This note is not part of the regulations, but is intended to indicate their general effect.
These regulations provide for—
1 new class exemption from the requirement for consent under section 10(1)(a) and (b) of the Overseas Investment Act 2005 (the Act) and section 57B of the Fisheries Act 1996, which relate, respectively, to overseas investment in sensitive land, overseas investment in significant business assets, and overseas investment in fishing quota (see new regulation 33A); and
3 new class exemptions from the requirement for consent under section 10(1)(a) of the Act, which relates to overseas investments in sensitive land (see new regulations 36AA to 36AC); and
1 new class exemption from the definition of overseas person (see new regulation 36B).
The exemptions do not apply to or in respect of any transaction entered into or occurring before 1 February 2017.
Exemption from requirement for consent for overseas investments in sensitive land, sensitive business assets, and fishing quota
The exemption in new regulation 33A is for overseas persons who are custodians acquiring shares or other property on behalf of other persons in the ordinary course of their business of acting as a custodian. For this exemption to apply, the custodian must obtain the property on the instructions of a customer, the beneficial interest in or entitlement to the property must be acquired by a person other than the custodian and the custodian must hold any rights or interests it acquires in the property on trust for, or on behalf of, the customer (other than permitted security interests), and the custodian must make no decisions in relation to that property but act only on instructions of the customer (including in relation to any right to vote or control the exercise of any votes that attach to the property).
A feature of the exemption is that, if it applies, it exempts a transaction from the requirement for consent only to the extent of the custodian’s acquisition of the rights or interests it holds as custodian. It does not extend to, for instance, exempting from the requirement for consent an investor who is an overseas person acquiring the beneficial interest in, or rights to, the property that is the custodial property.
Exemptions from requirement for consent for overseas investments in sensitive land
The exemption in new regulation 36AA is for certain acquisitions of leases or other interests in sensitive land (see section 12(a) of the Act) but does not extend to freehold estates. It applies where a lease or other interest held in the land is expiring or has recently expired. If certain terms and conditions are met, the person who held that interest will be able to acquire a new interest of the same type in that land without obtaining consent.
The exemption is intended for situations where a lease or other interest in particular sensitive land is effectively being re-granted to the same person who will conduct the same or substantially the same activity on that land. The terms and conditions of the new interest in relation to that land must be the same as in the previous interest, with some limited exceptions. (For example, the term of the new interest may be shorter.) The exemption could apply to allow any number of re-grants to a person; however, for the exemption to apply, that person must have obtained consent to acquire a previous similar lease or other interest in that land and the term of the new interest (including any rights of renewal) must expire within 20 years of the date that A acquired that interest. Other conditions of the exemption include that the person must continue to comply with any ongoing or unfulfilled land-use conditions of the previous consent that relate to that land and provide the regulator with certain information and documents within 1 month of relying on the exemption.
The exemption in new regulation 36AB is for certain transactions between overseas persons where the sensitive land in question (the relevant land) has been the subject of overseas investment that was consented to under section 10(1)(a) of the Act, has since remained in overseas ownership or control, and will continue to be used for the same or substantially the same activity. It applies both to certain acquisitions of an interest in sensitive land and to certain acquisitions of rights or interests in securities of a person who owns or controls an interest in sensitive land (see, respectively, section 12(a) and (b) of the Act).
The exemption does not apply to all types of sensitive land, and it will not apply if the relevant land together with any associated land (see section 8(4) of the Act) exceeds 5 hectares. It will not apply if any of the relevant land or any associated land is foreshore, seabed, a bed of a river or lake, or non-urban land, regardless of size. Nor will it apply if any part of the relevant land or associated land adjoins foreshore, seabed, or a bed of a river or lake. Other terms and conditions apply, including that the transaction cannot result in an overseas investment in significant business assets, that the total value of the consideration for the overseas investment in sensitive land (and in fishing quota, if any) that will result from the transaction does not exceed $100 million, that the investor must comply with any ongoing or unfulfilled land-use conditions of the previous consent that relate to that land, and that the investor must provide the regulator with certain information and documents within 1 month of relying on the exemption.
The exemption in new regulation 36AC applies where an overseas person acquires land in accordance with certain provisions of the Public Works Act 1981. For certain types of sensitive land, the size of the land covered by the exemption is restricted. A further term of the exemption requires that the land adjoin or be separated only by a public road from land in which the overseas person already has an interest (other than an exempted interest).
Some exemption terms and conditions are ongoing, while other terms and conditions are measured at points in time (such as the date of the relevant acquisition). If a person breaches a term or condition of an exemption, then the exemption does not apply and, if the overseas investment has been given effect to (and no other exemption from the requirement for consent applies), the investor will be in breach of the Act for not having obtained consent for the transaction.
Exemption from definition of overseas person
The exemption in new regulation 36B relates to bodies corporate in which overseas persons who are custodians hold securities for other persons. These bodies corporate will be exempt from the definition of overseas persons if the only reason they are overseas persons is because the overseas custodian holds rights or interests in those securities, rather than the securities being held outright by the person with the ultimate beneficial interest or entitlement to those securities. The exemption essentially treats the person who ultimately has the beneficial interest or entitlement as having all the rights and interests that the custodian has in those securities.
Regulatory impact statement
The Treasury produced a regulatory impact statement on 24 March 2016 to help inform the decisions taken by the Government relating to the contents of this instrument.