05.07.2019

Improvements to the overseas investment regime could be on their way…

Certain features of the Overseas Investment Act 2005 (“Act“) that have caused frustration in the past could be set to change. The Act is currently in the midst of a two stage review.  The first stage, completed last year, saw the introduction of residential homes being caught by the provisions of the Act, as well as a range of other changes such as a simplified process being introduced for some forestry transactions.

The second stage, which is now underway, was kicked off by the Government issuing a Consultation Document, which sets out a number of proposals for further reform of the Act. 

This stage of the review focuses on three areas:

What is screened – A review of the types of sensitive assets and the type of interests being acquired.  Specifically, this includes reviewing land that is considered sensitive only because of what it is next to.  People are often surprised to hear that they are caught by the Act when there is an overseas investment in a piece of land (or a company which has an interest in some land) in an industrial area, but it happens to be next to a reserve.  The proposed changes include amending the types of ‘adjoining land’ that make a piece of land sensitive.  Importantly, the proposed changes include the possibility of removing recreational reserves from the definition of land that makes an adjoining piece sensitive.  People are often even more surprised to find that the Act applies even if the interest that is being acquired is only a lease with a term of more than 3 years.  Another possible change being considered is increasing the term of a lease to 10 years before it is caught by the Act.  In our view, these proposed changes would make the regime less cumbersome and are likely to be welcomed by foreign investors.

Who is screened and when – This includes reviewing the current definition of ‘overseas person’ and the extent to which small transactions or changes in shareholdings of an overseas person that has no control over the sensitive assets will be caught by the Act.  Specific areas of review include ‘tipping point’ for requiring consent.  Currently, for example, any increase in shareholding of an overseas person who holds 25% or more of the shares of a company which owns sensitive land would be subject to consent, even if the change did not result in the overseas shareholder having more control over the asset.  Also, the requirement for consent can be triggered inadvertently in a number of ways including, for example where an overseas person’s shareholding increases when other shareholders participate in a share buy back.  In our experience, one of the difficulties faced in respect of these types of transactions being caught by the Act is that it is difficult for investors to show the benefits to New Zealand that will be created from the transaction, when often the intention is just for business to continue as usual. 

How screening is done – This part of the review looks to consider improvements on the screening progress.  This review is broken up into two parts. The first considers assessing investors’ character and capacity and looks at simplifying the investor test.  The second looks at screening impacts on investments and options to amend the tests that are used to establish whether an investment will benefit New Zealand. Proposals include a new “national interest test” which would provide a greater discretion to Ministers to decline an application.  The “special land” provisions, which require certain land to be offered back to the Crown, and the requirements relating to farmland advertising, are also being reviewed. 

Overall, the intention of the review and the proposals appear promising.  Treasury is currently in the process of analysing submissions made in response to the consultation document.  Following which, we may see some further reform to New Zealand’s overseas investment regime.

Kerry
Media contact - Kerry Browne
Please contact Kerry with any media enquiries and with any questions related to marketing or sponsorships on +64 9 375 8747 or via email.

Related Articles / Insights & Opinion

Mediation wide BW
Employment Law’s Dispute Resolution Process – Employment Relations Authority and Employment Court
In our last article, we introduced the dispute resolution process in the employment jurisdiction by discussing mediation – specifically, what mediation is and what to expect. This article discusses ...
17.04.2025 Posted in Employment
You’ve Been Served: Navigating the Use of Statutory Demands
An Introduction to Statutory Demands: A statutory demand is a legal document that is issued by a creditor (Creditor) to a debtor company (Debtor) demanding payment of a debt that is due and owing.  T...
15.04.2025 Posted in Insolvency and Restructuring
iStock  Succession Plan medium
Passing the Torch: Priming your Family Business for a Succession
As the first in a series of articles looking at the generational wealth transition and its impacts on business succession in New Zealand, Ben Hickson (partner, Corporate & Commercial) and John Kir...
07.04.2025 Posted in Corporate & Commercial & Private Wealth
Deciding to Wind Up? Observations on winding-up a trust from a recent High Court case
A trust can be a hassle and expensive to maintain.  So, it is not unusual for clients to reflect on whether a trust should be maintained. When settlors, Bert and Diana Queenin, decided to wind up the...
24.03.2025 Posted in Private Wealth
Mediation wide BW
Employment Law’s Dispute Resolution Process – Mediation
Navigating the dispute resolution process in the employment jurisdiction can be tricky. This article aims to spell out the key considerations for those involved in or contemplating mediation, which is...
24.03.2025 Posted in Employment
empty wallet finance concept
Amendment to the Crimes Act 1961: Intentionally not paying employees their wages now deemed theft
An amendment to the Crimes Act 1961 (Crimes Act) – the Crimes (Theft by Employer) Amendment Bill has been passed by Parliament and received Royal assent. It is now an enforceable provision of th...
14.03.2025 Posted in Employment
Time’s Up: Late Redelivery and the Assessment of Damages in Hapag Lloyd AG v Skyros Maritime Corporation and Hapag Lloyd AG v Agios Minas Shipping Company
The English Commercial Court gave an instructive judgment on the assessment of damages in Hapag Lloyd AG v Skyros Maritime Corporation and Hapag Lloyd AG v Agios Minas Shipping Company; an appeal brou...
11.03.2025 Posted in Trade and Transport
SEND AN ENQUIRY
Send us an enquiry

For expert legal advice, please complete the form below or call us on (09) 375 8700.