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Our wish list for New Zealand's overseas investment reform process

May 29, 2019

Contacts

Partners Greg Allen, James Hawes, Don Holborow, Andrew Matthews, Robert McLean, Cath Shirley-Brown, Michael Pollard, Simon Vannini
Senior Associates Victoria Anderson, Tom Heard, Tara Wylie

Overseas investment Government reform and public policy

The long overdue reform of New Zealand’s overseas investment regime is now under way. Our earlier release outlining the reform proposed in the April 2019 Consultation Paper is here.

We support the reform process and have submitted our response to the Consultation Paper (available here). We hope the consultation process results in an amended regime that is both principled and workable in practice. Our reform wish list is below.  

The reform process

In summary, the reform seeks to improve particular elements of the existing structure in all key areas of the regime, as set out in the Overseas Investment Act: what is screened, who is screened, and how the screening happens. The stated “test” for the reform process is that the amended regime better meets relevant policy objectives:

  • Supporting overseas investment in productive assets;
  • Encouraging more predictable, transparent and timely outcomes; and
  • Managing the risk of overseas investment to New Zealanders’ wellbeing.

Our reform wish list

  1. Shorter application process with certain timeframes
    Specified but realistic timeframes for different types of consent applications, with a limited ability for unilateral timetable extensions. A revised process enabling stakeholders to interact more meaningfully with OIO personnel and understand the status of application. The process will include a robust initial assessment element.

  2. Clearer, more transparent, approval requirements
    All statutory tests forming part of the approval requirements to be stated in clear, unambiguous and transparent terms, thus enabling prospective vendors and purchasers of relevant assets to assess, with confidence: (a) the time involved in a consent application process; (b) the elements to be met; (c) whether a consent application is likely to be approved; and (d) the likely complexity of the consenting process. 

  3. A tailored approach for listed companies
    Enable listed companies to assess easily and confidently whether they are an “overseas person”. Adopt a test that recognises what amounts to “control” of a listed company. 
    We propose that an NZ-listed company be “overseas persons” when the substantial product holder notices filed in relation to that company disclose either: (a) that one shareholder, with its associates, holds 25% or more; or (b) that a group of overseas shareholders (with their respective associates) holds 49% or more.

  4. Streamlined “good character” test
    The “good character” test (applicable to all consent applications) to be streamlined and simplified. Remove the business experience and acumen, financial commitment and immigration criteria elements; remove the requirement for New Zealanders involved in an overseas entity to prove “good character”. As a matter of OIO practice, exclude the requirement for applicants to submit a Google search about themselves as part of a good character application. In relation to corporates undertaking transaction, assess the “good character” of the entity, not its individual officers. 

  5. Limited and clearly defined veto power on grounds of “substantial harm” or “national interest”
    There should be an ability for the OIO to veto a transaction on the basis that it creates substantial harm or that it is not in the national interest, but the grounds for exercise of that veto power must be clearly defined, and the power used sparingly. Also, the onus should be on the relevant decision-makers to show that the transaction will create substantial harm, or is not in the national interest. Any exercise of such a veto power must be made at a senior government level.

  6. Reduce types of adjoining sensitive land
    Reduce the types of land treated as “sensitive” because they adjoin land that is ‘actually’ sensitive. Limit to land such as the foreshore, lakes, wahi tapu and national parks.

  7. Modified screening for acquisition of leased land
    Change how the screening process applies to sensitive land that is leased: no screening for a lease less than 10 years; simplified screening for a lease of between 10 and 35 years; full screening process for a lease of 35 years or more.

  8. Land use requirements applicable to all, not just overseas investors
    Ensure that requirements concerning use of New Zealand land or other resources are addressed substantively and comprehensively, in the appropriate statute(s), making these requirements applicable to all users of relevant land or resources, not just overseas investors through the operation of the overseas investment regime.

Contributors charlotte.mcloughlin@simpsongrierson.com