New Zealand welcomes foreign investment although the consent of the Overseas Investment Office (OIO) is required for certain transactions involving “overseas persons”. The screening regime is contained within the Overseas Investment Act 2005 (Act).
An overseas person is defined as:
- an individual who is not a New Zealand citizen and who is not ordinarily resident in New Zealand
- a partnership, body corporate or trust where an overseas person or persons have 25% or more ownership or control (or similar requirements are met), and
- a company incorporated outside New Zealand, or in which an overseas person or persons have 25% or more of any class of share, or the power to control 25% or more of the company’s governing body, or 25% of voting rights, or the right to exercise control over 25% or more of voting rights.
The Act applies to acquisitions by overseas persons of 25% or more direct or indirect ownership and/or control of interests in:
- significant business assets
- “sensitive” and “special” New Zealand land
- farm land, and
- fishing quota.
Business assets acquisitions
Business assets acquisitions (not involving land) by overseas persons require consent where:
- the total expenditure involved in establishing a new business exceeds NZ$100 million
- the price paid when buying an existing asset or business acquisition (whether by one transaction or a series of related transactions) exceeds NZ$100 million, or
- either the amount paid for the shares, or the gross value of the assets of the company (including its 25% or more subsidiaries) whose shares are being acquired, exceeds NZ$100 million.
There are a number of exemptions to the requirement to obtain consent that are contained in the Overseas Investment Regulations 2005 (Regulations). These can be viewed on the OIO’s website at: www.linz.govt.nz/overseas-investment/when-consent-required/exemptions/index.aspx
In addition to the Act and the Regulations, commercial fishing is also subject to the Fisheries Act 1996. We recommend you check with a qualified adviser on these requirements.
Overseas investment in sensitive land
Consent is required for an overseas person or their associate to acquire an interest in land if the land is “sensitive” and if the interest is for a term of three years or more (including rights of renewal). Briefly, land will be sensitive if it is, or includes:
- non-urban land over five hectares in area
- the foreshore or seabed
- land on certain named islands if the land is over 0.4 hectares
- land on any other islands excluding the North or South Island (regardless of the land area involved)
- any land which is over 0.4 hectares and:
- is the bed of a lake
- is held for conservation purposes under the Conservation Act 1987
- is earmarked in a district or proposed district plan to be used as a reserve,
- a public park, for recreation purposes or as open space
- is subject to a heritage order or a requirement under the Resource Management Act 1991 or the Historic Places Act 1993, and
- is an historic place or area or wahi tapu (site sacred to Maori) which is registered or the subject of an application to register under the Historic Places Act 1993, and
- any land which is over 0.2 hectares and adjoins the foreshore.
Land will also be sensitive if it is over 0.4 hectares and adjoins:
- the bed of a lake
- land held for conservation purposes under the Conservation Act 1987 if the conservation land is itself over 0.4 hectares
- any scientific, scenic, historic or nature reserve under the Reserves Act 1977 that is itself over 0.4 hectares
- any regional park
- any land listed as a reserve or a park by the OIO
- land over 0.4 hectares that adjoins the sea or a lake and is an esplanade reserve, a recreation reserve, a road or a Maori reservation
- land over 0.4 hectares that is subject to a heritage order or requirement for a heritage order, and
- land over 0.4 hectares that includes a historic place, historic area (which is itself over 0.4 hectares) or wahi tapu.
The definition of sensitive land is very detailed and, as such, requires careful checking and analysis from qualified advisers. In particular, and may be “sensitive” by association if it adjoins any of the types of land listed previously, or is “associated” with other land already controlled by an overseas person.
Special land is defined in the Regulations as the foreshore, seabed, riverbed or lakebed. If an investor wishes to acquire sensitive land under the Act and that sensitive land includes any special land, the special land must first be offered to the Crown by the owner. The Crown can acquire only that part of the sensitive land that is special land and can acquire it only if the overseas person actually completes the acquisition of the sensitive land.
The general policy approach is to acquire the land only if there if a public interest in the Crown owning it. Criteria include: whether there is a “recognised attitude” among New Zealanders or a group of New Zealanders toward the land; the inter-relationship of the land with the surrounding area; whether there is a more cost-effective alternative to Crown ownership and whether the benefits exceed the costs; whether Crown purchase will adversely affect the overseas person’s ability to carry out the investment.
Overseas investment in farm land
Where a proposed acquisition involves farm land (being land that is used exclusively or principally for agricultural, horticultural or pastoral purposes, or for the keeping of bees, poultry or livestock), that farm land must first have been offered by the vendor on the open market to persons who are not overseas persons in accordance with the procedures set out in the Regulations. Exemptions from this requirement can be obtained, but only in special circumstances and at the discretion of the relevant Minister.
The consent process
All applications for consent must be tested against the prescribed investment criteria set out in the Act and Regulations. An applicant (or it the applicant is not an individual, the persons with control of the applicant) must:
- be of good character
- have relevant business experience or acumen, and
- be able to demonstrate a financial commitment to the investment.
Additional criteria for sensitive land
Applications for overseas investment in sensitive land must also satisfy the following additional criteria.
- the applicant, or if the applicant is not an individual, all the individuals who control the applicant, are New Zealand citizens, ordinarily resident in New Zealand, or are intending to reside in New Zealand indefinitely and have applied for a visa or permit under any of Immigration New Zealand’s residence policies (refer to the chapter on Immigration)
- the overseas investment will, or is likely to, benefit New Zealand (or any part of it or group of New Zealanders), as determined by the relevant Ministers1
- if the relevant land includes non-urban land that in area (either alone or together with any associated land) exceeds five hectares, the relevant Ministers determine that that benefit will be, or is likely to be, substantial and identifiable, and
- the applicant submits a detailed business plan that addresses the “benefits to New Zealand” factors set out in the Regulations. Such benefits can be longer term as well as immediate.
Processing and decision application
The OIO is responsible for overseeing the Act, and assesses consent applications. The OIO will commonly contact the applicant or its advisers for further information during the process. The power to make decisions on whether to approve or decline an application is vested in the relevant Minister of the Crown. The Ministers have delegated to the OIO the power to decide all applications except those involving sensitive rural land and land adjoining waterways.
The processing of consent applications can take several months: two to three months for a business assets acquisition and three to four months for a sensitive land acquisition is typical. For complex applications, a longer period is not uncommon. We advise that potential consent requirements be assessed early when considering a foreign investment in New Zealand.
Consent is usually granted subject to various conditions with which the applicant must comply. When imposing conditions of consent, the OIO must be satisfied that the condition is necessary and will achieve the desired result. Conditions can be varied or revoked in appropriate circumstances.
Compliance will be monitored by the OIO and will continue until the benefits of the investment have been realised or the conditions have been revoked. The National Government has instructed the OIO that in general, monitoring should not extend beyond five years unless the benefits are not expected to begin accruing until after that time.
Penalties apply in case of a breach of these provisions.2 In addition, the High Court has the power, on application from the OIO, to order disposal of any property (which includes a right or interest in any security, an interest in land, an interest in fishing quota or any other property or any rights or interests in any other property).