Overseas Investment Urgent Measures Amendment Bill

A number of urgent changes to the Overseas Investment Act will bring in a temporary emergency notification regime for new investments and will fast track a number of reforms previously signalled. 

Temporary emergency notification regime

All foreign investments that result in more than a 25% ownership interest in a New Zealand business or business assets, or that increase an existing interest up to or beyond the thresholds of 50%, 75%, or 100%, regardless of dollar value, will be required to be notified under the Act.

On notification, the transactions will be reviewed to determine whether they are contrary to New Zealand's national interest. To preserve New Zealand's national interest, Ministers can impose conditions on, block or unwind transactions. “All clear” decisions are to be given within 10 working days (which is expected for the vast majority of cases) and within 30 working days to 60 working days where a more detailed review is required. 

It is expected the vast majority of notified transactions will proceed quickly, without any intervention.

Fast tracked reforms

As part of the emergency measures, Government has accelerated some of the reforms initially proposed in the Overseas Investment Amendment Bill (No 2), including:

• Bringing forward the “national interest test”. This applies to "transactions of national interest" which includes transactions that are required to be screened under the Act (i.e. sensitive land / significant business assets) and involve non-New Zealand government investors (essentially non-NZ government investors holding greater than 10% of the business/asset) or strategically important businesses (SIBs).

• Reducing the scope of what constitutes sensitive adjoining land. 

• Bringing forward provisions that simplify the “investor test”.

• Introducing new exemptions by way of regulations - including for non-listed companies and managed investment schemes with non-controlling foreign ownership interests and to support New Zealand's ability to access debt and equity financing.

• Introducing a standing consent for NZX listed issuers who have widespread foreign portfolio ownership (i.e. less than 10%).

In summary

• The Urgent Measures Bill is due to pass in mid-June 2020

• The new Act will only apply to transactions entered into when the Bill comes into force (which is two weeks after the Bill is passed). 

• The existing rules will continue to apply to all transactions entered into before the commencement date, including ‘conditional agreements’ for sale and purchase.

The remaining provisions in the Phase 2 reforms that have not been fast tracked will be moved to a new Overseas Amendment Bill (No 3). This (No 3) Bill will go through the usual legislative process and is expected to pass within 12 months.

Who to talk to

To discuss how these changes could impact your business, reach out to one of the PwC Legal team.