Australia’s foreign investment approval regime consists of:
- the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) and its associated regulations; and
- Australia’s Foreign Investment Policy (Policy).
The Policy provides guidance in relation to FATA and also sets out additional transactions, not covered by FATA, which require prior approval.
The Foreign Investment Review Board (FIRB) has released its policy for 2013, which contains three important substantive changes.
The first change is to clarify the definition of “foreign government investor”. The analogous definition in the old policy provided that it included (among other things) any entity where foreign governments, their agencies and their related entities held an interest of more than 15%, leaving open the question of whether foreign government related entities from different countries would be aggregated together to reach the 15% threshold. (Our experience was that FIRB generally did aggregate.) The new Policy clarifies that a foreign government investor includes an entity where:
- foreign governments, their agencies and related entities from a single country hold a 15% or more interest; or
- foreign governments, their agencies and related entities from multiple countries hold a 40% or more interest.
This is a sensible change that brings the calculation more in line with other concepts in FATA. It is important to note that foreign government investors from different US states would still be aggregated together under this definition.
The second is to clarify the Policy in relation to the enforcement of security by state-owned banks. Previously, the Policy provided that a state-owned bank needed prior approval to “enforce” a security interest, and it was unclear how this could work in practice or why it was necessary given enforcement rarely leads to ownership of or control over assets. The new Policy clarifies that a foreign government investor that is regulated by APRA as an “Authorised Deposit Taking Institution” does not require approval to:
- take security over an asset as part of an ordinary course money lending agreement;
- enforce the security and sell the asset; or
- enforce the security and control the asset, where the bank retains control of the asset for less than 12 months.
The third substantive change relates to the requirement for government related investors to obtain approval to commence a new business in Australia. While this has been a feature of the Policy for some time, the new Policy now contains a definition of “new business” which clarifies that it is:
- starting business in Australia for the first time; or
- if already operating a business in Australia, commencing a new primary activity that is not incidental to an existing primary activity and that falls within a different division under the “Australian and New Zealand Standard Industrial Classification” as published by the Australian Bureau of Statistics.