Whether owing to the lack of judicial interpretation on key
areas of the Foreign Acquisitions and Takeovers Act 1975
(FATA) and the regulations under FATA1
(Regulations) or the policy driven intention of
FATA, the vexed question of whether or not to formally lodge an
application for FIRB approval arises more often than not.
As foreign investment increasingly targets Australian assets
particularly in the real estate space, that question will become
more common despite the recent relaxation of FIRB rules.
One way for foreign investors to obtain a level of comfort
without the cost, uncertainty and delay of making a formal FIRB
application is to make a 14 day FIRB enquiry, a process that we
have recently used for both a foreign owned entity seeking an
interest in land for industrial and commercial purposes and a
foreign resident acquiring a substantial rural estate.
Interest in Land under an Agreement for Lease
The question arose for a foreign owned entity as to whether it
might be necessary to obtain FIRB approval where, under an
agreement for lease, it was to enter into a lease of land for
industrial and commercial purposes for warehousing and distribution
upon the completion of the construction of a warehouse. In this
instance the interest being acquired was to be wholly incidental to
the conduct of the foreign entity's existing and/or proposed
The documentation involved was fairly standard pre-commit
documentation. However, because of:
the wide nature of the definition of "interest in
Australian urban land" in FATA (which would include an
agreement for lease);
the premises/site to be developed upon was arguably vacant and
to be subdivided;
uncertainty in FATA and the Regulations as to the meaning of
the zoning of the land was part of a broader parcel of land
with a wide zoning/permissible use,
there was uncertainty regarding whether an application needed to be
made and/or FIRB approval was required.
Clause 3(f) of the Regulations
Clause 3(f) states as follows:
"The Act does not apply in relation to the acquisition
of an interest in Australian urban land of the kind
the land is being used,or is able to be
used immediately and in its present state, for
industrial or non-residential commercial purposes; and
the acquisition is wholly incidental to the conduct of the
existing or proposed business activities of the foreign person
(other than business activities that include acquisitions of land
or the development of, or investment in, land or the development or
operation of any form of accommodation facility)."
Proposal in the 14 day FIRB enquiry
The proposal under the pre-commit documentation was that when
the lease was formally entered into, the land would no longer be
vacant and the zoning of the property would be clearly a
Confirmation was therefore sought of FIRB on the basis that:
as the "acquisition" of the interest in
"Australian urban land" (ie an interest as
lessee or licensee under the lease) under clause 12A of FATA did
not become binding until practical completion of the building
occurred, then under clause 26A, the time for notification is
deemed to be when the leasehold interest is
"acquired" and this was after the warehouse was
constructed or substantially constructed.
Accordingly, at that time, the land would no longer be vacant
land and under clause 3(f) of the Regulations, the acquisition
would be exempt.
Ultimately this submission was accepted by FIRB in writing and
the tenant obtained the necessary comfort in respect of whether or
not a formal application for FIRB approval was required.
Factors to consider in the process
The FIRB enquiry system is a useful process to obtain a level of
comfort for foreign investment in Australia and avoid the cost and
possible delay of a formal application.
It is important, however, in any such enquiry to clearly state
the relevant issue requiring clarification, the background facts
and circumstances of the particular case and the confirmation the
foreign person is seeking.
In addition it is important to note that:
the enquiry will only be actioned if materials available on the
FIRB website (www.firb.gov.au) are insufficient; and
FIRB only endeavours to respond within 2 weeks, so any enquiry
should be made promptly and preferably during an early stage of
If you require any assistance or have further questions
regarding the FIRB enquiry system, please contact us.
1 Foreign Acquisitions and Takeover Regulations
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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