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New overseas investment rules - no real surprises, but some worry remains

November 19, 2019


Partners Greg Allen, James Hawes, Don Holborow, Andrew Matthews, Robert McLean, Michael Pollard, Simon Vannini
Consultants Charlotte McLoughlin

Overseas investment Government reform and public policy

Today the Government released an update on the much-needed overhaul of New Zealand’s overseas investment regime. The Government announced some overall intentions for the regime, following the consultation process earlier this year.

Two key changes

The two big changes flagged in the release are a national interest test for certain “high risk” assets, and a “call in” power in relation to the sale of certain strategically important assets.

  • The national interest test will apply to sale of assets such as ports and airports, telecommunications infrastructure, electricity and other critical infrastructure. No detail is yet available on what the new test will entail. We hope that the new test balances the national interest in securing continued supply of the relevant key services against the interests of attracting offshore infrastructure investment capital.
  • A “call in” power will apply to the sale of strategically important assets. Such assets are stated to include not only military technology and direct suppliers to defence and security agencies (as one might expect), but also to “significant media entities where these are likely to damage our security or democracy”. Again, no detail is yet available on when and how the call in power will apply, other than a statement that the call in power would only be used to control those investments that pose a significant risk to national security or public order, and will be used rarely and only where necessary to protect New Zealand.

Other changes indicated

  • Enhanced enforcement powers, with maximum fixed penalties for non-compliance rising from $300,000 to $10 million (for corporates).
  • An investment in a water bottling enterprise, involving sensitive land, will now face additional scrutiny. It is not clear whether similar scrutiny will be applied to similar investments not subject to the overseas investment regime.
  • Clear timeframes for OIO decision-making - a critical and welcome change to the existing regime.  
  • Exemptions for certain low risk transactions (including those involving companies which are majority owned and controlled by New Zealanders). We hope that this includes a sensible regime applicable to New Zealand listed companies, allowing them a more certain compliance pathway.

Next Steps

None of these changes are a particular surprise. All were indicated as being possible in the consultation document, and politically the national interest test was always going to happen. As always, so much lies in the detail. We look forward to examining those details and what they mean for the New Zealand business community when the Bill is released in early 2020.

Get in touch

Please get in touch with any of our contacts to discuss these changes in more detail and how they could impact your business.