NZ foreign investment changes

By Nick Miller and Simon Jenkins.

Key Points:
Non-land acquisitions in New Zealand will be made easier, but some land acquisitions will face new hurdles.

The threshold for consent to proposed foreign investments in NZ companies not involving land is to be raised from NZ$50million to NZ$100 million. At the same time, the NZ Government has recommended the tightening of the foreign investment restrictions regarding land of special heritage or environmental value, as well as foreshore or seabed acquisitions.

These changes are the result of the review of the Overseas Investment Act 1973 initiated last year.

The current threshold for the screening of non-land business assets involving a 25% or more shareholding in a NZ company is NZ$50 million. Overseas Investment Commission consent is required for proposed acquisitions exceeding this threshold. This threshold will now increase to NZ$100 million which is similar to the A$100 million "examine in detail" threshold applied by the Australian Foreign Investment Review Board (the notification regime applied in Australia cuts in at A$50 million).

However, given it's 20 years since an application for consent not involving land was turned down, this change is unlikely to have any significant impact on investors seeking to acquire non-land business assets in NewZealand. Unlike acquisitions involving land, non-land applications for consent do not need to satisfy a "national interest" test.

Of more practical significance may be the fact that the NZ Government has also:

• announced the toughening of the foreign investment restrictions on land of special heritage or environmental value; and
• proposed that it have a new right of first refusal in respect of foreshore and seabed land which would otherwise be sold into foreign ownership. This issue has risen to the forefront of political debate as a result of a number of high profile land acquisitions by foreign interests in recent years (including the sale of Young Nicks Head and the purchase of South Island land interests by singer Shania Twain). The right of first refusal is part of the political response to the Court of Appeal's decision last year that customary title existed in the seabed and foreshore.

The proposed changes involving land interests may have a significant impact on Australian investors seeking to acquire foreign investment interests in New Zealand. They will face increased difficulty acquiring interests involving land classified as having a special heritage or environmental value.

The NZ Government expects to incorporate these changes into legislation by the end of the year.

For further information, please contact Nick Miller.