Changes to the Consent Criteria for Investments in Sensitive Land
Existing Requirements: To obtain consent, the overseas person – or the individuals with control, defined broadly to include shareholders with more than 25% ownership, directors, or in some cases senior management – must satisfy the ‘investor test’. In addition to meeting the investor test, an overseas person wanting to acquire an interest in sensitive land must show that the investment will, or is likely to, benefit New Zealand. The benefit to New Zealand will be assessed against seven benefit factors: economic benefit, environmental benefit, public access, protection of historic heritage, oversight benefit, consequential benefit and advancing a significant government policy. An investment will also be subject to a national interest assessment if it involves land or assets that are used for a defined class of strategically important business, or if the investment involves a foreign government.
Proposed New Approach: The New Zealand Government has agreed to remove the investor test and benefit to New Zealand criteria for consent outlined above except in the case of investments in farmland, fishing quota and certain residential land. The national interest assessment will be retained with no changes to the classes of transactions subject to this assessment. To manage the uncertainty that the national interest assessment could create, a rapid triage and assessment process is being proposed with a distinct “phase one” and “phase two” approach to the assessment process for consent applications. This would enable the Overseas Investment Office to quickly grant consent to transactions and to quickly escalate transactions that could pose a risk to the national interest to a second stage where a national interest assessment would take place.
Changes to Consent Timeframes
The Government has indicated that the maximum timeframe for a “phase one” assessment (i.e., assessing whether a transaction should be consented to or otherwise subject to a national interest assessment) should be no longer than 15 working days. For transactions not subject to a national interest assessment, this maximum timeframe would be a significant reduction on the current consent timeframes, being (for example):
- 70 working days, for transactions involving sensitive land consent (not including farm land).
- 35 working days, for transactions involving significant business assets.
The Government has indicated that only a small number of applications will be declined under the new regime, noting that under the current regime an average of six applications per year (around 2% of total applications) have been declined over the previous 30 years.
Next Steps for Reforms – Target Date for New Regime End of 2025
To implement the proposed changes, legislative amendments to the Overseas Investment Act 2005 are required. A Bill containing the proposed changes, and various other technical amendments, is expected to be introduced to the New Zealand Parliament around the middle of this year. It is also expected that an updated Ministerial Directive Letter will be issued before the new legislation is enacted to help guide the Overseas Investment Office’s decision-making when assessing applications under the national interest assessment.
Ultimately, while no change is being made to the types of investment that require consent, the changes announced are still the most significant reforms to New Zealand’s overseas investment regime in at least 20 years.
