5.06.2020

COVID-19: OIO Update

Government fast-tracks new measures during COVID-19 crisis

Yesterday, the Government announced that it is urgently amending the Overseas Investment Act (“Act“) to protect New Zealand’s businesses and assets from opportunistic foreign acquisitions as the economy recovers from the COVID-19 fallout.  The changes follow similar moves in other jurisdictions (including Australia) and essentially bring forward the “national interest test” and other critical measures of the Phase Two reforms that were publicly announced in late 2019, but with some temporary amendments to respond to the urgent COVID-19 situation.

Temporary notification requirement

The urgent amendments to the Act will temporarily apply a “national interest test” to all foreign investments (that are not already subject to the Act), regardless of dollar value, where the transaction will result in a more than a 25% foreign ownership interest in a New Zealand business or more than 25% of its assets, or will increase an existing foreign ownership interest up to or beyond 50%, 75%, or 100%.

This temporary power will take the form of a simple notification requirement.  It will be reviewed every 90 days and will remain in place for as long as it is necessary to protect the national interests of New Zealand while the economic aftermath of COVID-19 continues to significantly impact the country.  It is difficult to assess how long this may be.

The Government has advised that the process will be quick to ensure investment is not unduly delayed while protecting Kiwi businesses from being preyed upon by foreign investors as they recover from the damage caused by COVID-19.  The details of the notification requirements and established timelines are not yet clear. 

“National interest test”

In addition to the above temporary measures and once they have been lifted, a “national interest test” for our most strategically important business assets will remain.  This will apply to transactions that are already subject to the Act, with a minimum threshold of $100 million (or higher, if set by the terms of an international trade agreement), as well as investments in sensitive land and fishing quota.  The test will provide the Minister with broad discretionary power to deny consent to any investment that the Minister considers is contrary to New Zealand’s national interest.

Other Phase Two Reforms Accelerated

Other measures of the Phase Two reforms will also be fast-tracked, such as equipping the Overseas Investment Office with enhanced enforcement powers.

Further, in recognition of the anticipated need for capital by New Zealand businesses in the near term, the requirement for certain low-risk transactions to obtain OIO consent will be removed from the Act’s regime.  This will include purchases by fundamentally New Zealand entities (as referred to in our earlier article on the Phase Two reforms) and small changes in existing shareholdings.  In addition, the Act’s supporting regulations will be amended to extend existing exemptions and remove two further classes of low risk lending and portfolio management transactions from screening.

We expect that the business community will welcome this simplification of the Act’s regime which aims to cut some red tape and promote productive, sustainable, and inclusive foreign investment. 

When will these changes come into effect?

The critical COVID-19 measures of the Phase Two reforms are expected to be in force by mid-June.  The balance of the Phase Two reforms will be progressed in the usual way to ensure that they are fully considered by Parliament.

If you would like any further information about the proposed changes, or how they may affect your business, then please contact the Business Advice Team.

 

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.

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

Bereavement Leave Confirmed for Miscarriages and Stillbirths 
New Zealand has become the second country in the world to pass legislation that provides bereavement leave for mothers and their partners after a miscarriage or stillbirth.
26.03.2021 Posted in Business Advice & Employment Law
Court of Appeal Overturns Employment Court’s Decision in Tourism Holdings
Tourism Holdings Limited v A Labour Inspector of the Ministry of Business, Innovation and Employment (Tourism Holdings) is the first decision in which the Employment Court considered section 8(2) of the Holidays Act 2003 (Act). The Court of Appeal has recently overturned this decision.
26.03.2021 Posted in Business Advice & Employment Law
Guarantees must be in writing and signed to be enforceable
For a guarantee to be enforceable, the requirements set out in section 27 of the Property Law Act 2007 (Act) must be strictly complied with.  This is what the NZSC held in Brougham v Regan. The key i...
19.03.2021 Posted in Business Advice
UK Supreme Court Delivers Decision on Uber Driver Employment Status
The distinction between employee and independent contractor can be complex, particularly where the nature of the business model blurs the lines of standard employment practices.
16.03.2021 Posted in Business Advice & Employment Law
Holidays Act Overhaul – Taskforce Recommendations
There have been calls for an amendment of the Holidays Act 2003 (Act) for some time.
16.03.2021 Posted in Business Advice & Employment Law
Unwanted Land Covenants and Easements: Seeking a Court Order
The Supreme Court recently considered an application by Synlait Milk to modify a land covenant restricting the burdened land use to farming, grazing and forestry operation to protect the ability of the benefited land owner to develop a quarry.  This article looks at the circumstances in which the courts might give relief to parties in an application to extinguish or modify a covenant or easement.
15.03.2021 Posted in Property Law
New ICC Arbitration Rules 2021 come into force
The revised International Chamber of Commerce (ICC) Arbitration Rules for 2021 (2021 Rules) have now come into force and apply to all ICC arbitrations begun after 1 January 2021.  While the new Rules...
10.03.2021 Posted in Litigation & Dispute Resolution
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.
-->