In these times of change and innovation, overseas investment will play a crucial part in supporting the growth and recovery of New Zealand’s economy. The Overseas Investment (Urgent Measures) Amendment Act 2020 has introduced changes which seek to balance New Zealand’s stated aim of attracting investment and support for kiwi businesses whilst protecting New Zealand’s national interests.
This month, these changes bring us new criteria for the “investor test”, the continued application of the temporary notification regime and consultation on changes to the application fee structure.
New investor test
The new overseas investor test will come into force on 22 March 2021. This test is intended to simplify the assessment of whether investors are suitable to own New Zealand assets. The simplification aims to encourage and attract responsible overseas investors while increasing the clarity of existing safeguards. This is achieved by replacing the current broad criteria with a clear list of distinct factors to consider. Investors will no longer have to satisfy the general tests of business acumen and financial commitment which is currently a costly, time consuming and uncertain process.
The new test will assess whether investors (or any individuals with control of the investor) are likely to pose a risk to New Zealand based on 12 factors relating to their character and capability. The factors include:
- Convictions resulting in imprisonment
- Corporate fines
- Civil pecuniary penalties
- Tax evasion
This test is a targeted process, essentially a checklist, providing greater certainty.
If none of the factors are established the test is met, however the relevant Ministers retain discretion in that they may decide that the established factor(s) do not make the investor unsuitable to own or control sensitive New Zealand assets. The test will apply to applications received on or after 22 March 2021, as well as applications made before 22 March 2021 where no transaction has been entered into to buy the asset concerned.
Temporary notification regime
This month, we have been advised that the temporary emergency notification regime for screening overseas investment transactions will remain in place until at least 25 May 2021. This means that most business acquisitions by overseas persons will continue to require notification and clearance under this regime.
It is a simple process to lodge a notification, and most notifications are cleared within the ten business day period if no concerns are raised. However investors need to ensure their transaction documents have the necessary conditions precedent, that they are properly advised, and that the potential timelines are factored into the sale process.
The Overseas Investment Office is also currently consulting on changes to its fee regime. The preferred option represents a shift away from a single fee for applications under each category, and instead a differentiated fee structure with different fee levels for standard and complex applications. For further details, or if you would like to make a submission, see here. Submissions are due by 19 March 2021.
If you would like to catch up on the other changes to the overseas investment legislation that have been introduced over the last twelve months, then please see our prior articles here and here, or please give us a call.
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