The Foreign and Investment Review Board (FIRB) has just released
a new foreign investment policy, which sets out its approach when
assessing foreign investment applications under the Foreign
Acquisitions and Takeovers Act 1975. Among other things, the
policy defines the term 'foreign governments and their related
entities', and outlines the factors FIRB will take into account
when considering if a proposed investment is contrary to
Australia's national interest.
Foreign governments and their related entities
The term 'foreign governments and their related
entities' is defined in the policy as including:
a body politic of a foreign country;
companies or other entities in which foreign governments, their
agencies or related entities have more than a 15 percent interest;
companies or entities that are otherwise controlled by foreign
governments, agencies or related entities.
All foreign governments and their related entities are required
to seek FIRB approval before making a direct investment in
Australia, regardless of the value of the investment. In contrast,
foreign persons who are not controlled by foreign governments and
their related entities must only seek FIRB approval to acquire an
interest of 15 percent or more in an Australian business or
corporation that is valued above AUD $231 million. US investors are
subject to a higher threshold of AUD $1,004 million.
National interest considerations
Where a proposed transaction involves a foreign government or a
related entity, the Australian government will consider if the
investment is commercial in nature, or if the investor may be
pursuing broader or political objectives that could go against
Australia's national interest. This includes assessing whether
the prospective investor's governance arrangements could
facilitate actual or potential control by a foreign government
(including through the investor's funding arrangements, such as
where the investor defaults under a loan from a State-owned bank,
and assets coming under the control of such banks).
Proposals from foreign government entities operating on a fully
arm's length and commercial basis are less likely to raise
national interest concerns.
The policy sets out a number of factors that FIRB takes into
consideration when assessing the national interest considerations
of a proposed foreign investment:
National security (the extent to which the investment affects
Australia's ability to protect its strategic and security
Competition (diversity of ownership is preferred within
Australian industries and sectors to promote healthy
Other Australian government policies, including tax (the impact
of a foreign investment proposal on Australian tax revenue)
Impact on the economy and the community (the impact of the
proposed investment on the general economy)
Character of the investor (the extent to which the investor
operates on a transparent commercial basis and is subject to
adequate and transparent regulation and supervision)
Mitigating factors that may help determine that proposed
investments are not contrary to national interest include:
the existence of external partners or shareholders in the
the level of non-associated ownership interests;
the governance arrangements for the investment;
ongoing arrangements to protect Australian interests from
non-commercial dealings; and
whether the target will be, or remain, listed on the ASX or
another recognised exchange.
Foreign persons looking to acquire interests in mineral rights,
mining leases, mining tenements or production licences need to
apply for FIRB approval where the proposed transaction will
the right to occupy Australian urban land, and the term of the
lease or licence (including extensions) is likely to exceed five
an interest in an arrangement involving the share of profits or
income from the use of, or dealings in, Australian urban land.
For more information on FIRB and the new foreign investment
policy, please contact HopgoodGanim's Corporate Advisory and
An actuarial review of the Invensys Australia Superannuation Fund showed it to be in surplus to the tune of $189.2 million. In mid 2003, the Invensys Group proposed to the trustee that the surplus be repatriated to the principal employer in the group.
CIVs will have flow-through status for tax purposes and similar criteria as the MITs, to encourage foreign investment.
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