9.07.2019

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.

Do you need expert legal advice?
Contact the expert team at Hesketh Henry.
Kerry_100x100 1
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

Phishing for payment: How Team New Zealand was scammed
Hackers often try to scam entities making international payments by impersonating one, or both, parties to the payment.
Requirements for international yachts and crew entering New Zealand
While New Zealand’s sea borders are currently closed to most foreign Flagged vessels, a number of pleasure craft and super yachts in the Pacific are hoping to enter New Zealand in time for the Ameri...
04.12.2020 Posted in Maritime Law
Class Actions – Supreme Court rules it’s “opt-out”, Law Commission Issues Paper imminent
Following the Supreme Court decision in Southern Response v Ross [2020] NZSC 126 the Law Commission is now set to release its Issues Paper on Class Actions and Litigation Funding on 4 December 2020. ...
The Commerce Commission is set to undertake a market study into the Retail Grocery Sector
On 17 November 2020 the Minister of Commerce and Consumer Affairs announced a market study into the retail grocery sector through the Commerce Commission under Part 3A of the Commerce Act 1986 (Act)....
Court of Appeal cuts fine for Steel & Tube’s breaches of the Fair Trading Act 
The Court of Appeal in Commerce Commission v Steel & Tube Holdings Limited [2020] NZCA 549 has set aside last year’s High Court decision under the Fair Trading Act 1986 (FTA) where it imposed a ...
My way or the highway: repudiation, cancellation and dispute resolution clauses
In Jade Residential Ltd v Paul, the Court of Appeal reviewed two issues which may arise in contractual disputes: The right to cancel a contract for “partial” repudiation; and Whether an aggrieved...
Making up the shortfall: Subcontractor awarded an interim injunction requiring head contractor to hold its retentions in a separate trust account
In a recent High Court decision,[1] Hanlon Plumbing Limited (Hanlon) successfully obtained an interim injunction on a without notice basis requiring Downey Construction Limited (Downey) to pay retenti...
16.11.2020 Posted in Construction Law
Send us an enquiry
For expert legal advice, please complete the form below or call us on (09) 375 8700.
  • This field is for validation purposes and should be left unchanged.
-->