With the Christmas and New Year period rapidly approaching, the pressure to complete a transaction before everyone goes on leave is no doubt being felt by all parties involved, especially if your financial year ends 31 December as is becoming increasingly common.
Foreign Investment Review Board (FIRB) approval under the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) is a common condition precedent to transactions involving a cross-border element. Unfortunately, the FIRB approval timetable does not lend itself to a rapid end of year close and is often a timing concern for transactions. FIRB has announced on its website that applications received after 12:00pm on 20 November are likely to face significant delays. This delay is attributable to the Christmas break the Treasury Department (in which the FIRB team sits) and the ATO take over Christmas and their reduced staff numbers either side of the holiday period.
FIRB timeframes – statutory requirements
Holiday period aside, it would be surprising if an application lodged today was decided before Christmas. Under section 77 of the FATA, FIRB has 30 days from when the application fee is paid to make a decision and then a further ten days to notify an applicant of that decision. These time frames are however often extended. FIRB has broad powers to extend the statutory time frame. The most common mechanism for extending an application's time frame is by FIRB requesting the applicant to apply for an extension. If the applicant declines to do so, FIRB can publish a notice in the Government gazette which allows FIRB to extend the time frame for a further 90 days. As the notice is public it removes the confidentiality of the FIRB process. As such, it is always likely to be in an applicant's best interest to agree to the extension.
Common time frames for a FIRB application for a non-complex transaction are 40 to 50 days to make a decision and a further few to notify. This period is reduced if FIRB is familiar with the applicant (for example an applicant who has made several applications on a similar basis recently). For more complex applications, potentially ones involving foreign government investors, large agricultural acquisitions, acquisitions of key infrastructure, complex off-shore structures or multiple parties, FIRB has taken as long as 60 – 80 days. This extended time period is due to the large amount of stakeholder engagement FIRB must carry out, including state governments, other departments and agencies, in addition to multiple rounds of requests for information (RFIs).
Strategies to expedite an approval
There are several strategies that can be used to help reduce the overall FIRB approval timetable. These strategies are:
- Advance discussions – FIRB encourages parties to engage with it before an application is made. Although it will not give a binding indication of the decision it will make, FIRB will indicate what its key areas of interest will be allowing you to better brief FIRB when the time to apply for approval comes. McCullough Robertson has met with FIRB several times on behalf of clients, explaining a future applicant's corporate structure and the intended transaction structure to facilitate a smoother and faster FIRB approval process.
- Tax Information – Tax compliance (past, present and future) is now a key feature in any FIRB application and helpfully there is now an online checklist setting out what tax information an application should contain. For any complicated transaction or one with cross-border taxation implications, the ATO strongly encourages applicants to use this tax checklist when completing their application.
- Pre-empt RFIs – It is common in a FIRB process to receive RFIs from FIRB in respect of certain areas of interest (e.g. tax compliance, debt financing and funds flow). As such, when preparing an application it is best practice to try and pre-empt these as it can remove or reduce the entire RFI process thereby reducing the overall application time. Although RFIs are very transactionally specific, including a little bit of extra information can shave several days off the application process.
Regardless of the time frame for a transaction, FIRB is a key and crucial process when applicable. FIRB and the ATO are currently undertaking a widespread enforcement process of anyone who may have overlooked FIRB approval in a transaction or has not complied with any conditions imposed. This aggressive push makes compliance fundamental to a transaction's long-term success with FIRB, even if it is a speed bump.
Prior engagement with FIRB, compiling a detailed application and anticipating FIRB and its stakeholders' questions can assist in expediting the FIRB process, making sure it's not the condition that holds up completion.
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.