By Craig Nelson - 11 Apr 2016
The OIO has just released decision sheets on consents
granted in February.
This is the first of a regular blog on the workings of the
Overseas Investment Office. We aim to help you better understand
how the OIO consent process works by learning from the experience
of others. If you have any questions regarding OIO matters, please
contact Craig
Nelson.
Retrospective Consent & Mortgages
New Wish Investment Limited obtained retrospective consent to
acquire interests in mortgages secured over sensitive land. There
are two points of interest here:
- First, this was a retrospective application for consent. This
means OIO consent was not obtained before making the investment,
but was instead applied for and obtained afterwards. The Overseas
Investment Act includes a process for retrospectively granting
consent to allow investors to correct an inadvertent failure to get
consent. Investors could be fined (among other remedies) for
investing without consent, but the OIO will assess investments on a
case by case basis. The OIO can take a pragmatic approach and allow
an application for retrospective consent if there was a genuine
mistake made by the investor.
- Secondly, overseas investors need OIO consent to take
mortgages over sensitive land. This is a useful reminder to take
care with financing arrangements, as lenders can be surprised to
learn that they need to get OIO consent. Exemptions are available
to lenders who take mortgages in the ordinary course of business,
but this exemption is narrow and strictly applied.
Only one benefit
In the Kerrytown Road Orchards LP decision, consent was granted
for the purchase of 20 hectares of land for an apple orchard.
Interestingly, the decision sheet only quotes one relevant benefit
(out of 21 possible net benefit factors). The benefit was that the
investor had made previous investments in NZ. It is unusual for
consent to be granted on the basis that there is only one relevant
benefit to NZ. While there are no strict rules on the number of
benefits needed to get consent, in our experience somewhere between
four and eight benefit factors are quoted when consent is granted.
It is a matter of both the quality of the benefits as well as the
quantity of benefits. As only one factor was quoted in this case,
this suggests that the quality of that one benefit must be
high.
Compare this, for example, with another decision which
coincidentally relates to acquisition of land to develop an orchard
made by T & G Global Limited. In this case, the decision sheet
quoted six different benefit factors as being relevant to the OIO's
decision.
Increasing shares in an existing investment
Rayonier Canterbury LLC obtained consent to acquire up to 100%
of Matariki Forestry Group, in a context where it is already the
majority owner. This decision highlights a consent requirement that
is not always well understood by investors - that is, OIO consent
is needed if you own or control 25% or more of a New Zealand
company which owns sensitive land and you increase that stake.
Investors with foresight can seek OIO consent to acquire more
shares than they plan to acquire initially (e.g. an investor
intends to acquire 50% of a company, but seeks consent to acquire
up to 100% to cover potential further investments). However, OIO
consents typically lapse after 12 months, so any further investment
cannot be delayed. It is possible to get this period extended, but
the OIO will consider requests for extensions on a case by case
basis.
Non-economic benefits
Ferrovial Services Australia Pty Limited obtained consent to
acquire up to 100% of the shares in Broad Spectrum Limited. Of note
is that the only two relevant benefit factors quoted in the
decision sheet are that Ferrovial was considered to be a key person
in a key industry and that rejecting the consent would affect the
image, trade or international relations of NZ. This is a useful
reminder to applicants to consider the full range of the 21
different benefit factors and that it is not always necessary to
demonstrate a substantial direct positive economic benefit to NZ
from the investment.
Environmental Factors
In our experience, the OIO can struggle to see the benefit of
investing in forests where a forest is already established and well
managed. New Forests was recently granted consent to invest in
various forests. Based on the benefit factors quoted in the
decision sheet, environmental factors (such as protecting /
enhancing indigenous vegetation/fauna) appear to have played an
important part.
For investors who might struggle to show a substantial economic
benefit, think about what environmental benefits will arise from
the investment.
consents granted in February. This is the first of a regular blog
on the workings of the Overseas Investment Office. We aim to help
you better understand how the OIO consent process works by learning
from the experience of others. If you have any questions
regarding OIO matters, please contact Craig Nelson.
Retrospective Consent & Mortgages
New Wish Investment Limited obtained retrospective consent to
acquire interests in mortgages secured over sensitive land.
There are two points of interest hconsents granted in
February. This is the first of a regular blog on the workings of
the Overseas Investment Office. We aim to help you better
understand how the OIO consent process works by learning from the
experience of others. If you have any questions regarding OIO
matters, please contact Craig Nelson
Contact
Craig
Nelson