3/11/2021·4 mins to read
Final and essential elements of overseas investment reform now in place
The final elements of the three-year reform process for New Zealand’s overseas investment regime are now confirmed, coming into effect on 24 November 2021. We explain the new elements briefly below.
What's new? - Here's what you need to know
Statutory time frames for consent processes: Prescribed time frames will apply for all types of consent applications. Time starts to run when the application is received and fees paid, and can be paused and extended for a variety of reasons.
Simplified ‘benefit to New Zealand’ test: The ‘benefit to NZ’ test is now simplified, with one key substantive, and positive, difference - relating to how the so-called 'counterfactual' element will operate.
Farm land advertising: If an application involves farmland, completion of any required advertising process must be completed before the agreement is entered into.
- Fresh or seawater areas to be offered to the Crown: If land to be acquired includes an interest in a marine or coastal area, or the bed of a lake or river, the application must include a notification to the Crown which has a right to acquire those interests.
Statutory time frames for consent processes
Long awaited statutory time frames for consent applications will come into effect on 24 November 2021. The time frames will apply 'end to end', with the clock running from when the application is received until the consent process is complete.
The time limits differ dependant on the application pathway, including:
- One home to live in - 10 working days
- Standalone investor test - 30 working days
- Significant business assets - 35 working days
- National interest test (for above categories) - 55 working days
- Benefit test (general and forestry) - 70 working days
- Benefit test (farm land) - 100 working days
- Fishing quota - 200 working days.
If an application involves more than one pathway, the timeframe that is the longest will apply. The timeframes are subject to pauses (particularly where the applicant has been asked to provide further information), extensions and exceptions.
The Overseas Information Office (OIO) has issued a guidance note about the 24 November 2021 changes, including commentary on the new timeframes, and the pauses, extensions and exceptions.
These time frames are ambitious and will require the OIO to modify its own processes. Applicants wishing to keep a process within the prescribed timeframes will need to ensure all required information is provided and fees paid, from the outset, and that any additional information requested by the OIO is provided without delay.
Simplified ‘benefit to New Zealand’ test
The ‘benefit to New Zealand’ test will be simplified and streamlined.
Streamlined benefits: Applicants must still show, in relation to a set of specified factors, how a proposed investment will benefit New Zealand. The specified benefits (now grouped into seven general benefits rather than 21 separate factors), remain largely the same as before, but the changes will provide greater scope for how applicants may present, and the OIO may consider, the stated benefits.
- More realistic investment counterfactual: Applicants must explain how the proposed investment will be better than a counterfactual investment scenario. The counterfactual test has changed, and will be considerably easier to measure. The current test is based on a (rebuttable) presumption that the alternative investor is a hypothetical well-funded New Zealand purchaser. The new test will be a comparison of the likely result of the proposed overseas investment, against the status quo. This makes an assessment of the benefits much more straight-forward for the applicant and the OIO. It also avoids the need, as applies under the current regime, for parties to ‘crystal ball gaze’, and make extensive and frequently unrealistic assumptions in doing so.
New farm land advertising regime
Farmland of more than five hectares must be advertised within New Zealand before that farmland can be acquired by an overseas investor.
The new rules require all advertising to be completed before the parties enter into a sale and purchase agreement; it cannot be left as a condition of settlement. The form of advertising is more prescriptive with both paper and online advertising required. The advertising period has also been extended from 20 to 30 working days.
New exemptions to the advertising requirements apply in some circumstances. Certain exemptions will apply automatically, including where the farm land is being acquired from a family member and where the farm land shares or securities are quoted on a securities market. Exemptions may also be granted (under a discretionary process) where farm land is non-productive or of low productivity. We expect this exemption to apply in situations where the sale of farm land is part of a much larger transaction (eg a sale of an entity or business), where the farm land could not be acquired on its own.
The existing farmland advertising provisions will apply to any agreement entered into before 24 November 2021. The new provisions, including the new exemption regime, will apply to any agreement entered into on or after that date.
Fresh or sea water areas
Revised rules apply for marine or coastal areas, and the beds of lakes and rivers, previously referred to as 'special land'.
If a consent application under the ‘benefit to New Zealand’ or forestry consent pathway includes a marine or coastal area, the bed of a lake, or the bed of a river, the Crown must be notified and the Crown has a right to acquire those interests. The consent application serves also as notice to the Crown. The record of title for the relevant land will include the Crown’s right to acquire the land and the Crown has 10 years to acquire the land, with compensation payable to owners and certain third parties if determined appropriate.
Long running, desperately needed, reform process now complete
Implementation of this final set of changes to New Zealand’s overseas investment regime completes the long-running overseas investment regime reform process. These last elements of the overall reform package, and particularly the desperately needed prescribed statutory timeframes for consent applications, will finally enable the regime’s participants to proceed with a degree of certainty that has not existed before.
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Please contact one of our experts (pictured right) if you would like to discuss any of the above.