OIO changes to streamline the investing and consenting processes

The Overseas Investment Office (OIO) recently announced five new class exemptions and some other changes to the way it goes about its business. It’s also looking at a few other potential exemptions, all of which – with the right safeguards – should be welcomed.

The new class exemptions come into force on 1 February 2017.  They cover:

  • Lease renewals
  • Situations where land has previously been the subject of an OIO consent,
    has remained in overseas ownership and will continue to be used for the same activity
  • Transactions due to the Public Works Act 1981
  • Situations where a custodian is investing on behalf of another
    person, and
  • Situations where a company is considered an overseas person only
    because an overseas custodian holds rights or interests in the company’s shares.

The OIO has made various changes to the consent application process; these are all aimed at reducing the overall time it takes to deal with an application, without compromising the quality of decision-making.

There are three key changes to note:

  1. The OIO is promoting pre-application meetings to discuss things at a high level at an early stage.
  2. New application templates are being finalised and should be available in February.
  3. There’s a triaging of applications by senior staff, with more of a risk-based approach to the assessment of applications that come through the OIO’s doors. More complex and higher risk applications may take longer; more straightforward or lower risk applications should be turned around faster.

On the enforcement front, overseas investors should note that the OIO is stepping up its surveillance and investigation function. This will include looking into situations where commitments have been made but not delivered on.

In the background, the OIO is also looking at making changes to some of the existing class exemptions, and also some potential new exemptions. Some of the possibilities include more flexibility for an overseas investor to increase their shareholding in a company without needing consent; exempting certain sale and leaseback transactions from the need to get consent; and also exempting certain transactions where the only sensitive land in question is common property (which can often occur in hotel/resort-type developments). There is a good case for these exemptions and we hope to hear more on them from the OIO in the coming months.

Limited partnerships become popular

A flexible and convenient option, limited partnerships are an increasingly popular business structure for venture capital and private equity firms looking to enter the New Zealand market. The Limited Partnerships Act 2008 enables a form of partnership with:

  • General partners (who are liable for all the debts and liabilities of the partnership) and who manage the day to day running of the business, and
  • Limited partners (who are liable to the extent of their capital contribution to the partnership) and who can enjoy more of a silent investor-type role.
  • Some of the key advantages that a limited partnership provides include:
  • Partners can be individuals, companies or partnerships that exist under the Partnerships Act 1908
  • Status as a separate legal personality
  • An indefinite lifespan, if desired
  • Various safe harbour activities for limited partners where their actions do not amount to the management of the business or otherwise breach the Act, and
  • Tax benefits for partners of the limited partnership.

The Act prescribes similar reporting responsibilities to other company structures, such as preparing financial statements and filing annual returns with the Companies Office. Potential partners must also meet eligibility requirements; for example, being a New Zealand resident.

Overall this internationally-recognised regime has removed previous barriers to foreign investment in New Zealand. It enables home-grown businesses to be more competitive in seeking venture capital funds and other private equity schemes.

Disclaimer: All the information published in Commercial eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of this firm. Articles appearing in Commercial eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2016. Editor - Adrienne Olsen, em. adrienne@adroite.co.nz  ph. 029 286 3650 or 04 496 5513