In brief: foreign investment review procedure in Australia

Procedure

What jurisdictional thresholds trigger a review or application of the law? Is filing mandatory?

The system of monetary thresholds is complex: both the way that the threshold is calculated and the dollar value of the monetary threshold differ for different kinds of transactions. Monetary thresholds are also indexed annually for inflation and are affected by Australia’s treaty obligations; therefore, different thresholds may apply for investors from countries with which Australia has entered into free trade agreements. Not all free trade agreements contain the same exemptions. The standard monetary threshold for foreign persons who are not foreign government investors and who are investing into an Australian company or business that is not an agribusiness, media business or national security business is A$310 million for 2023.

In terms of the way that the threshold is calculated:

• for acquisitions of interests in shares of Australian corporations or units in Australian trusts, the threshold is the higher of the value of the gross assets of the target entity and the value implied by the consideration paid for the shares or units;
• for acquisitions of interests in Australian land other than agricultural land, the threshold is the value of the interest in land being acquired;
• for acquisitions of interests in Australian agricultural land, the threshold is the consideration for the land being acquired plus the value of all other Australian agricultural land held by the acquirer;
• for acquisitions of interests in Australian agribusinesses, the threshold is the consideration paid for the investment plus the value of all other investments in that agribusiness held by the acquirer;
• for asset acquisitions, the threshold is the consideration for the acquisition; and
• for other control type transactions, the threshold is the gross assets of the target entity.

What is the procedure for obtaining national interest clearance of transactions and other investments? Are there any filing fees? Is filing mandatory?

Notifiable actions and notifiable national security actions must be notified and approval must be sought – failure to do so is itself an offence – while significant actions that are not notifiable actions or notifiable national security actions, as well as reviewable national security actions, do not, strictly speaking, have to be notified, but doing so and obtaining a statement of no objection cuts off the Treasurer’s powers (subject to the Treasurer's last resort review powers).

The procedure for securing approval for a foreign investment proposal that is a notifiable action, significant action, notifiable national security action or reviewable national security action is that the applicant must lodge an application with the Foreign Investment Review Board (FIRB) online. The online application requires basic information about the transaction: names and addresses of the parties, the kind of transaction and information relevant to calculating the monetary threshold for the transaction and the application fee. The applicant is expected to attach a cover letter that explains the transaction in detail, including reasons for the transaction and the acquirer’s intentions for the target.

Each application attracts filing fees, which are calculated based on a formula for each transaction. The application is not considered to be lodged until payment is made, and if FIRB determines during the course of assessment that additional fees are owed, the statutory deadline recommences from the date the final correct fee is paid.

Once the application is lodged, the case officer assigned to the application may contact the applicant to ask questions. In addition, all FIRB applications are submitted to other government agencies for input. Consult agencies for significant actions and notifiable actions will always include the Australian Taxation Office and the Australian Competition and Consumer Commission (ACCC) (even if ACCC clearance is not being sought by the parties). They may also include other government agencies such as the Critical Infrastructure Centre, which coordinates the national security review of applications involving critical infrastructure, as well as securities services and state governments.

More complex transactions may result in an ongoing dialogue between the FIRB and the applicant regarding the imposition of conditions.

Which party is responsible for securing approval?

The acquirer is responsible for securing approval.

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?

From a statutory perspective, the review process consists of a 30-calendar-day examination period and a 10-calendar-day notification period. The examination period can be extended on request by the applicant, or by the Treasurer (either exercising a new power to extend unilaterally, or issuing a public interim stop order). In practice, the length of time is affected by the time of year, the extent to which the application is being reviewed by other government departments, the election cycle and general levels of business, and voluntary extensions by the applicant are routine.

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?

For any notifiable action or notifiable national security action, it is an offence to fail to notify the foreign investment proposal. For a significant action (including a notifiable action), notifiable national security action or a reviewable national security action that is notified, it is an offence to proceed with the foreign investment proposal until a statement of no objection is received or the Treasurer’s power to make a decision in relation to the proposal expires. (There is an exception for certain ‘passive increases’ that amount to significant or notifiable actions, where post-completion approval can be sought.) Criminal penalties for failing to comply are: for individuals, up to ten years’ imprisonment or a A$3,330,000 fine or both; and for companies, a fine of up to A$33,300,000.  The government has announced an intention to substantially increase potential penalties, and as of 1 January 2023 has done so in respect of provisions relating to residential land.

There are a range of other civil and criminal penalties that apply for various other contraventions of the Foreign Acquisitions and Takeovers Act 1975 (Cth).

Officers of companies commit an offence or may be liable for civil penalties if the corporation is convicted of the offence or is the subject of a civil penalty order and the person authorised or permitted the commission of the offence or the contravention of the civil penalty provision by the corporation.

Third parties who knowingly assist a breach may also be subject to civil and criminal penalties.

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?

Most foreign investment proposals are routine and do not require any prior consultation with the Australian government. If an applicant considers that a foreign investment proposal may be controversial, it is possible to engage in dialogue with the Treasury and the FIRB before and during the application process. However, guidance will generally not be given as to how an application will be decided.

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?

Most foreign investment proposals are routine, and the review process is confidential. However, given the case-by-case nature of the examination process, high-profile transactions have the potential to become politicised. It is sensible for applicants to monitor the Australian media and political process to ensure that information in the public domain that is inconsistent with the application is appropriately addressed.

There is no procedure for expediting approvals. The Treasury and the FIRB may take into account requests for early decisions based on commercial imperatives, but they have no obligation to do so and these requests should be used sparingly.

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?

If a foreign investment proposal is a notifiable action or significant action and the Treasurer is satisfied that the proposal is contrary to the national interest, or if the proposal is a notifiable national security action or a reviewable national security action and the Treasurer is satisfied that it is contrary to national security, the Treasurer has the power to order the disposal of any interests in Australian securities, assets or land that were acquired under the proposal, unless the proposal was notified and a statement of no objection obtained.

The Treasurer can re-review actions notified after 1 January 2021 where approval has been given to determine whether a national security risk relating to the action exists, if since the transaction was notified, the Treasurer has become aware that:

• the applicant made a statement that was false or misleading in a material particular, or that omitted a matter or thing without which the statement was misleading in a material particular;
• the business, structure or organisation of the person has or the person's activities have materially changed; or
• the circumstances in which the action was or is proposed to be taken have materially changed.

The Treasurer may make orders in relation to the action if:

• the Treasurer conducts a review in compliance with the law;
• the Treasurer is reasonably satisfied that:
  • the false or misleading statement or omission directly relates to the national security risk; the national security risk posed by the change of the business, structure or organisation of the foreign person or the change to the person’s activities could not have been reasonably foreseen or could have been reasonably foreseen but was only a remote possibility at the time of the original approval; or
  • the relevant material change alters the nature of the national security risk posed at the time of the original approval; and
• the Treasurer is satisfied that reasonable steps have been taken to negotiate in good faith with the person, and is satisfied that requiring the person to comply with an order is reasonably necessary for purposes relating to eliminating or reducing the national security risk and the use of existing regulatory systems would not adequately eliminate or reduce the national security risk.

In addition, where a transaction constitutes a significant action or a reviewable national security action but is not notified, the Treasurer has 10 years to call the action in for review, if he or she considers that a national security risk exists.