The Overseas Investment (Urgent Measures) Amendment Bill has come back to the House in slightly improved shape, and will now be passed under urgency this week to come into force by mid-June.
The Bill is part of a wide-ranging government response to speed up the post-COVID-19 economic recovery. Chapman Tripp recommended some improvements to strengthen the Bill’s ability to perform this brief.
Several of our recommendations have been accepted and we consider that the Bill will be more effective as a result.
Clarification that the regime covers only strategically important businesses themselves, not ancillary activities (e.g. duty free shops at strategically important airports).
Overseas persons, and transactions exempted from the consent requirements of the Act (such as listed issuers and acquisitions of interests in most ‘adjoining land’), will also be exempted from the COVID-19 emergency call-in power and the more permanent call-in regime.
Additional assurance that transactions requiring full consent under the Act do not also trigger the emergency notification requirements or its replacement call-in power.
Regulations will now limit the types of assets of a strategically important business that trigger the permanent call-in power (following cessation of the emergency regime). The effect of this is to allow the exemption of non-critical and replaceable assets, which was another of the changes we argued for in our submission.
The listed issuer ‘standing consent’ will be extended to listed managed investment schemes, such as Goodman Property Trust and Vital Healthcare Property Trust.
The Minister will review within 45 days whether the emergency notification regime is capturing too broad a set of transactions (although there are no legislative mechanisms to lessen the regime's scope. New or amended regulations would be required).
Changes kicked down the road
Disappointingly, the Committee deferred some changes that could usefully be made now for consideration in the context of the Overseas Investment No.3 Bill, which will implement the other reforms arising from the Phase 2 review.
This includes a suggestion from Chapman Tripp, the Retirement Villages Association and others that ‘standing consents’ to remove most listed issuers and to narrow application of the Act to adjoining land be permanent (rather than time-limited).
Officials opposed this, saying permanent exemptions should not be made without full parliamentary scrutiny, especially as any such change would be automatically locked in to international obligations (such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership) – meaning that they could not be changed later.
For most listed issuers the ‘standing consents’ should do the job, although the s 61B exemption power will be available only to those which meet the ‘standing consent’ requirements – i.e., having less than 25% aggregate control by those overseas persons and their associates that own more than 10% of a listed company, or where aggregate ownership of overseas persons exceeds 50%.
The Committee also rejected changes Chapman Tripp proposed to:
- better capture genuinely non-New Zealand government investors, and make it simpler for investors to determine whether they are relevant government enterprises, and
- clarify that the regime only applies to offshore share transfers where the target holds (whether directly or indirectly) New Zealand assets.
Officials opposed both changes on the grounds that they relate to broader issues across the overseas investment regime.
Chapman Tripp submission.
Chapman Tripp commentary on the original Bill, anticipating that at least some elements would be fast-tracked to deal with the economic damage created by the pandemic.
Chapman Tripp commentary on the announcement that a fast-track Bill would be introduced.