The New Zealand government has announced that it is retaining the temporary emergency notification regime in the Overseas Investment Act 2005 (the OIA) for another 90 days. While New Zealand is free of Covid-19 in the community, it was no surprise that the ministers concluded that the ongoing economic effects of the COVID-19 pandemic justify the notification regime continuing. The next review of the temporary regime is due by 24 February 2021.
Since 16 June 2020, overseas investors have needed to notify the Overseas Investment Office (OIO) of most acquisitions of New Zealand business assets or shares (directly or indirectly) that are not already subject to screening under the OIA, irrespective of the value of the transaction. The OIO and ministers then assess whether the transaction is contrary to New Zealand’s national interest. In particular, this can include consideration of whether:
- the target is in financial distress, and
- the value attached to the target is fundamentally lower than would be the case absent the COVID-19 pandemic.
However, ministers have broad discretion to consider all manner of factors that may relate to the “national interest”.
While the notification regime has been an additional burden for investors, with rare exceptions, this requirement has had no adverse impact on transaction timing.
- As of 24 November 2020, overseas investors had lodged 226 emergency pathway notifications, only 8 of which had been subjected to a more detailed review. Overall, 94% of investors received notification decisions within 10 working days.
- No “direction orders” (being the relevant decision on the notification) have so far been published on the OIO’s website, which will only occur where approval is declined or issued with conditions. However, we expect that this will be a matter of timing as conditions have been imposed on some transactions to date.
This post was authored by Glenn Shewan of Bell Gully, a Baker McKenzie partner firm
