Overseas Investment Amendment Regulations 2020

Regulations

1 Title

These regulations are the Overseas Investment Amendment Regulations 2020.

2 Commencement

These regulations come into force on the 14th day after the date on which the Overseas Investment (Urgent Measures) Amendment Act 2020 receives the Royal assent.

3 Principal regulations

These regulations amend the Overseas Investment Regulations 2005 (the principal regulations).

4 New Part 1AA inserted

After regulation 3A, insert:

Part 1AA Matters relating to terms defined in Act

3B Sensitive information

(1)

This regulation prescribes classes of information that are not sensitive information for the purposes of the definition of sensitive information in section 6(1) of the Act.

Genetic information

(2)

Genetic information is not sensitive information unless it is information about an individual’s inherited or acquired genetic characteristics resulting from the analysis of a biological sample.

Biometric information

(3)

Biometric information is not sensitive information unless it is—

(a)

biometric information as defined in section 5(1) of the Customs and Excise Act 2018; or

(b)

information relating to an individual’s behavioural indicators.

Health information

(4)

Health information is not sensitive information unless it is information about an individual’s mental or physical health history or their history of addiction or substance abuse.

Financial information

(5)

Financial information is not sensitive information unless it is information used to determine an individual’s financial position or credit score.

3C Strategically important businesses

(1)

This regulation prescribes classes of businesses that are SIBs for the purposes of the definition of SIB or strategically important business in section 6(1) of the Act.

Ports and airports

(2)

A business that is involved in ports or airports is a SIB if it is a lifeline utility listed in clauses 2 to 6 of Part A of Schedule 1 of the Civil Defence Emergency Management Act 2002.

Electricity

(3)

A business that is involved in electricity generation, distribution, metering, or aggregation is a SIB if it—

(a)

is a generator (as defined in section 5 of the Electricity Industry Act 2010) with a total capacity (as defined in section 73 of that Act) exceeding 250MW; or

(b)

provides electricity lines services (as defined in section 54C of the Commerce Act 1986).

Water

(4)

A business that is involved in drinking-water, waste water, or storm water infrastructure is a SIB if the business—

(a)

provides a large drinking-water supply or a medium drinking-water supply (as defined in section 69G of the Health Act 1956); or

(b)

provides a waste water or sewerage network that services 5,000 or more people; or

(c)

disposes of sewage or storm water for 5,000 or more people.

Telecommunications

(5)

A business that is involved in telecommunications infrastructure or services is a SIB if it provides telecommunications services (as defined in section 3 of the Telecommunications (Interception Capability and Security Act) 2013).

Irrigation

(6)

A business that is involved in an irrigation scheme is a SIB if—

(a)

the scheme involves a water supply system for the collection and storage or reticulation (or both) of water primarily for agricultural production; and

(b)

the business has 1 or more resource consents under the Resource Management Act 1991 to take (in total) more than 25 million cubic meters of water per year.

Business that develops, produces, maintains, or otherwise has access to sensitive information

(7)

A business is a SIB if it develops, produces, maintains, or otherwise has access to—

(a)

sensitive information in connection with the supply by the business of services to 1 or more of the following:

(i)

an intelligence or security agency:

(ii)

the Department of the Prime Minister and Cabinet:

(iii)

the Ministry of Foreign Affairs and Trade; or

(b)

data sets of sensitive information relating to 30,000 or more individuals.

(8)

However, subclause (7) does not apply until section 53 of the Overseas Investment (Urgent Measures) Amendment Act 2020 has come into force.

3D Transactions of national interest

(1)

This regulation is made under section 127(1) of the Act for the purposes of section 20A of the Act (transactions of national interest).

(2)

A transaction that would otherwise be a transaction of national interest under section 20A(1)(a) or (b) of the Act is not a transaction of national interest if—

(a)

in the case of a transaction of a kind described in section 12(a) or 13(1)(c) of the Act, the only property acquired is an estate or interest in residential (but not otherwise sensitive) land:

(b)

in the case of a transaction of a kind described in section 12(b)(i) or (ii), the only estate or interest in land owned or controlled by A is in residential (but not otherwise sensitive) land.

5 Regulation 37 amended (Exemptions for corporate dealing)

Replace regulation 37(1)(a) with:

(a)

the acquisition by an overseas person of property—

(i)

from another member of the same group, being a group that comprises an overseas person and persons that are directly or indirectly at least 95% owned by that overseas person, as part of a reconstruction or reorganisation of that group; or

(ii)

from an overseas person that directly or indirectly owns at least 95% of that overseas person:

6 New Part 2A inserted

After regulation 64, insert:

Part 2A National security and public order risks management regime

64A Overseas investment covered by the emergency notification regime

(1)

For the purposes of section 82(2)(b) of the Act, an acquisition of property used in carrying on a business is of a value that effectively amounts to a change in control of the business if the value of property acquired is more than 25% of the value of all property owned by the person from whom the property was acquired immediately before the acquisition.

(2)

In determining the value of property,—

(a)

regard may be had to—

(i)

the most recent financial statements of the business or person prepared for the purposes of any enactment:

(ii)

the accounting records of the business or person:

(iii)

all other circumstances that affect, or may affect, the value of the property:

(b)

reliance may be placed on valuations of the property that are reasonable in the circumstances.

(3)

This clause is repealed when section 53 of the Overseas Investment (Urgent Measures) Amendment Act 2020 comes into force.

64B Exemption from requirements under emergency notification regime

The requirements under the emergency notification regime do not apply in relation to a call-in transaction if—

(a)

the transaction—

(i)

is a transaction that requires consent; and

(ii)

is exempt from that requirement under—

(A)

Schedule 3 of the Act; or

(B)

a provision of Part 2 or 4; or

(C)

any other regulation made under section 61C of the Act; or

(D)

any exemption granted under section 61D of the Act; or

(b)

the transaction—

(i)

would be a transaction that requires consent if it met the monetary thresholds under section 13 of the Act; and

(ii)

would then be exempt from that requirement under a provision referred to in paragraph (a)(ii)(A), (B), or (C); or

(c)

the transaction does not require consent because it relates to the acquisition of an estate or interest in land that is an exempted interest.

64C Interim direction orders

For the purposes of section 91(4)(a) of the Act, the specified date is the last day of the period (specified in regulation 69A) within which the Minister must take a risk management action in the relation to the transaction.

7 New subpart 3 of Part 2 inserted

After regulation 69, insert:

Subpart 3—Miscellaneous provisions

69A Time frame for taking risk management action

(1)

This regulation sets time frames under section 37B(1)(a) of the Act for the purposes of section 84.

(2)

The Minister must take a risk management action in relation to a transaction notified to the regulator under section 85 no later than 40 working days after the regulator receives the notification.

(3)

The Minister may extend the time limit under subclause (2), once, for a further period of up to 30 working days.

(4)

The Minister may only do so if satisfied that the extension is necessary in order to adequately consider which risk management action should be taken.

(5)

The Minister must give notice of the extension to the person who gave the notification before the initial time limit expires.

69B Land owned or managed by governance entity of collective group of Māori

(1)

This regulation prescribes enactments for the purposes of—

(a)

table 2 in Part 1 of Schedule 1 of the Act (as amended by the Overseas Investment Amendment Act (No 3) 2020) (Table 2); and

(b)

the standing consent in clause 32 of Schedule 1AA of the Act.

Land owned by governance entity of collective group of Māori under specified enactments

(2)

The following enactments are specified for the purposes of row 10 of Table 2:

(a)

Maori Purposes Act 1931:

(b)

Maori Purposes Act 1934:

(c)

Mauao Historic Reserve Vesting Act 2008:

(d)

Ngā Mana Whenua o Tāmaki Makaurau Collective Redress Act 2014:

(e)

Ngāi Tahu (Tūtaepatu Lagoon Vesting) Act 1998:

(f)

Reserves and Other Lands Disposal Act 1956:

(g)

Reserves and Other Lands Disposal Act 1970:

(h)

Tutae-Ka-Wetoweto Forest Act 2001:

(i)

Whakarewarewa and Roto-a-Tamaheke Vesting Act 2009.

Reserves managed by governance entity of collective group of Māori under specified enactments

(3)

The following enactments are specified for the purposes of row 11 of Table 2:

(a)

Maori Purposes Act 1934:

(b)

Maori Purposes Act 1931:

(c)

Mauao Historic Reserve Vesting Act 2008:

(d)

Ngā Mana Whenua o Tāmaki Makaurau Collective Redress Act 2014:

(e)

Ngāi Tahu (Tūtaepatu Lagoon Vesting) Act 1998:

(f)

Reserves and Other Lands Disposal Act 1970:

(g)

Reserves and Other Lands Disposal Act 1956:

(h)

Tutae-Ka-Wetoweto Forest Act 2001:

(i)

Whakarewarewa and Roto-a-Tamaheke Vesting Act 2009.

8 Regulation 85 amended (Definitions)

In regulation 85, revoke the definitions of non-NZ government investor and relevant government enterprise.

9 Regulation 87 revoked (Definition of relevant government enterprise)

Michael Webster,
Clerk of the Executive Council.

Explanatory note

This note is not part of the regulations, but is intended to indicate their general effect.

These regulations amend the Overseas Investment Regulations 2005 (the OI Regulations) as a consequence of the enactment of the Overseas Investment (Urgent Measures) Amendment Act 2020, which amends the Overseas Investment Act 2005 (the OI Act). These regulations come into force 14 days after that amendment Act receives the Royal assent.

Regulation 4 inserts new Part 1AA to define matters for the purposes of definitions in the OI Act. New regulation 3C prescribes classes of businesses that are strategically important business (or SIBs).

New regulation 3D excludes from the definition of transaction of national interest transactions involving land where the only land involved is residential (but not otherwise sensitive) land.

Regulation 5 amends regulation 37 to correct a drafting error in the exemption for corporate dealings to ensure that any entity within a corporate group that is at least 95% owned by the same overseas person may acquire an interest in sensitive assets from another entity within that group without obtaining consent. The exemptions inserted by the Overseas Investment Amendment Regulations 2018 erroneously reduced coverage of the exemptions for groups that are between 95% and 100% owned by an overseas person.

Regulation 6 inserts new Part 2A, which prescribes matters for the purposes of the new national security and public order risks management regime in Part 3 of the OI Act.

New regulation 64A defines acquisitions that are covered by the new temporary emergency notification regime in a manner comparable to the test for major transactions in the Companies Act 1993 but with the threshold being 25% of the pre-acquisition value of the assets owned by the person from whom the property was acquired.

The OI Act and OI Regulations exempt a range of transactions from the requirement for consent. Acquisitions of exempted interests (easements and some profit à prendre) also do not require consent. New regulation 64B also exempts these transactions from the requirements under the emergency notification regime (including the requirement to give a call-in notice). The exemption in new regulation 64B also applies to transactions that do not require consent because they do not meet the monetary value threshold in section 13 of the OI Act, but which, if they did meet that threshold and required consent, would be covered by an exemption.

New regulation 64C specifies, for the purposes of section 91(4)(a) of the OI Act, the date on which an interim direction order will expire (if it does not expire earlier).

Regulation 7 inserts new subpart 3 of Part 2. New regulation 69A sets time frames for the purposes of section 84 of the OI Act. Specifically, it sets the time frames within which the Minister must take a risk management action in relation to a transaction notified under the emergency notification regime.

New regulation 69B prescribes enactments for the purposes of table 2 in Part 1 of Schedule 1 of the OI Act (which relates to land that is sensitive by reason of the type of land it adjoins), and the standing consent in clause 32 of Schedule 1AA of the OI Act (which relates to transactions involving sensitive adjoining land entered into during the epidemic period).

Regulations 8 and 9 revoke definitions that are no longer required in the regulations because they are now in the OI Act.

Statement of reasons

The following statement of reasons is published for the purposes of section 61F(5) of the Overseas Investment Act 2005

(1)

This statement sets out the Minister’s reasons for recommending the exemption regulation in new regulation 37(1)(a) in the Overseas Investment Amendment Regulations 2020 and why the Minister considers each exemption to be necessary, appropriate or desirable. The Minister Responsible for the Act (the Minister of Finance) formally delegated authority to lead this review to the Associate Minister of Finance (Hon Parker).

(2)

Under the Act, the Minister may recommend exemptions under sections 61C and 61D only if the Minister considers:

  • that there are circumstances that mean that it is necessary, appropriate or desirable to provide an exemption for any of the matters referred to in section 61B(a) to (c) of the Act; and

  • that the extent of the exemption is not broader than is reasonably necessary to address those circumstances.

(3)

When considering whether to recommend that an exemption be made, the Minister must have regard to the purpose of the Act, which acknowledges that it is a privilege for overseas persons to own or control sensitive New Zealand assets, and that it is therefore appropriate for overseas investments in those assets to be made only after meeting consent criteria and subject to prescribed conditions.

(4)

The Minister may also have regard to all or any of the factors set out in section 61D(2)(b) of the Act, including any other factor that seems to the Minister to be relevant to the circumstances.

Reasons for exemptions for corporate dealing (new regulation 37(1)(a))

(5)

This exemption would allow members (companies and other entities) of the same group, which are overseas persons that own sensitive assets, to transfer those sensitive assets to different entities in the corporate group without consent, provided the ultimate ownership and control of the sensitive assets by overseas persons does not increase. For example, this exemption means that the transfer of sensitive assets from an initial overseas person consent holder to a wholly-owned subsidiary company would not require consent. This would replace existing regulation 37(1)(a).

(6)

This exemption is for the matters referred to in section 61B(a) and (b) of the Act. It is minor and technical and provides an exemption where compliance with the Act would be inefficient and unduly burdensome, taking into account the nature of the transaction.

(7)

I consider this exemption is appropriate and desirable, having regard to the Act’s purpose, because it resolves an unintended consequence that has resulted from the drafting of the previous regulation introduced through the Overseas Investment Amendment Regulations 2018. Regulation 37(1)(a) previously provided an exemption for overseas persons restructuring their holdings of sensitive assets, but was limited to transactions in which the parent in the corporate structure acquired an interest in the sensitive asset. This in effect meant that other overseas entities in the corporate group required consent to restructure their holdings of sensitive assets. This was not the intended outcome of the regulation. Requiring other entities that are overseas persons, to obtain consent to restructure in other circumstances would be inefficient and unduly burdensome. This is because there is no change in the ultimate ownership and control of the sensitive assets by overseas persons (having regard to the Act’s purpose and general requirements, and the factors in s 61E(2)(b)(i) and (ii) of the Act).

(8)

Further, I consider this exemption is not broader than reasonably necessary because it is limited to situations where there is no change in the ultimate ownership and control of the sensitive asset by overseas persons. The exemption only operates where the ownership and control of the group by the relevant person is unchanged. In circumstances where there is an increase or other change in ultimate ownership and control, overseas persons would still be required to obtain consent according to the usual rules in the Act.

Issued under the authority of the Legislation Act 2012.

Date of notification in Gazette: 4 June 2020.

These regulations are administered by the Treasury.