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ACQUISITION OF ENTERPRISES

The Overseas Investment Act (OI Act) came into force on 25 August 2005. This summary deals only with the new OI Act and OI Regulations. For any queries in relation to the previous regime under the 1973 Act or the transitional provisions under the OI Act, please contact us.

Under the OI Regulations, the consent of the New Zealand Overseas Investment

Office (OIO) is required in the case of certain investments by overseas persons.

Non-land investments requiring consent include the following:

establishing a new business for a period exceeding 90 days in any year (either alone

or in partnership with another person) where the total expenditure expected to be

incurred in setting up the business exceeds $100 million;

acquiring 25 percent or more ownership or control of the securities of a New Zealand

company where the value of the securities, the consideration for the transfer, or the

value of the New Zealand target company's and any (25% or more) subsidiary's

assets exceeds $100 million;

increasing the proportion of ownership or control of the securities of a New Zealand

company where the overseas person already has 25 percent or more ownership or

control and the value of the extra securities, the consideration for the acquisition of

the extra securities, or the value of the New Zealand target company's and any

(25% or more) subsidiary’s assets exceeds $100 million; and

acquiring property (including goodwill and other intangible assets) used in carrying

on a business in New Zealand where the consideration provided for the acquisition

exceeds $100 million.

Where an overseas person acquires shares in a company which owns land, and

that acquisition requires consent under the OI Regulations, the issues raised in

Section 4 (Acquisition of real estate), below, will also be relevant.

The legislation provides that where consent is required for an investment, such consent may only be given if certain criteria are satisfied by the applicant. These include that the overseas person or, if that person is not an individual, the individuals with control of the relevant overseas person must:

have business experience and acumen relevant to the investment;

have demonstrated financial commitment to the investment;

be of good character; and

not be an individual of the kind referred to in section 7(1) of the Immigration Act 1987

(which lists persons not eligible for exemptions or permits under that Act, usually

because of criminal or terrorist records).

The 25 percent threshold as it relates to an overseas person is not intended by the New Zealand government to represent a limitation on preferred levels of foreign investment. It is merely a point at which official involvement will be triggered.

While 100 percent ownership by an overseas person can be approved in all industry sectors, some New Zealand based companies have restrictions relating to foreign ownership, notably in the area of New Zealand's fishing resources.

The Minister of Finance is responsible for policy relating to controls over foreign investments in New Zealand, although this is shared with the Minister of Lands in respect of certain land applications and the Minister of Fisheries in respect of certain applications relating to the acquisition of New Zealand's fishing quota.

Nearly all applications for consent in the last five years have been approved by the Overseas Investment Commission (the predecessor body to the OIO) in a relatively prompt fashion.
The OI Regulations also provide for procedures in relation to applications, fees, reporting and monetary requirements in respect of approved applications (if required)

For further information, please contact us »

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