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.