What jurisdictional thresholds trigger a review or application of the law? Is filing mandatory?
If an investment is caught under the Act's consent pathways, filing is mandatory, and consent must be received before the relevant investment is ‘given effect to’. The Overseas Investment Office (OIO) considers that an investment is given effect to on signing a binding agreement, which means that any such agreement must be expressly conditional on receipt of OIO consent or, in the case of a notification under the national security and public order call-in regime, receipt of a direction order, to avoid breaching the Overseas Investment Act 2005 (the Act).
- there is no jurisdictional threshold for ‘sensitive land’ investments – the test is whether a qualifying interest in ‘sensitive land’ will be acquired; and
- the threshold for investments in ‘significant business assets’ is NZ$100 million consideration or gross assets, unless a higher threshold applies by virtue of the investor’s jurisdiction being a New Zealand trade agreement counterparty country (currently NZ$560 million for Australia and NZ$200 million for other trade agreement countries).
The national interest test will mandatorily apply to a transaction that already requires OIO consent under one of the usual pathways above where the investment relates to a strategically important business or is undertaken by a non-New Zealand government investor. The minister can also exercise residual discretion to review any other transaction that requires OIO consent if he or she considers the investment may be contrary to the national interest.
The national security and public order call-in regime only applies to investments that do not require consent or approval under the usual pathways. There is no monetary threshold that investments must meet to be caught under the national security and public order call-in regime, although there is a high bar in terms of when the regime is triggered – limited to investments in strategically important businesses and critical national infrastructure, with no residual discretion available to the minister. Notification of a transaction under the national security and public order call-in regime is voluntary in most cases (but recommended, in order to avoid risks associated with the transaction being called in for review after it has been implemented); however, notification is mandatory where the relevant strategically important business to which the investment relates is a business that researches, develops, produces or maintains military or dual-use technology, or is a critical direct supplier to either New Zealand's intelligence or security agencies, or both.National interest clearance
What is the procedure for obtaining national interest clearance of transactions and other investments? Are there any filing fees? Is filing mandatory?
OIO consent is mandatorily required for all transactions that are caught under the Act and must be obtained before the transaction is given effect. If a binding agreement in respect of a transaction covered by the Act is entered into before OIO consent is obtained, it must be expressly conditional on obtaining that consent, and the transaction cannot proceed unless and until consent is obtained.
OIO consent is obtained by making an application using webforms on the OIO website, which differ depending on the type of investment (sensitive land, business assets, residential land, forestry rights, etc). For all investments that require consent under the Act, the investor is required to complete an application form. The vendor is also required to prepare and submit a vendor information form.
Mandatory and voluntary notifications under the national security and public order call-in regime are also made via a webform on the OIO's website.
The application forms themselves contain guidance as to the information required to be included in the submission, and there are significant guidance and resources available on the OIO website to assist investors.
For all types of consent application, detailed information is required to be provided in the application form in relation to (among other things):
- the applicant;
- the transaction, including copies of all relevant agreements giving effect to the transaction;
- the applicant’s business and financial position (and in each case that of its wider corporate group, if applicable);
- the applicant’s ultimate ownership and control, including all relevant entities up to the top of the corporate chain, all ultimate beneficial owners of 5 per cent or more of the applicant and corporate structure charts;
- details of any foreign-government-related investors in the ownership structure and their holdings;
- the directors (or equivalent) of all entities in the ownership and control structure;
- details as to how material decisions are made in relation to the applicant or investment and who makes those decisions, including copies of any relevant contracts (such as shareholder or limited partnership agreements), constitutional documents and any delegation of authority documents;
- in respect of each ‘individual with control’ (key decision-maker) in relation to the applicant and investment, certain personal details, summary curricula vitae information, passport copies and 'investor test' character and capability confirmations;
- whether the transaction is a transaction of national interest due to: the investment relating to a strategically important business; or the investor being a foreign government investor; and
- whether the transaction may otherwise be considered to be a transaction of national interest (ie, there is a risk that the transaction is contrary to New Zealand's national interest).
In addition to the application form, an investment plan is required to be prepared and submitted for investments in sensitive land. This is effectively a business plan relating to the investment, the purpose of which is to set out the net benefit to New Zealand that will arise as a result of the investment by reference to certain ‘benefit factors’ that are set out in the Act and Overseas Investment Regulations 2005. These benefit factors include economic benefits (such as the creation of jobs, increasing export receipts, increases in business productivity and the introduction of new technology or business skills), environmental factors (such as the protection of native wildlife and plants, erosion control and improvements to water quality) and other factors such as the protection of heritage sites, the advancement of government policy and increased participation by New Zealanders. However, any net benefits to New Zealand arising directly from the investment can be claimed. Benefit claims are measured against the current state of the business, assets or land (or both), and are required to be detailed and backed up by quantitative evidence and analysis that is set out in the investment plan.
The vendor information form required to be submitted by the vendor must contain details about the vendor, and the current state of the business, land or assets (or both). This form is submitted to the OIO by the vendor separately to, but concurrently with, the investor’s submission of its application.
Fees are required to be paid to the OIO for all consent application types. The quantum of fees differs between application types, but currently includes fees of NZ$38,800 for significant business assets applications; NZ$2,040 to NZ$35,000 for residential (but not otherwise sensitive) land; NZ$33,600 to NZ$59,000 for forestry rights applications; NZ$68,200 to NZ$141,900 for sensitive land decisions made under delegation by the OIO; and NZ$74,000 to NZ$146,200 for sensitive land decisions made by the ministers. An additional fee of NZ$83,700 is payable where a consent transaction also requires a national interest assessment.
No fees are required to be paid in respect of a notification under the national security and public order call-in regime, including when the transaction is called in for review by the minister.
Which party is responsible for securing approval?
The purchaser or investor is the party responsible for making the application or notification and obtaining consent or clearance (as applicable).
The counterparty’s involvement in the application or notification process is relatively limited; although, for consent applications, the vendor is required to complete and provide to the OIO separately a vendor information form, which contains basic details regarding the vendor, the vendor's ownership and control structure, a description of the business, and the reasons for the sale.Review process
How long does the review process take? What factors determine the timelines for clearance? Are there any exemptions, or any expedited or ‘fast-track’ options?Consent regime
Assessment timeframes differ depending on the OIO consent pathway that is triggered by the investment. These timeframes reflect the relative complexities of the assessment processes and the amount of information gathering, analysis and consultation required. The statutory timeframes are non-binding and there is no right of recourse or deemed consent for the investor if the timeframes are not met. Further, the timeframes can be extended by the OIO for a number of reasons, including while it waits for additional information that it has requested from the applicant during the initial 15 working day review period. The new assessment timeframes range from 35 working days for significant business assets consents, to 55 working days for national interest assessment and one-off forestry consents, to 70 working days (not farmland) or 100 working days (farmland) for sensitive land consents. Where the national interest test applies in addition to the standard consent pathway or more than one consent pathway applies to the transaction, the applicable timeframe will be the longer timeframe (eg, for a significant business assets consent with national interest assessment the timeframe will be 55 working days; for a standard sensitive land consent with national interest assessment the timeframe will be 70 working days; and for a significant business assets and sensitive farmland application the timeframe will be 100 working days).
In all cases, application preparation time is additional to the OIO’s review period, and requires significant expertise and dedication of resources to obtain and analyse the required information and produce the application and required appendices. It typically takes between two weeks and one month to obtain and prepare the required information and prepare a high-quality and fulsome application that meets the OIO's disclosure standards. Where insufficient information is provided in the application on submission, the application will be rejected by the OIO after an initial 15-working-day review period and returned to the applicant.
National security and public order call-in regime
A transaction notified under the national security and public order call-in regime will either be cleared to proceed or called in by the minister for review within 15 working days from notification. Where the transaction has been escalated, the minister will generally decide the matter within a further 40 working days, but can extend this for an additional 30-working-day period in particularly complex or sensitive cases.
In practice, the vast majority of notified transactions will be given clearance to proceed within the 15-working-day time frame, ensuring that transactions are not unduly delayed.
Must the review be completed before the parties can close the transaction? What are the penalties or other consequences if the parties implement the transaction before clearance is obtained?
Yes, OIO consent or clearance must be obtained before the parties can close the transaction. Owing to the length of the OIO review consent process, this often results in a material period between signing and closing a transaction that requires consent under the Act.
A person who is required to apply for consent to an overseas investment transaction commits an offence if that person gives effect to the overseas investment without the consent required by the Act, and will be liable on conviction to, in the case of an individual, imprisonment for a term not exceeding 12 months or to a fine not exceeding NZ$500,000, or, in the case of a body corporate, to a fine not exceeding NZ$10 million. The OIO can also apply to a court to order disposal of interests in property or assets (including securities) acquired in contravention of the Act. The OIO has a large, dedicated enforcement team, and regularly brings enforcement proceedings and imposes fines for breaches.Involvement of authorities
Can formal or informal guidance from the authorities be obtained prior to a filing being made? Do the authorities expect pre-filing dialogue or meetings?
The OIO has historically shied away from giving formal guidance, particularly in relation to issues of legal interpretation, and has generally directed applicants to rely on their own New Zealand legal advisers to navigate both the legislation and the application process. However, in 2022 the OIO has shown greater willingness to provide guidance and interpretations over email, such that it is now a genuine option in difficult or marginal cases.
Additionally, informal pre-application meetings with the OIO are both encouraged by the OIO and can be beneficial, particularly to introduce a new investor to the OIO and discuss any matters of particular complexity or novelty regarding the applicant’s ownership and control structure, the transaction and the applicant’s future plans in relation to the target assets.
Pre-application meetings normally last for about an hour and can be in person at the OIO’s offices in Wellington or can be conducted by teleconference or videoconference.
There is no expectation on the part of the OIO of pre-application dialogue or meetings.
When are government relations, public affairs, lobbying or other specialists made use of to support the review of a transaction by the authorities? Are there any other lawful informal procedures to facilitate or expedite clearance?
Applications are prepared and primarily supported (including liaising with the OIO before and during the application process) by the applicant’s New Zealand legal advisers. However, specialist government relations experts can assist (informally) in cases where additional advocacy is required.
Informally, the OIO will seek to expedite the consent process to meet statutory timelines for other regulatory processes, particularly on offshore transactions involving overseas regulated or statutorily imposed takeover or scheme timetables.
What post-closing or retroactive powers do the authorities have to review, challenge or unwind a transaction that was not otherwise subject to pre-merger review?
Under the national security and public order call-in regime, the government has the power to exercise control over investments not subject to the consent regime under the Act but that pose risks to national security or public order.
All overseas investment transactions that do not require consent under the Act but that relate to a business that researches, develops, produces or maintains military or dual-use technology, or is a direct supplier of integral and not readily replaceable goods or services to an intelligence or security agency, are mandatorily notifiable under the call-in regime. In this case, where notification is mandatory, the notifiable transaction cannot be 'given effect to' unless a clearance to proceed has been received.
Overseas investment transactions that do not require consent under the Act but involve acquisitions of interests in a strategically important business, either indirectly through the acquisition of securities or through direct acquisitions of assets, will be voluntarily notifiable. In the case of acquisitions of securities, notification will be triggered as follows:
- in relation to an overseas investment in a media business, a significant part of the business of which is the generation or aggregation of content, which has a significant impact on media plurality, only where a more than 25 per cent ownership or control interest is acquired (directly or indirectly);
- in relation to an overseas investment in a strategically important business that is listed on the New Zealand Stock Exchange, only where the overseas person or their associates acquire a 10 per cent or more ownership interest, control of 10 per cent or more of the voting rights or disproportionate access or control with a lesser ownership or control interest; and
- in relation to an overseas investment in any other strategically important business, where the overseas person or their associates acquire any ownership or control interest in that business.
In this case, where notification is voluntary, the notified transaction can be completed prior to a decision having been received, but this runs a risk that the transaction would subsequently be unwound if an adverse decision is rendered. Market practice is generally to notify the relevant transaction in both clear and marginal cases on the basis that in most cases a clearance to proceed will be received within a 15-working-day review period.
If a material risk to New Zealand's national security or public order is identified in respect of any transaction that is subject to the call-in regime, whether notified or not, the investment could be blocked, have conditions imposed or, where it has been implemented, be unwound. The OIO also has the power to apply for urgent injunctive relief from the courts and obtain court-enforceable undertakings from investors who have breached the Act; and to place entities into statutory management in order to enforce an order to unwind a transaction undertaken in breach of the Act.