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.