2019 M&A Forecast - Major changes to overseas investment regime

New Zealand’s Overseas Investment regime has
seen significant change during 2018. The new
coalition government implemented a number of
amendments, and signalled further reviews ahead.
Changes to the regime include:

  • The indicative processing time for applications
    to acquire sensitive land is currently 90 to 120
    working days. We recommend allowing a four
    to six month timeframe as a minimum when
    sensitive land is concerned, and allowing
    between three and four months where sensitive
    land is not involved. Complicated applications
    take longer.
  • A large amount of supporting financial and
    personal information is required of overseas
    directors and shareholders of not only the
    investing entity, but also of its ultimate
    controlling parent company. The Overseas
    Investment Office (OIO) requires details of
    ownership structures to clearly identify the
    ultimate individuals who own and/or control the investment entity undertaking the New Zealand
    investment. This process has more significance
    than previously, and we have seen significant
    consent applications declined when this
    information has not been satisfactory to the OIO.
    For buyers, time should be spent in advance so
    that all information is provided up front, and for
    sellers care should be taken to critically review
    the information before signing, taking the OIO
    risk into account.
  • Through a combination of “Directive Letters”
    from the Treasury to the OIO, and amendments
    to legislation, changes have been introduced
    with the following effects:

– forestry rights are now included in the
definition of sensitive land which will
capture more forestry transactions, with
the Government streamlining the forestry
consent process and providing the ability for
a “standing consent” to acquire forestry land
without having to go through the OIO process;

– residential land is included in the definition
of sensitive land – with the definition of
residential land being wider than expected.
This can impact on corporate transactions
where the business being acquired owns or
leases residential land (for example land used
for retirement villages);

– for rural land (non-urban land of five hectares
or more, but not including forestry land), the
OIO must identify that the benefits to New
Zealand will be, or are likely to be, substantial
and identifiable to allow the investment to
proceed. The Government has directed the
OIO to place most weight on certain economic
benefits and the extent to which New
Zealanders have oversight or can participate
in the investment going forward. This means
that corporate transactions involving rural
land are likely to face high hurdles to obtain
OIO consent.

Read the full Merger and Acquisition Forecast

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