To protect key New Zealand business assets from unnecessarily falling into foreign ownership while the economy recovers from the impacts of the COVID-19 pandemic, the Government has changed parts of the Overseas Investment Act 2005 (the Act).
“We need to minimise the possibility that cornerstone businesses in our productive economy are sold in a way contrary to our national interest while the pandemic is causing the value of many businesses to fall,” Associate Finance Minister David Parker said.
Notification Process & Penalties
From 16 June 2020, the changes to the Act require that an overseas person must notify the Overseas Investment Office (OIO) if they are proposing to acquire, regardless of value, the following interests in a NZ business or its assets:
A. An ownership interest of more than 25%;
B. An increase of an existing ownership interest to or beyond certain ownership thresholds (50%, 75% or 100%); or
C. Assets representing 25% of more of an existing business.
The notification process from overseas persons to the OIO involves the following:
Overseas person to notify the OIO using the OIO’s on-line notification form.
OWait for the Minister (via his office) to make a Direction Order, or otherwise, determining whether the transaction is permitted to proceed.
The above notification process is of no charge to the overseas person, however can take up to between 10-40 working days (plus an additional 30 working days if deemed necessary by the Minister).
The penalty of non-notification for individuals can be up to $50,000 and $300,000 for others. The penalty of not following a condition of consent can trigger pecuniary penalties of up to $500,000 for individuals and $10,000,000 for others.
“It is important to have new rules that protect Kiwi businesses from being snapped up and having opportunities potentially lost in the event that a business owner wants to sell their assets, as they recover from the damage caused by the virus.” said Parker.
This temporary power will be reviewed every 90 days and will remain in place only while it is deemed as necessary to protect the essential interests of New Zealand.
“The changes we are introducing do not mean New Zealand is closing the door on foreign investment, only that the Government should have the ability to ensure that such investments are in line with our national interest and that we are well placed to grow once the COVID-19 crisis passes,” Parker said. “This Government welcomes productive, sustainable, and inclusive foreign investment.”
These changes sit alongside existing consent pathways for significant business and sensitive land assets.