Overseas Investment

Foreign ownership and control of sensitive NZ assets are governed by the Overseas Investment Act and regulations. Assets acquisition are largely simple and protected by sound legal system.

The New Zealand government has been actively encouraging foreign investments from overseas. Our firm comprising of migrant lawyers is one of the pioneering New Zealand overseas investment advisory legal firms in Auckland business district offering specialised legal services for overseas investors in obtaining OIC’s consents etc.

Overseas Investment Act 2005 (OIA) and the Overseas Investment Regulations 2005 (OIR) are adminishered by the Overseas Investment Office (OIO) by assessing applications for consent from foreigners who wish to, make substantial investments in New Zealand. The OIO is a unit of Land Information New Zealand (LINZ). The OIO generally monitors compliance with conditions of consent and enforces breaches of the Act and the relevant provisions of the Fisheries Act. The Minister of Finance and the Minister of Land Information decide sensitive land applications (although some decisions are delegated) and the Minister of Finance and the Minister of Fisheries decide fishing quota applications. The regulator (or the regulator’s delegate) decides business (non-land) applications under delegation from the Minister of Finance.

FUNCTIONS OF THE OVERSEAS INVESTMENT OFFICE

In carrying out its functions under the OIA and OIR 2005, the overseas investment office considers the following criteria:

(a) whether the relevant overseas person or persons has or have the necessary business experience and acumen required for the investment;
(b) whether the relevant overseas person or persons are of good character;
(c) whether the relevant overseas person has demonstrated financial commitment to the investment;
(d) that the relevant overseas person is not ineligible for exemptions or permits under section 7(1) of the Immigration Act 1987; and that either:

(i) the relevant overseas person or persons is/are New Zealand citizens, ordinarily resident in New Zealand, or intending to reside in New Zealand indefinitely; OR
(ii) the overseas investment will, or is likely to, benefit New Zealand (or any part of it or group of New Zealanders), as determined by the relevant Ministers under section 17 of the OIA; and where applicable
(iii) if the relevant land includes non-urban land that, in area (either alone or together with any associated land) exceeds 5 hectares, the relevant Ministers determine that that benefit will be, or is likely to be, substantial and identifiable.

(e) if the relevant land is or includes farm land, either that farm land or the securities to which the overseas investment relates have been offered for acquisition on the open market to persons who are not overseas persons in accordance with the procedure set out in regulations (unless the overseas investment is exempt from this criterion under section 20 of the OIA).

OVERSEAS PERSONS DEFINED

The key definition in the Overseas Investment Act 2005 is the term “overseas person”. In the case of an individual an overseas person is an individual who is not a New Zealand citizen and who is not ordinarily resident in New Zealand. A company will be an overseas person if it is incorporated outside New Zealand or they are 25% or more owned and controlled by an overseas person or persons.

The term “overseas person” is also extended to apply:

(a) to a body corporate if an overseas person or persons have

(i) 25% or more of any class of the body corporate’s securities; or
(ii) the power to control the composition of 25% or more of the body corporate’s governing body; or
(iii) the right to exercise or control the exercise of 25% or more of the voting power at a meeting of the body corporate; or

(b) a partnership, unincorporated joint venture, or other unincorporated body of persons (other than a trust or unit trust) (A) if:

(i) 25% or more of (A’s) partners or members are overseas persons; or
(ii) an overseas person or persons have a beneficial interest in or entitlement to 25% or more of (A’s) profits or assets (including on (A’s) winding up); or an overseas person or persons have the right to exercise or control the exercise of 25% or more of the voting power at a meeting of (A); or

(i) 25% or more of A’s governing body are overseas persons; or
(ii) an overseas person or persons have a beneficial interest in or entitlement to 25% or more of A’s trust property; or
(iii) 25% or more of the persons having the right to amend or control the amendment of A’s trust deed are overseas persons; or
(iv) 25% or more of the persons having the right to control the composition of A’s governing body are overseas persons; or

(d) a unit trust (A) if:

(i) the manager or trustee, or both, are overseas persons; or

(ii) an overseas person or persons have a beneficial interest in or entitlement to 25% or more of A’s trust property.

WHEN CONSENT IS REQUIRED

The OIA and OIR allow the government to monitor the nature and extent of significant new and existing overseas investment into New Zealand. Currently consent is required:

(a) for overseas investment in any land classed as sensitive land under Part 1 of Schedule 1 of the OIA and,

(b) if the interest acquired is a freehold estate or a lease, or any other interest, for a term of 3 years or more (including rights of renewal, whether of the grantor or grantee), and is not an exempted interest (also classed as sensitive land); or

(c) rights or interests in securities of a person (A) if (A) owns or controls (directly or indirectly) an interest in land described in (a) or (b) above and, as a result of the acquisition,—

(i) the overseas person or the associate (either alone or together with its associates) has a 25% or more ownership or control interest in (A); or

(ii) the overseas person or the associate (either alone or together with its associates) has an increase in an existing 25% or more ownership or

control interest in (A); or

(iii) (A) Becomes an overseas person.

(d) if a transaction will result in an overseas investment in significant business assets as defined by section 13 of the OIA to include:

(i) the acquisition by an overseas person, or an associate of an overseas person, of rights or interests in securities of a person (A) if

– as a result of the acquisition, the overseas person or the associate (either alone or together with its associates) has a 25% or more ownership or control interest in (A) or an increase in an existing 25% or more ownership or control interest in (A); and

– the value of the securities or consideration provided, or the value of the assets of (A) or (A) and its 25% or more subsidiaries, exceeds $100 million; or

(ii) the establishment by an overseas person, or an associate of an overseas person, of a business in New Zealand (either alone or with any other person) if—

– the business is carried on for more than 90 days in any year (whether consecutively or in aggregate); and

– the total expenditure expected to be incurred, before commencing the business, in establishing that business exceeds $100 million; or

(iii) the acquisition by an overseas person, or an associate of an overseas person, of property (including goodwill

and other intangible assets) in New Zealand used in carrying on business in New Zealand (whether by 1 transaction

or a series of related or linked transactions) if the total value of consideration provided exceeds $100 million.

NOTE: sections 56 to 58B of the Fisheries Act 1996, require consent for a transaction that will result in an overseas investment in fishing quota.

SENSITIVE LAND

A stated above, sensitive land is fully defined under Part 1 of Schedule 1 of the OIA. In determining the value of investments for consent purposes however, it is important to also take “associated land” into account. Associated land is:

(a) Any land (A) that adjoins land (B) or, in the case of land on an island listed in Part 2 of Schedule 1, land (A) and land (B) are on the same island; and

(b) a person owns or controls, or will (as the result of any transaction entered into or to be entered into) own or control, (directly or indirectly) an interest in land (A) (other than an exempted interest); and

(c) the same person, or an associate of that person, owns or controls, or will (as the result of any transaction entered into or to be entered into) own or control, (directly or indirectly) an interest in land (B) (other than an exempted interest).

EXEMPTIONS

APPLICATIONS FOR CONSENT

Applications for consent must be made in accordance with the Overseas Investment Act 2005. The application must:

(a) be in writing; and

(b) be signed by each applicant; and

(d) be accompanied by a statutory declaration verifying that the information

contained in the application is true and correct, unless the regulator waives

this requirement (The statutory declaration must be made by each

applicant or, if an applicant is a body corporate, by an officer of that applicant); and

(e) be sent to the regulator; and

(f )be accompanied by the relevant fee, unless this has already been paid.

WHO DECIDES THE APPLICATION?

An application must be decided,—

(a) in the case of a land decision, by the Minister and the Minister for Land Information:

(b) in the case of a business decision, by the Minister:

(d) in the case of a decision that is in more than 1 of the above categories, by all of the

Ministers that are relevant to those categories. However, a Minister or Ministers may delegate the power to decide.

Consent may be:

(a) granted in respect of a proposed or specified transaction, instrument or person;

(b) granted in respect of classes of transactions, instruments, or persons that the relevant Minister or Ministers determine;

(d) granted subject to the payment of a bond;

(e) granted in whole or in part;

(f) granted retrospectively;

(g) refused.

Furthermore, The Minister may revoke a consent for an overseas investment transaction before the overseas investment has been given effect if, in the Minister’s opinion, the consent has been obtained by fraud. Consent may also be varied by agreement, and/ or the transaction can be cancelled under the Overseas Investment Act.

Overseas Investment

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