Submission to Treasury on Overseas Investment Act reform

27 May 2019

Chapman Tripp has made a submission to the Treasury on the Consultation document Reform of the Overseas Investment Act 2005.

We supported the following options/solutions as part of Treasury’s proposed reform of the Act:

Sensitive adjoining land: the current definition of sensitive adjoining land is too broad. Treasury’s proposal to narrow the definition in a material way, while still retaining exceptions to protect adjoining land where actually needed, suitably deals to this problem.

Leases: leases should only be screened if they are residential leases over 12 years or leases over 35 years for all other categories.

Definition of overseas person: issuers with a primary listing of their equity securities on a licensed financial product market (such as the NZX Main Board) should be treated as an overseas person only if at least one overseas person (alone or together with its associates) has obtained a shareholding of 25% or more in the issuer.

Portfolio investors: a class exemption should be adopted, to be granted to portfolio investors that are beneficially owned and controlled by New Zealanders (i.e. with at least 51% of the entity's funds under management invested on behalf of New Zealanders).

Tipping point: consent should be required only for a transaction in an entity that owns or controls an interest in sensitive land where an overseas person acquires a class of securities in that entity such that, when the transaction is complete, the acquirer will hold shares giving them a control interest in the entity; and as a result of that transaction, the entity invested in will be an overseas person.

Investor test: the business experience and acumen, financial commitment and immigration eligibility criteria should be removed from the test. In respect of the good character criterion, we support the simplifications proposed by Treasury’s Option 1 or Option 2, and believe either would streamline the character assessment in a manner that does not undermine materially its purpose or scope.

Impact of investments: a national interest test should be adopted to operate alongside a simplified benefit to New Zealand test. The onus of the test should be on decision-makers to identify a reason why the national interest would be harmed by the proposed transaction, rather than requiring applicants to demonstrate that the transaction would benefit national interest.

Timeframes: deadlines that are tailored to each of the Act’s consent pathways should be introduced. This should be supported by increased resources for the Overseas Investment Office.

Read our full submission

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