What jurisdictional thresholds trigger a review or application of the law? Is filing mandatory?
Filing is mandatory and consent must be received before the relevant investment is ‘given effect to’. The OIO considers that an investment is given effect to on signing of a binding agreement, which means that any such agreement must be expressly conditional on receipt of OIO consent to avoid breaching the Act.
As noted in question 3:
- 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$530 million for Australia and NZ$200 million for other trade agreement countries).
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 included in 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 the OIO’s prescribed form application templates (available on the OIO website), which differ depending on the type of investment (sensitive land, business assets, residential land, forestry rights, etc). For all investments, the investor is required to complete an application form. The vendor is also required to prepare and submit a vendor information form.
The application forms themselves contain guidance as to the information required to be included in the submission.
For all types of 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, corporate structure charts, etc;
- 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;
- the business experience and acumen (including summary curricula vitae information) of the ‘individuals with control’ (key decision-makers) (IWC) in relation to the applicant or investment;
- the ‘good character’ of each IWC; and
- copies of passports of each IWC.
In addition to the application form, an investment plan is required to be prepared and submitted for sensitive land investments. This is effectively a business plan relating to the investment, the purpose of which is to set out the ‘benefit to New Zealand’ that will arise as a result of the investment by reference to 21 ‘benefit factors’ that are set out in the Act and Regulations. These benefit factors include matters such as introduction of new investment for development purposes, creation of jobs, increases in business productivity or efficiency, introduction of new domestic services or technology and protection of indigenous flora and fauna. Benefit claims are measured against a ‘counterfactual’ (see question 16) 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 is required to contain details about the vendor, the current state of the land or assets and the vendor’s future plans in respect of the land or assets. 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 application types. The quantum of fees differs between application type, but currently include fees of NZ$32,000 for significant business assets applications; NZ$34,100 for residential land and forestry rights applications; NZ$41,500 for sensitive land decisions made under delegation by the OIO; NZ$49,000 for sensitive land decisions made by the ministers; and NZ$54,000 for combination sensitive land and business assets applications where ministerial approval is required.
Which party is responsible for securing approval?
The purchaser or investor is the party responsible for making the application and obtaining consent. The counterparty’s involvement in the application process is relatively limited although, for sensitive land applications, the vendor is required to complete a ‘vendor information form’ (see question 9).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?
How long the OIO consent process takes depends on a range of factors and can range from one to two months to a year or more. There is currently no legislated review period with which the OIO must comply.
Typically, a significant business assets application process takes between one and four months from the time of submission to the OIO to consent being received, with the risk being to the longer end of that range. Sensitive land application processes typically take between two and eight months to obtain consent, again with the risk being to the longer end of that range.
The majority of sensitive land applications require separate review and approval by the Minister of Finance and the Minister of Land Information, following a recommendation by the OIO. The ministerial review and approval process is unpredictable, and may be impacted by parliamentary recesses, ministerial workloads and political influences. The OIO and ministers may also consult with interested stakeholders and experts in relation to heritage, environmental, cultural and walking access issues arising in relation to sensitive land applications, and these processes add further unpredictability to the review timeline.
In all cases, application preparation time is additional to the OIO’s review period, and requires significant expertise and dedication of resources to provide and assimilate the required information. It typically takes between two weeks and a month to prepare and obtain the required information and draft an application.
The government has announced that the proposed reform of the Act in 2020 will include the introduction of review time frames that are tailored to each type of application and reflective of the different levels of complexity that apply to the purchase of different asset types (eg, an investment in significant business assets will have a different time frame to investments in sensitive land). The particular time frames have not yet been determined.
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 must be obtained before the parties can close the transaction. Owing to the length of the OIO review process, this often results in a material period between signing and closing of a transaction that is subject to 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$300,000, or, in the case of a body corporate, to a fine not exceeding NZ$300,000. 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.
The government has announced that the proposed reform of the Act in 2020 will include increasing the financial penalties above to NZ$500,000 for individuals and NZ$10 million for corporates. The reforms will also introduce powers for the OIO to apply for urgent injunctive relief and obtain court enforceable undertakings to deal with breaches (including prospective 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 tends to shy away from giving formal guidance, particularly in relation to issues of legal interpretation, and generally directs applicants to rely on their own New Zealand legal advisers to navigate both the legislation and the application process. However, 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 with the OIO any matters of particular complexity or novelty regarding the applicant’s ownership and control structure, the transaction and/or 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.
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?
Neither the OIO nor the government currently has any power to review, challenge or unwind a transaction that does not require OIO consent under the Act.
The government has announced that the proposed reform of the Act in 2020 will include introducing a new ‘national security and public order call in power’ to allow the government to exercise control over investments not already subject to the Act but which pose risks to national security or public order. Mandatory and voluntary notification requirements will also be introduced. If a material risk to the national interest is identified then the investment could be blocked, have conditions imposed or, where relevant, be unwound. The OIO will also have the power to apply for urgent injunctive relief from the courts and obtain court enforceable undertakings from investors who have breached the Act.