New Zealand: Greater protections in the New Zealand national interest
Late last year, we advised that the New Zealand Government had announced that it would introduce a new “national interest test”. The fall out from COVID-19 has resulted in this new test being introduced as a matter of urgency (under The Overseas Investment (Urgent Measures) Amendment Act 2020) and some additional temporary changes to the Overseas Investment Act 2005 (“Act”) that are in respond to the urgent COVID-19 situation.
Temporary notification requirement
The urgent amendments to the Act will temporarily apply a “national interest test” to all foreign investments (that are not already subject to the Act), regardless of dollar value, where the transaction will result in a 25% or more foreign ownership interest in a New Zealand business or more than 25% of its assets, or will increase an existing foreign ownership interest up to or beyond 50%, 75% or 100%.
This temporary power takes the form of a simple notification requirement and has been in place since 16 June 2020. The New Zealand Government has advised that it will be reviewed every 90 days and will remain in place for as long as it is necessary to protect the national interests of New Zealand while the economic aftermath of COVID-19 continues to significantly impact the country. It is difficult to assess how long this may be.
The New Zealand Government advised that the process would be quick to ensure investment was not unduly delayed while protecting Kiwi businesses from being preyed upon by foreign investors as they recover from the damage caused by COVID-19. In our experience to-date, the Overseas Investment Office is responding very quickly, with the majority of responses being received in around one week.
“National interest test”
In addition to the above temporary measures and once they have been lifted, a “national interest test” for New Zealand’s most strategically important business assets will remain. This will apply to transactions that are already subject to the Act, with a minimum threshold of $100 million (or higher, if set by the terms of an international trade agreement), as well as investments in sensitive land and fishing quota. The test will provide the New Zealand Government with a broad discretionary power to deny consent to any investment that the relevant Government Minister considers is contrary to New Zealand’s national interest.
Author: Kate Telford, Partner, Business Advice Team, Hesketh Henry
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