Reform of the Overseas Investment Act 2005: Phase 2
Treasury has released a consultation document on the second phase review and potential reform of the Overseas Investment Act 2005 (OIA).
What is the purpose?
The stated aim of the reform is to balance “supporting high-quality investment and ensuring governments have flexibility to manage any risks arising from overseas investment”.
The consultation document invites public feedback on 3 broad areas to improve how the OIA regulates:
- the identification of sensitive assets caught by the OIA (and interests in those assets);
- which entities are considered ‘overseas persons’; and
- how overseas investments are screened for the purposes of obtaining consent under the OIA.
For OIA purposes, determining:
- whether or not land is sensitive; and/or
- whether or not a purchaser is an overseas person;
can be complex. Any potential legislation that has an effect on those matters, and may also bring in an additional ‘strand’ to the screening process, will certainly have an impact on both purchasers (wanting to know if their acquisition is ‘caught’) and vendors (seeking clarification on the marketability of their land to overseas investors/purchasers).
A copy of the consultation document can be found here.
Which parts of the OIA are affected?
The scope of the review is comprehensive, however key areas for consideration are:
- The ‘benefit to New Zealand’ test: Should it be retained and whether additional factors should be included when assessing the impact of an investment (such as negative effects of the proposed investment, water extraction matters, tax residency and Māori cultural values).
- Discretion to block transactions: Should Government have power to block certain transactions not currently caught by the OIA for reasons of national security or public order concerns.
- Definition of ‘overseas person’ for corporates: In particular, whether the current definition is too broad insofar as it captures some domestically incorporated companies that are controlled by New Zealanders (including many of the largest companies on the NZX).
- What constitutes ‘sensitive land’: Whether the definition of ‘sensitive land’ should be refined, in particular as it relates to leases and acquisitions of land adjoining ‘sensitive land’.
- The investor test: What information the Government can request from investors to ensure they are of good character.
Excluded from the review are the changes already brought in by the Overseas Investment Amendment Act 2018 (which, amongst other changes, included residential property as ‘sensitive land’). We have previously issued a series of alerts on these changes, which are summarised here.
We are reviewing the consultation document in detail and keeping a watching brief on developments.
Treasury is running public meetings and hui to allow interested people and organisations to give feedback on the consultation document. Written submissions can also be made. The closing date for submission is 24 May 2019.
If you have any questions on the consultation document or would like our assistance in developing a submission to Treasury, please contact one of our experts.