The Government has today introduced the Overseas Investment (National Interest Test and Other Matters) Amendment Bill (Bill) to Parliament. The Bill is the most substantial regulatory reform in this area for over 20 years. Below we outline the opportunities and our concerns arising from the new Bill.

The Bill is essentially as signalled (see our earlier article), which we expand on below, and marks a significant shift in New Zealand's approach to international investment. While it retains the purpose statement that it is a privilege to invest in New Zealand, it balances this with another purpose of the Act, which is to recognise the role of overseas investment in increasing economic opportunity by enabling the timely consent of less sensitive investments.

The effect of the new Bill is that for a large number of foreign investors, provided there are no national interest risks, their applications will be processed within 15 business days. The Bill consolidates the national interest test, the benefit to New Zealand test and the investor test for all assets other than farm land, residential land and fishing quota (which will largely remain subject to the existing tests that apply).

The Bill introduces a three-stage process for the national interest risk assessment:

Stage 1: the Regulator must complete an initial risk assessment to establish if either the national interest test is met because a national interest assessment is not required or that a national interest assessment is required. An assessment is required if the Regulator has reasonable grounds to consider that the transaction may include a risk to New Zealand’s national interest.

Stage 2: the Regulator undertakes a national interest assessment whereby it must comply with any Ministerial directions, must have regard to the mandatory factors (being the purpose of the Act, the risk to the national interest and whether the risk can be managed by another regulatory regime) and may have regard to one or more of the non-mandatory factors (investor risk factors including character and capability, whether the national interest risk may be adequately managed by a condition and whether a risk that is contrary to the national interest may be offset by the benefits).

Stage 3: only a Minister may decline a transaction of national interest, it cannot be delegated. The Minister will have regard to the same factors as the Regulator under the Stage 2 assessment.

These changes will certainly expedite the process for foreign investors and reinforce the message that New Zealand is open for business. This is to be welcomed noting that appropriate protections remain in place for our most sensitive land, and for strategically important businesses or where there is non-New Zealand government investment.

There are some other changes put forward in the Bill including:

• introducing regulatory power to identify new types of strategically important businesses (SIBs) and to require mandatory notification where this was previously voluntary; and
• creating repeat investor provisions for the new national interest test where there is no substantive change to ownership and control;
• removing the consent requirement for investors to increase their shareholding from 75% to 100%.

These changes are also largely positive, although, as we have noted before (and below) the SIB list needs work, particularly in relation to military or dual-use technology as the strategically important goods list which determines this is many hundreds of pages long. This is even more important in light of the mandatory notification requirement that will come in with the Bill.

The Bill is expected to come into force before the end of the year and be implemented by early 2026. A new Ministerial Directive Letter will come into force at the same time. There will be a lot to work through before then, including application forms/process, fees and Regulations.

We appreciate the Government’s desire to move quickly on this to enable much needed foreign investment.

However, as we have indicated previously, we would have liked to see some changes to the farm land and residential land definitions which would have enabled regulatory oversight over large areas of farmland and one-home-to-live-in, but enabled investment in certain types or uses of farm land, residential land development, or the acquisition of certain types of residential or lifestyle land that does not detrimentally impact on NZ’s need for more affordable housing, to proceed without consent.

While we think it is unlikely that any of these changes will make their way into the Bill through submissions, to date, the current Government has used the Ministerial Directive Letter very effectively, and we hope that there is the possibility that some of these changes may be able to be implemented through further use of directive letters.

There may also be scope for some matters, to be addressed through changes to the Regulations. In particular, we would like to see amendment to:

• exemptions, particularly to exclude NZX (and even ASX) listed companies that conduct significant business operations in New Zealand (or Australia) from consent requirements;
• the Strategically Important Business definition (as noted above); and
• farm land advertising requirements which we consider unnecessary, ineffective and proving unworkable for the majority of transactions.

There will be the opportunity to make submissions as the Bill passes through Select Committee. If you would like to make a submission or have any questions on this changing area of law, please contact one of our experts.