THE END OF THE EMERGENCY NOTIFICATION REGIME
Posted by Thomas Barnaby on July 6 2021 in News
In our previous article, we explained the new ‘investor test’ which came into force on 22 March 2021 as part of a collection of various other measures in the Overseas investment (Urgent Measures) Amendment Act 2020. Further to that article, the New Zealand Government has since ended the emergency notification regime on 7 June 2021, which had been introduced last year as part of the Government’s Covid-19 response.
EMERGENCY NOTIFICATION REGIME
The purpose of the previous emergency notification regime was to prevent vulnerable New Zealand assets from being subject to opportunistic foreign takeover due to the impacts of Covid. The previous regime required overseas investors to notify the Government before they proceeded with an investment in New Zealand, if that investment:
- Resulted in more than a 25% ownership interest;
- Increased an existing interest in that business to, or beyond, certain thresholds; or
- Resulted in the acquisition of more than 25% of the business’ assets.
THE NEW 'CALL-IN' POWERS
Subsequent to the Government completing their 90-day review of the regime and having concluded the impacts of Covid no longer justifying the regime remaining in force, a narrower national security and public order (NSPO) call-in power has been introduced. Notification is mandatory for investment in some industries, and voluntary for others.
The NSPO notification regime applies to any transaction to acquire an interest in “strategically important businesses” or property. In the majority of cases, the NSPO notification regime has a $0 and 0% ownership and control threshold.
The exceptions to this general rule are:
- Investments which result in an investor holding less than 10% of a publicly listed entity’s shares (unless the investment grants disproportionate access to, or control of, that entity); or
- Investments in media entities, where the threshold for screening is more than 25% ownership or control interest in the entity.
The purpose of the new call-in powers is to allow screening of investments in strategically important businesses that do not normally require consent under the Overseas Investment Act. This includes those involving the acquisition of critical national infrastructure or military technology.
If a transaction is found to be contrary to national security or public order, the relevant Ministers may block the transaction or give direction orders to manage the risks associated with the investment. The Government aims that these powers will strike the right balance between facilitating productive investment whilst managing risks where they arise.
The revocation of the emergency notification regime and the application of the new call-in notifications are subject to a short transitional period. The transitional arrangements are based on the date which the transaction takes place, rather than when the date the notification is made to the Overseas Investment Office. Therefore:
- If the transaction was entered into before 7 June 2021, the emergency notification regime continues to apply.
- If the transaction was entered into on or after 7 June 2021, the NSPO notification regime applies.
While the Government has discontinued the emergency notification regime, should the economic conditions in New Zealand necessitate a greater level of protection of our national interests (for example, due to the further impacts of Covid), the Government has the ability to reinstate it.
We recommend that overseas investors seek legal advice about how these changes may affect them. If you would like any further information about the changes, or assistance with an application, please contact us.
Thomas Barnaby | Solicitor | Thomas.Barnaby@shieffangland.co.nz
Kellie Bright | Special Counsel | Kellie.Bright@shieffangland.co.nz
This paper gives a general overview of the topics covered and is not intended to be relied upon as legal advice.