Indeed, we have gone further and set out in our consultation that the sectors and activities that we propose to be covered by mandatory notification include critical suppliers to Government and the emergency services. That approach will ensure that the Secretary of State is notified about acquisitions and control of entities covered by those definitions.

As noted by Michael Leiter at last week’s evidence session, the list of 17 sectors is very robust and it will ensure the right cover. I do not believe it would be right to create a further case to be covered by the Bill, simply by virtue of the fact that a person became a top 3 supplier. As the Government have said throughout the development of the policy for the Bill, they have no intention of intervening in the routine provision of goods and services, and the overwhelming majority of suppliers pose no national security risk whatever.

The Government do not believe that being a top 3 supplier in itself provides control over the entity that it provides the supplies to; it merely reflects the desirability of the goods and services provided by that business. For example, let us consider the top 3 suppliers into the Zahawi household. I am sure that Sainsbury’s, Waterstones and Deliveroo are extremely delighted by my recent lockdown business, but I do not think they would consider that they have control; my credit card statement may, of course, tell a different story.

Modern supply chains move so fast that such trigger events would be happening in incredible volumes, on a daily basis, all of which could be notifiable to Whitehall and bring businesses grinding to a halt. It would put the Government in the position of potentially adjudicating on every supply chain decision in every sector, which would be an enormous power disproportionate to the issue that the amendment, with good intention, seeks to address.

Taken together, Sir Graham, I do not believe these two amendments are in the interest of supporting business in this country to succeed. They do not offer the protections to national security that the Bill already appropriately and proportionately provides. As such, I respectfully ask the hon. Members to withdraw them.

Photo of Sam Tarry Sam Tarry Labour, Ilford South 5:00 pm, 1st December 2020

I thank the hon. Members for Wyre Forest and for Aberdeen South for their contributions. It is my fear that, in some of the Minister’s answers, there was perhaps an admission from Government colleagues that there is a correct driver, in terms of what we are trying to push at with this amendment. It would be more ideal if we were able to bring back an amended amendment that would win the support of the Government side, given that there clearly is recognition from experienced Members of the House that this is a problem and it could continue to be a problem. That could be a risk. For that reason, we will press for a Division.

Photo of Graham Brady Graham Brady Chair, Conservative Party 1922 Committee

I am sorry. Can I be clear that you would like a Division?

Photo of Sam Tarry Sam Tarry Labour, Ilford South

We would indeed, because it is a point of key principle.

Question put, That the amendment be made.

Division number 8 National Security and Investment Bill — Clause 8 - Control of entities

Aye: 6 MPs

No: 10 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

The Committee divided: Ayes 6, Noes 10.

Question accordingly negatived.

Amendment proposed: 14, in clause 8, page 6, line 38, at end insert—

“(10) The fifth case is where a person becomes a major debt holder and therefore gains influence over the entity’s operations and policy decisions.

(11) For the purposes of subsection (8A), a major debt holder is a person who holds at least 25% of the entity’s total debt.

(12) The sixth case is where a person becomes one of the entity’s top three suppliers of goods, services, infrastructure or resources and therefore gains influence over its operations and policy decisions.”.—

This amendment would mean that a person becoming a major debt holder or a major supplier would count as a person gaining control of a qualifying entity.

Question put, That the amendment be made.

Division number 9 National Security and Investment Bill — Clause 8 - Control of entities

Aye: 6 MPs

No: 10 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

The Committee divided: Ayes 6, Noes 10.

Question accordingly negatived.

Question proposed, That the clause stand part of the Bill.

Photo of Nadhim Zahawi Nadhim Zahawi Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), The Parliamentary Under-Secretary for Health and Social Care

Clause 8 sets out for the purpose of the Bill the circumstances in which a person gains control of a qualifying entity as defined in clause 7. More specifically, the clause sets out the four ways in which control can be gained.

The first two cases are where certain shareholdings or voting rights are acquired. The clause stipulates that acquisitions increasing a person’s holding in a qualifying entity above 25%, 50%, 75% or more all constitute trigger events. The thresholds have been chosen because of their significance under UK company law.

Under the Companies Act 2006, a number of key decisions relating to shareholders’ rights in relation to the decision making of a company require a special resolution. Special resolutions require a majority of 75% of votes to be passed. This means that a holding of more than 25% allows one person to, by themselves, block a special resolution. Similarly, a holding of 75% or more allows one person to, by themselves, pass a special resolution.

Under the Companies Act, ordinary resolutions, which apply to more routine shareholder decisions, require a simple majority. This means that a holding of more than 50% allows one person to, by themselves, make decisions affecting the governance of a company.

The Government believe these thresholds represent reasonable proxies for various levels of control over entities. The clause deliberately includes references to both shares and votes to prevent the artificial construction of acquisitions to avoid meeting one of these thresholds—for example, a 40% stake with 51% of voting rights. In most cases, ordinary shares carry the equivalent amount of voting rights: one vote per share.

Recognising that the regime also concerns entities other than companies established under the Companies Act, the third case explicitly extends the same principles on voting rights enabling the passage of a resolution to other entities. That means that any acquisition of voting rights that allows a person to secure or prevent the passage of any resolution governing the affairs of the entity is a trigger event. This is important because other types of entities are not subject to the Companies Act and may have different thresholds for the passing of resolutions.

Finally, the fourth case that constitutes control of an entity is the acquisition of material influence over its policy. This reflects that no single shares or votes threshold is appropriate in every case.

Material influence is an existing concept under the Enterprise Act 2002, which denotes the lowest level of control that might give rise to a relevant merger situation that may be considered for competition or public interest reasons. Material influence captures acquisitions of smaller stakes or other rights or interests in entities, such as board representation and rights, which nonetheless enable a person materially to influence the policy of the entity.

Other factors, such as the status and expertise of the acquirer or a relationship of financial dependence, may be relevant. Clearly, determining whether material influence has been or is to be acquired will require an assessment of all the circumstances of the case by the Secretary of State. It is not possible, therefore, to provide any hard and fast rules that will be applicable in all cases.

The Competition and Markets Authority has published guidance about what it considers to constitute a material influence. The Secretary of State intends to apply that in so far as is possible in the context of this new regime, for the purposes of determining whether control has been or is to be gained over a qualifying entity.

For the avoidance of doubt, the Government have no plans to publish their own separate guidance on material influence. Collectively, these four cases represent the ways in which control of entities can be acquired for the purpose of the Bill. It is vital that they stand part of the Bill so that the Secretary of State may scrutinise acquisitions of control over entities in whatever form that takes. I hope that hon. Members will agree that this approach has been carefully considered to reflect the complexity of the make-up of modern entities.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (Digital, Culture, Media and Sport)

As we are over time, I shall not detain the Committee long, but I want to say a few words on this important clause. Our debate has again highlighted the Minister’s apparent determination and conviction that the Bill cannot be improved on, even as we all acknowledge––and as the Telecommunications (Security) Bill makes absolutely clear––that the Government’s record on national security in this context can very much be improved on. I noted his celebration of the innovators and entrepreneurs, and his concerns about the chilling effect on them of bringing debt holders into the Bill’s remit as proposed in the amendment of my hon. Friend the Member for Ilford South.

The entrepreneurs and innovators seeking investment, particularly foreign investment, are unfortunately to have no such protection from the Minister. We want a consistent and robust approach, given the breadth of powers that the Bill gives to the Secretary of State. I was concerned that, even with the wise intervention of the hon. Member for Wyre Forest, the Minister did not make a proposal to take these constructive amendments away to consider and perhaps return with Government amendments that reflect them later in the Bill’s passage. We will not oppose stand part, but I hope that the Minister will continue to consider our suggestions for the improvement of this and other clauses.

Question put and agreed to.

Clause 8 accordingly ordered to stand part of the Bill.