In Australia at the moment the Government is encouraging foreign investors to notify the Government of potential transactions. One area we're seeing that operate quite a bit is foreign government investors and it surprises a lot of clients and a lot of offshore companies when there may be a foreign investor.
Really at the end of the day the thresholds are quite low and particular private equity funds, infrastructure funds can often be caught, and it surprises them. For example, for a company from overseas if they've got more than 20% of their investor base from one country, even though they are not associated, but they may be foreign government instrumentalities such as pension funds and that can qualify them as a foreign government investor.
The thresholds are also quite low and it can capture transactions where there is transactions happening overseas but there happens to be a relatively small piece of Australian assets involved.
One way the Government is trying to deal with this lowering of the threshold for foreign government investors is through exemption certificates and this is particularly relevant for private equity funds, portfolio companies which are owned by private equity funds, infrastructure funds, and not what we would traditionally see as a straight government investor.
This area is quite new and the Treasury and FIRB are still working through their policy guidelines. That will be an iterative process where Government is working with law firms, investment banks and other market participants to come up with some sensible rules.
Some of the questions we are thinking about are how long will these certificates be given for. It looks maybe 4 years, not 5 years.
Will they make a foreign government investor the equivalent of a non-foreign government investor for example will it just up the limit to 20%?
Will there be no-go areas?
Will tax laws be relevant here?
So these are issues which are being worked through at the moment but over time we believe that there will be some sensible parameters to allow ordinary course transactions which are not affecting the national interest to be put through more smoothly.