It amends the Overseas Investment Act 2005 (Act) with the final changes coming into force on 24 November 2021.
Changes to apply from 24 November 2021
The final changes to the Act under this round of reform seek to simplify investor requirements and ensure the right checks and balances on overseas investments are in place to protect New Zealand’s environment and society. The final changes include:
- new assessment timeframes for consent applications;
- strengthened requirements for the advertising of farm land for sale;
- new consent requirements on fresh or seawater areas; and
- a streamlined “Benefit to New Zealand” test.
A New Ministerial Directive Letter has also been published with effect from 24 November 2021.This letter gives important guidance on the policy objectives of the new legislation and the Minister’s direction to the regulator on how the new legislation is to be interpreted.
All changes apply to any application received on or after 24 November 2021 except for the changes to the farm land advertising requirements. The new farm land advertising requirements apply to all farm land sales entered into on or after 24 November 2021, irrespective of when the application is received. Further details on each of the changes are set out below.
New assessment timeframes now apply for consent applications filed on or after 24 November 2021. The new timeframes vary depending on the consent pathway to accommodate the complexity of the required assessment. Fishing quota or annual catch entitlement, for example, has the longest timeframe of 200 working days. These timeframes are a welcome addition to provide greater clarity and assurance for investors on how long an application for consent will take.
It should be noted that these changes allow for the timeframe to be paused or extended when the Overseas Investment Office is either waiting for further information from the applicant or the applicant needs to take certain actions. It is therefore in the applicant’s best interests to promptly respond to avoid delays.
Farm land advertising
Those who wish to sell farm land to an overseas buyer must first offer the land for purchase by a New Zealander on the open market prior to a transaction being entered into with the overseas buyer. The methods of advertising have also been strengthened as follows:
- The advertising must occur before the transaction is entered into with an overseas buyer;
- The advertising must be in both a paper publication and on the internet;
- The farm land must be advertised for a minimum period of 30 working days; and
- Advertisements must be published within the 12 months preceding the earlier of either the date the application is made, or the date the transaction requiring consent is entered into.
The risk of non-compliance includes an application for consent to sell farm land to an overseas buyer being declined on this basis. There are a number of exceptions to the advertising requirement for which application can be made.
Fresh or seawater areas
Consent must now be sought prior to the purchase of land that is or includes fresh or seawater areas (i.e., marine or coastal areas and beds of lakes or rivers). This requires notification to the Crown, which has the right to acquire the fresh or seawater interest. Alongside this notification, an application for consent involving fresh or seawater areas must include a number of details in the sensitive land certificate. Those affected by the Crown’s acquisition of fresh or seawater areas may claim compensation for material losses under the new provision.
Benefit to New Zealand test
The “Benefit to New Zealand” test is now simplified to include an assessment of the following seven broad factors, with the investor’s analysis requiring a comparison of the current state of the assets against what is likely to occur to them as a result of the investment:
- economic benefit;
- environmental benefit;
- public access;
- protection of historic heritage;
- advancing government policy;
- oversight benefit;
- consequential benefit;
This test replaces the previous counterfactual analysis test which required an assessment across 21 specific factors, with the benefits of the proposed transaction offered by the applicant being weighed against what an adequately funded, alternative New Zealand purchase could offer. We expect the removal of the counterfactual considerations under the former test to assist applicants in making simpler and more straightforward submissions in their application.
If you have any questions about these or any other changes to New Zealand’s overseas investment legislation or require any advice in this area, please get in touch with our Business Advice team or your usual contact at Hesketh Henry.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.