Updated OIO guidance reflects the Government’s ongoing commitment to streamlining the investment processes for overseas investors, while ensuring that New Zealand’s national interests remain protected.
This week, the Overseas Investment Office (OIO) published fresh guidance on three areas of the Overseas Investment Act 2005 (Act):
- the definition of “associate”;
- alternative monetary thresholds for significant business asset (SBA) transactions; and
- grocery-sector investments.
While the underlying framework remains unchanged, the guidance continues the Government’s push to ensure the OIO regime is not seen as a barrier to overseas investment in New Zealand. The guidance will assist both existing and prospective overseas investors in navigating New Zealand’s screening regime with greater certainty and efficiency.
Clarifying who is an “associate”
The Act limits investments by overseas persons and their associates. The associate concept is central to the Act’s anti-avoidance framework, designed to prevent overseas persons from circumventing the regime by using a third party to acquire assets on their behalf.
However, the associate provisions are drafted very broadly. This has led investors and their advisors to adopt a conservative approach. Despite pursuing legitimate business arrangements, many have sought clarification from the OIO or applied for consents to avoid the risk of technical breaches and the associated penalties.
The new guidance records the OIO’s narrower interpretation of the associate provisions, better balancing the anti-avoidance objectives of the Act with the benefit of legitimate overseas investment. The OIO’s guidance confirms that:
- the focus remains on substance over form – the central question is whether an arrangement gives an overseas person ownership or control of the relevant asset;
- it is helpful to distinguish between being associates “for general purposes” (a broad concept that can catch many ordinary commercial relationships) and being associates “in relation to an overseas investment” (the trigger for consent);
- the OIO does not consider that ordinary, arm’s-length arrangements such as leasing agreements, conventional financing structures, or typical shareholder agreements, will usually create an associate relationship that requires consent; but
- nevertheless, schemes designed to park assets with New Zealand entities pending onward sale to an overseas person remain high-risk and have resulted in enforcement action.
Overall, the guidance is welcome as it will give investors greater confidence where legitimate commercial arrangements could otherwise trigger a technical breach of the Act. Early engagement remains critical where influence or direction is less clear-cut.
Alternative monetary thresholds
The standard “significant business assets” threshold requires overseas persons to obtain consent for an acquisition where the consideration paid, or the value of the target’s assets, exceeds NZ$100 million. However, higher thresholds apply to investors from a number of countries with whom New Zealand has a relevant free-trade agreement (FTA).
The alternative monetary thresholds framework is complex. The interpretation of these thresholds can frequently cause concern – particularly for investors using special purpose vehicles (SPVs) to effect large transactions.
The updated factsheet consolidates these rules across all FTAs and clarifies eligibility, by:
- confirming the headline thresholds, the most significant being NZ$200 million for eligible investors from CPTPP signatories, UK, EU, PACER Plus, China, Korea, Taiwan and others, and NZ$650 million (rising to NZ$676 million on 1 January 2026) for eligible Australian non-government investors (with lower limits for government-related investors);
- explaining the eligibility tests, focusing on nationality, residency, “substantive business operations” and ownership/control requirements;
- confirming that the OIO will assess a person’s business operations in the context of their corporate structure, meaning that the activities of parents, subsidiaries and ‘sister’ entities may be relevant to assessing whether a person (including an SPV) has substantive business operations in a country or jurisdiction; and
- emphasising that New Zealand subsidiaries of overseas corporates cannot rely on higher thresholds, and that care is required when using SPVs to conduct transactions.
Again, this is welcome guidance for investors, particularly in bringing clarity to the status of SPV investors. However, the nature of these regulations is that application of the threshold remains complex. It is disappointing that the OIO did not take this opportunity to clarify a particularly fraught area of these regulations, which is the implications of government ownership of investors.
Grocery-sector investments
For some time, the Government has publicly encouraged new entrants and greater competition in the grocery market. However, some commentary indicated a perception by potential investors that the OIO regime is a material barrier to entrants in the grocery industry.
The new guidance is the first sector-specific note issued under the Act and aims to correct this perception. This messaging is consistent with the Government’s desire to present New Zealand as “open for business” for foreign investment.
Key points include:
- explicit recognition of a desire to “deliver more effective competition” in the guidance;
- emphasising that no grocery-sector consent has ever been declined;
- confirming standing consents are available for repeated acquisitions of residential land used for supermarkets and distribution centres;
- noting the investor test and (where relevant) benefit to New Zealand and national interest assessments are generally met with relative ease for investments in the grocery sector; and
- highlighting that expected processing times are well within statutory limits and typical conditions imposed by the OIO are predictable (development milestones, capital spend, ongoing investor test compliance).
Overall, this guidance does not state anything new about the OIO’s approach to the interpretation of the Act. In our experience, the OIO regime has never been a substantial barrier to grocery industry investment. However, it reinforces the Government’s positive messaging to potential investors and as such is welcome.
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 adviser.
Disclaimer: 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.
