What jurisdictional thresholds trigger a review or application of the law? Is filing mandatory?
See question 3. 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 foreign investment proposals.
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 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.
Question 3 sets out the most common dollar thresholds. These vary depending on the kind of transaction and the nature of the investor and can be affected by Australia’s treaty obligations.National interest clearance
What is the procedure for obtaining national interest clearance of transactions and other investments? Are there any filing fees?
The procedure for securing approval for a foreign investment proposal that is a notifiable action or a significant action is that the applicant must lodge an application with 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. They vary depending on the kind of application and the consideration for the transaction. For business applications, transactions with consideration of A$10 million or less attract a A$2,000 filing fee; greater than A$10 million but below A$1 billion attract a filing fee of A$25,700, and above A$1 billion attract a filing fee of A$103,400. Other transactions like internal reorganisations attract a filing fee of A$10,200. The application is not considered to be lodged until payment is made.
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 will always include the ATO and the Australian Competition and Consumer Commission (ACCC) (even if ACCC clearance is not being sought by the parties). It may also include other government agencies such as the Critical Infrastructure Centre, which coordinates the national security review of applications involving critical infrastructure and industries, and state governments.
More complex transactions may result in an ongoing dialogue between the Treasury and FIRB and the applicant regarding the imposition of conditions.
Which party is responsible for securing approval?
In most cases, the acquirer is responsible for securing approval.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?
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 issuing an interim stop order, which gives the Treasurer an additional period of up to 90 calendar days to examine the application. 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, it is an offence to fail to notify the foreign investment proposal. For a significant action (including a notifiable 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. Penalties for failing to comply are: for individuals, up to three years’ imprisonment or an A$157,500 fine or both; and for companies, a fine of up to A$787,500.
Civil penalties for less serious breaches include: for individuals, a fine of up to A$52,500; and for companies, a fine of up to A$262,500.
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.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?
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 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 FIRB may take into account requests for early decisions based on commercial imperatives, but they have no obligation to do so and such 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, then regardless of whether the transaction was actually notified, if the Treasurer is satisfied that the proposal is contrary to the national interest, the Treasurer has the power to order the disposal of any interests in Australian securities, assets or land that were acquired under the proposal.