In March this year the government announced it would review the Overseas Investment Act 2005 (Act) and Overseas Investment Regulations 2005 (Regulations) with the aim of simplifying overseas investment rules in New Zealand to promote and encourage the flow of overseas investment into New Zealand.
Consideration is to be given to raising the thresholds for business and land investments, and to how the type and scope of land defined as sensitive under the Act can be refined to ensure that only purchases of land of particular significance or importance to New Zealand are screened. There is also scope that the restriction on the acquisition of 'strategically important infrastructure' assets may be reconsidered.
This review is a product of frustrations with the existing regime expressed by overseas investors investing in New Zealand and the current government's recognition of the importance of overseas investment in New Zealand. Careful thought will need to be given to the underlying policy of the Act and the Regulations. Hopefully the end result will provide greater certainty and less delay for investors and will result in the regime being less of an impediment to overseas investment in New Zealand.
New Designation And Delegation Letter
As an initial step, the Minister of Finance has issued a new delegation letter to the Overseas Investment Office (OIO). The Minister has delegated to the OIO greater authority to make decisions under the Act on whether to grant consent to an overseas investment in sensitive land.
The OIO now has the power to consider applications for consent to an overseas investment in some sensitive land, including in some instances where the substantial and identifiable benefits criterion is not required to be satisfied, which previously had to be approved by the Minister. In our view, this could have been extended further.
The OIO's authority regarding decisions on whether to grant overseas investment in significant business assets is largely unchanged.
The intention of the new delegations is that fewer applications will require the Minister's consent, reducing the time taken to obtain consent in these cases.
The Overseas Investment Amendment Regulations 2009 will come into force on 9 July 2009 and will amend the current exemptions for obtaining consent for a transaction under the Regulations.
The current application of the exemptions are increased from intra-group transactions where the companies concerned are wholly owned by the overseas person, to intra-group transactions where the companies are at least 95% owned by the overseas person. Three new exemptions have also been added which permit an overseas person to acquire a portfolio or bundle of securities, the temporary acquisition of securities for underwriting or sub-underwriting purposes, and the acquisition of further securities by an overseas person for which consent has already been granted.
Timetable And Submissions
The timetable for the review has not yet been finalised. There is an opportunity to make submissions during the review by sending an email to firstname.lastname@example.org. Cabinet will consider recommendations from the review and changes to the Act will be open to public submissions through the select committee process. DLA Phillips Fox will be making submissions in relation to the review of the Act and Regulations. The key changes that we think should be made are as follows:
Simplifying the form of application to reduce the volume of information required. This will shorten the time taken to prepare an application and also the time taken for the OIO to review the application.
- Increasing the thresholds for both sensitive land and significant business assets acquisitions, including the 25% control threshold, especially in relation to listed companies.
- Reducing the scope of the definition of 'Associate' which is much too broad.
- Limiting the types of sensitive land that also make adjoining land sensitive.
- Tightening the 'special land' provisions. The current process by which special land, for example riverbeds, is to be offered to the government is onerous and time consuming.
- Relaxing the farm land advertising requirements, in particular, to exclude transactions involving the sale of farm land that also involve other large scale assets that will not be sold separately.
- Relaxing the number and complexity of the criteria for consent for purchases of sensitive land that are set out in the Regulations. In addition, provide that an overseas investor purchasing sensitive land from an existing overseas owner need not realise added benefits beyond those being realised by the current overseas owner.
- Ensuring that the conditions imposed on overseas investors are not materially more onerous than those that a New Zealand owner would need to comply with and generally consistent with the requirements of the relevant territorial authorities and government agencies.
If you would like us to make submissions on your behalf or to assist you in making your own submissions, please let us know.
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This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances.