A shift in New Zealand’s current overseas investment regime – speeding up the OIO consent process
The Overseas Investment Act 2005 (Act) requires overseas investors to apply to the Overseas Investment Office (OIO) for consent to buy certain types of assets in New Zealand – such as “significant business assets” and “sensitive land” (which can include farm land)
The Minister of Finance can issue directive letters to the OIO. These directive letters set general policies and processes that the OIO is to follow when making decisions on overseas investment.
On 6 June 2024, Hon David Seymour, the Associate Minister of Finance, issued a new directive letter to the OIO (Letter). Amongst other things, the Letter directs the OIO to have a focus on efficiency when processing OIO applications. The Letter also directs the OIO to start with the assumption that overseas investment is in the national interest of New Zealand when processing applications.
The Letter is another step taken by the current coalition Government to encourage overseas investment in New Zealand. As stated in the Coalition Agreements, the Government aims to attract foreign investment, believing that it will boost prosperity for all New Zealanders “particularly given the size of New Zealand’s investment need relative to the scarcity of domestic capital”.
The announcement made by Hon David Seymour when releasing the Letter indicated this is part of a three-step process to better enable overseas investment in New Zealand. The first step, (discussed here) involves the delegation of more consent decisions to the OIO. Hon David Seymour stated the next step will be to “rewrite” the Act.
Some of the key takeaways from the Letter for the rural sector are discussed below.
Timeframes / Processing Applications
The OIO is instructed to:
- allocate the majority of their resources on “high risk” transactions, noting the bulk of overseas investment poses no risk to New Zealand; and
- process 80% of new consent applications within half the time specified by the statutory timeframes.
This should result in quicker consent decisions for overseas investors and we are already seeing this in action. Processing times for more complex applications will remain largely unchanged.
Removal of other regulatory regimes considerations
The OIO is instructed to only consider matters under the Act, and not consider risks (such as risks identified under the Resource Management Act 1991) that other regulators are required to consider (unless there is compelling evidence for the OIO to do so).
Farm land advertising exemptions
The Act already requires farm land to be advertised to New Zealanders before it can be sold to an overseas investor. Exemptions can be granted to this requirement. The Letter provides a non-exhaustive list of examples where farm land advertising exemptions can be given, including:
- when there is substantial compliance with the advertising requirements (e.g. where the advertising does not meet all of the requirements but nonetheless achieves the purpose of advertising;
- for future advertising (e.g. where an overseas investor seeks consent to acquire selected properties in the future should they be put up for sale and advertising occurs after consent); and
- where there is only one natural buyer (e.g. a boundary adjustment or where there is landlocked land.
Benefit to New Zealand test
When processing an application for a transaction involving sensitive land, the OIO must already apply the “benefit to New Zealand” test. The Letter directs the OIO to prioritise Government policy and objectives outlined in the Coalition Agreements when applying this test. We expect overseas investments that strongly align with Government policy, such as those aimed at increasing exports receipts, will have a greater chance of obtaining OIO consent.
Want to know more?
If you have any questions about the matters raised in this article, please contact our specialist Overseas Investment team.
PDF version available here.