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Overseas investment - a busy year to date

July 20, 2016

Contacts

Partners James Hawes, Robert McLean, Andrew Matthews, Michael Pollard
Senior Associates Victoria Anderson, Tara Wylie

Overseas investment

So far 2016 has been a busy year for New Zealand's overseas investment regime:

  1. The Overseas Investment Office (OIO) has consulted on and announced changes to its fee structure.
  2. P.D. McKenzie CNZM QC has completed a review of the OIO's good character processes and made recommendations to the OIO.
  3. In April 2016, the High Court ordered the first civil penalty of its type under the Overseas Investment Act 2005 (Act)[1].

In addition, the OIO has faced ever increasing media attention on transactions requiring consent under the Act. Transactions involving Scales Corporation and Silver Fern Farms are just two recent examples.

The Office of the Auditor-General has also announced that it will carry out a review of how effectively the OIO collects and manages information.

The Minister for Land Information, the Hon Louise Upston, held a workshop in Auckland on 21 June 2016 on foreign investment and the OIO's processes. During discussions at the workshop and following that meeting, interested parties made various suggestions to the OIO that are designed to speed processing times. These suggestions include:

Practical

  1. Outsourcing: Given the unpredictable nature of the OIO's workload, the OIO should look to outsource part (or all) of the process relating to certain applications (perhaps those that are deemed to be least sensitive) in times of most stress.
  2. Fee Customisation: Fees should be customised, to a greater extent, to the complexity of the application, meaning additional resources can be committed to the most complex investments.
  3. Sliding Fee Scale: A sliding scale of fees should be introduced, tailored to deal with different types of application, and for investors who make repeat applications. Different timeframes for processing such applications should exist based on the likely complexity or simplicity.
  4. Urgency: Situations exist where urgent consent is required, and the OIO should introduce an optional urgency fee payable for a fast tracking process.

Legal

  1. Incidental Interests in Land: The requirement to obtain consent in connection with certain classes of "sensitive land" should be eliminated. Many transactions are caught by the regime merely because of an incidental land interest that has no real sensitivity, and is of little value to the public. For example, small recreation reserves could be removed from the list published in accordance with section 37 of the Act.
  2. Repeat Investors: Where an investor has been approved by the OIO in the past, it should not have to provide the same level of information on each subsequent investment. To simplify the process, repeat applicants should be able to provide a simplified set of generic information to the OIO.
  3. One Fee: When an acquisition involves several smaller transactions, only one application encompassing the whole acquisition structure should be required, enabling a reduction in processing time.
  4. Good Character: New guidelines should be developed and published detailing the OIO’s approach to the "good character" requirement. Relevance and materiality should be the guiding principles. For example, a minor driving offence of an applicant who is applying to the Overseas Investment Office to get consent to acquire "significant business assets" in New Zealand, should not be taken into account (or be required to disclosed) as it is irrelevant. On the other hand, a charge for fraud, for example, would be clearly relevant.

Since the meeting, the OIO has engaged proactively with industry participants. In particular, the OIO has advised that:

  • a quarterly newsletter is to be published by the OIO starting in August 2016;
  • the OIO is now providing applicants with an estimated timeframe for their application to be allocated for full assessment (the current estimate is around 25 working days);
  • pre-application discussions with applicants are being encouraged; and
  • targeted exemptions to the OIO's screening process have been announced, and Treasury is expected to consult on an exposure draft of the exemptions in late August. The five proposed exemptions are:
  • an exemption from the requirement to advertise on the open market for the acquisition of leasehold farmland for a term of up to 20 years;
  • an exemption for leasehold land where a previously consented lease is being renewed or re-granted on the same terms, and the ownership and size of the property is unchanged;
  • an exemption for transactions between overseas persons for certain land that is considered less sensitive;
  • an exemption for certain transactions in connection with the Public Works Act 1981 where consent has previously been obtained to acquire the adjoining land; and
  • an exemption for overseas custodians for shareholdings held on behalf of New Zealand investors.

We will keep you updated of changes to the OIO's processes and the overseas investment regime over the coming months.

 

 

[1] Chief Executive of Land Information NZ v Carbon Conscious New Zealand Limited [2016] NZHC 558 [4 April 2016], in which the Court ordered Carbon Conscious New Zealand Limited to pay a $40,000 civil penalty.