Overseas Investment Amendment Bill 2020 introduces Phase II OIO Reforms
The Overseas Investment Amendment Bill 2020 was introduced last week. The purpose of the Bill is to give effect to the amendments identified in Phase II of the Government’s OIO reform (Phase I resulting in the 2018 amendments that brought residential land under the scope of the OIO regime, and introduced streamlined test for forestry investments). The Government’s Phase II reforms are designed to achieve a balance between, on the one hand, streamlining the Act to cut red tape and support high-quality overseas investment and, on the other hand, strengthening the Act to provide stronger protections for farmland and the ability for the decision maker to consider broader impacts when screening investments.
The introduction of the Bill last week indicates that the Government still intends to enact the amendments before the end if it’s current term. This does not allow much time for the Bill to pass through the stages of Parliament, including the Select Committee and public submission stage, before the House rises on 6 August ahead of the 2020 election. To some extent this condensed timeframe will be managed by the amount of detail that will be set by Regulations before the relevant provisions of the new Act come into force. Most of the Act will come into force 42 days after it receives Royal assent, but more comprehensive changes may not come into force until 6 or 12 months after Royal assent.
In the tables below we have summarised how the Bill aims to achieve each of the Government objectives of the Phase II reform.
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Streamlining:
New definitions |
Increased flexibility |
Increased efficiency |
Reduce:
Key amendments
|
Reduce the number of transactions screened, so that minor changes in ownership and control do not trigger compliance requirements
Key amendments:
|
Increase efficiency in the OIO assessment and decision making process, with the intention of increasing investor certainty and addressing issues associated with long processing timeframes.
Key amendments:
|
Strengthening:
Increased coverage |
Increased discretion |
Increased enforcement |
Currently, the framing of the various tests means that:
Key amendments:
|
The new National Interest Test and Call-in Power will be exercised by a senior Minister, and subject to their discretion. The factors to be considered by the Minister are wide in scope. The issue of Ministerial guidance as to how the new powers will be applied will be crucial for investor certainty.
National Interest Test:
Call-in Power:
Mitigating risks: The intention is that these new tests are reserve powers, to be exercised rarely to mitigate material risks that cannot be managed in other ways. It is proposed that this will be supported by the following:
|
The OIO will be granted new enforcement powers to assist with effective enforcement of the regime, and better equip the OIO to respond to mid-level breaches.
Key Amendments:
|
The changes being introduced by the Bill will require additional resourcing from the OIO, which is currently not meeting is ‘”cost-recovery” objectives. The OIO is currently undertaking an internal fee review process. We can expect higher application fees to be announced in the near future.
Call-in Power - A Summary
Assets within scope |
Military and dual-use technology |
Critical direct suppliers |
Sensitive data |
Critical national infrastructure |
Media |
Definition |
Businesses that research, develop, produce or maintain military or dual-use technology. To be further refined in Regulations |
A business that is a direct supplier of goods or services to an intelligence or security agency, where the goods or services are integral to the functioning of the agency and their supply cannot be readily replaced. The Minister must notify a person if they are a critical direct supplier. |
Businesses that develop, produce or maintain, or otherwise have access to sensitive information (e.g. genetic, biometric, health or financial information) To be further defined in Regulations |
In all cases of a class to be set out in Regulations |
Businesses that publish content or cause content to be published if
|
Notification mechanism |
Compulsory |
Compulsory |
Voluntary |
Voluntary |
Voluntary |
Trigger level (excluding the acquisition of listed equity securities, unless they grant the investor a disproportionate level of control over, or access to, that entity) |
0%
|
0%
|
0%
|
0%
|
25%
|
Trigger level for the acquisition of listed equity securities |
10% |
10% |
10% |
10% |
25% |
Estimated scale of captured transactions (Treasury estimates) |
300 |
Not released |
27,500 |
270 |
300 |
Decision making framework |
The decision maker must consider New Zealand’s international obligations and the extent to which any risks to national security or public order can be mitigated by conditions of consent. |
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Possible outcome |
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If you have any questions about the Overseas Investment Amendment Bill 2020 please contact Christina Lefever.
Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.​