Review Of All Foreign Business Investment In New Zealand
Under new urgent measures legislation, an overseas person must now obtain a direction order before acquiring any property used in carrying out a business or acquiring any significant interest in a NZ entity. The Overseas Investment (Urgent Measures) Amendment Act 2020 has wide reaching ramifications for any transaction with an overseas connection.
COVID-19 brought a number of challenges to the New Zealand economy. Covid-19 has placed businesses under pressure, and one result of that pressure is the fall in value of such businesses. Many consider the falling business values create the potential for overseas persons to acquire ownership or control of business assets important to New Zealand’s economic recovery at prices that do not reflect the long-term value of these businesses.
Temporary Emergency Notification Scheme
To manage the risks that may be posed by foreign investment, the Overseas Investment (Urgent Measures) Amendment Act 2020 came into force on 16 June 2020. As well as long term amendments to overseas investment in NZ, a temporary risk management scheme was introduced so the Government could review all business transactions with an overseas connection.
How it works
Here is how the scheme works:
- 25% or more of shares, securities, or other interests (including new incorporations)
- a controlling interest
- an increase from a 25% interest to 50% or more.
- any business
- any business assets
- equipment or machinery used in a business (for example, equipment leased to another business)
- intellectual property (for example, change of ownership of New Zealand trademarks)
- any other property used in a business (for example, property leased to a business)
which amounts to a change in control of a business.
- Direction Order – notifying that the acquirer may give effect to the transaction with or without conditions
- Prohibition Order – prohibiting the transaction
- Disposal Order – requiring disposal of sensitive assets previously acquired
- Statutory Management – recommend any person who owns sensitive assets be placed into statutory management.
- overseas companies
- companies with 25% overseas ownership
- trusts controlled by overseas trustees or appointers
- companies with 25% overseas control (for example, overseas directors).
You should watch out for:
• new company incorporations with overseas shareholders
• changes in ownership of overseas parent companies
• leased assets
The Temporary Emergency Notification Regime will be reviewed on the 31st of July 2020 (45 days after the Amendment Act came into force) to ensure it is not broader than necessary.
The Temporary Emergency Notification Scheme should be considered for all transactions with an overseas connection. There is no materiality threshold.
If you have any queries or would like advice on issues relating to this article, please do not hesitate to contact Mike Roberton, Deirdre Norris or Ah Song Sunwoo.