The government has just announced that it is retaining the temporary emergency notification regime in the Overseas Investment Act 2005 (the OIA) for another 90 days.
Ahead of the mandatory review date on 28 November, the ministers completed a review of the regime and concluded that the ongoing effects of the COVID-19 pandemic justify the notification regime continuing until the next statutory review, due by 24 February 2021.
Since 16 June 2020, overseas investors have needed to notify the Overseas Investment Office (OIO) of most acquisitions of New Zealand business assets or shares (directly or indirectly) that are not already subject to screening under the OIA, irrespective of the value of the transaction. In particular, an overseas person must notify any transactions that result in the overseas person:
acquiring an interest in a New Zealand business of more than 25%,
increasing an existing interest up to or beyond (as applicable) the thresholds of 50%, 75% or 100%, or
acquiring more than 25% of the value of the seller's New Zealand business assets (where the transaction is an asset acquisition, rather than an acquisition of securities),
irrespective of the value of the transaction.
Where notification is required under the temporary emergency notification regime, the relevant minister will assess whether the proposed transaction is in New Zealand's national interest, which can include consideration of whether:
the target is in financial distress, and
the value attached to the target is fundamentally lower than would be the case absent the COVID-19 pandemic.
Ministers are required to review the temporary emergency notification regime at intervals of no more than 90 days to assess whether the effects of the COVID-19 pandemic justify the regime remaining in force. Once ministers are satisfied that the notification regime should no longer remain in force, it will be replaced by a narrower national security and public order 'call-in' regime. This will only apply to investments in strategically important businesses, such as military technology and critical national infrastructure, that do not normally require consent under the OIA.
We will follow with a further article explaining the 'call-in' regime in more detail once the Ministers are satisfied the temporary emergency notification regime should no longer remain in force.
What has been happening?
While it has been an additional burden for investors to have to notify their transaction to the OIO under the emergency notification regime, with rare exceptions, this requirement has had no adverse impact on transaction timing.
As of 24 November 2020, overseas investors had lodged 226 emergency pathway notifications, only 8 of which had been subjected to a more detailed review. Overall, 94% of investors received notification decisions within 10 working days.
No “direction orders" have so far been published on the OIO's website, which will only occur where approval is declined or issued with conditions. However, we expect that this will be a matter of timing as conditions have been imposed on some transactions to date.
If you have any questions about the matters raised in this article please get in touch with the contacts listed, or your usual Bell Gully advisor.
This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.