The COVID-19 crisis has caused the value of many businesses to fall, making them potentially attractive targets for overseas investors looking for a bargain. The Government has responded by making changes to the rules regulating overseas investment in New Zealand businesses and property.

The aim is to protect New Zealand businesses and property from opportunist overseas investors hoping to profit from any price reductions caused by the economic consequences of the COVID-19 restrictions. 

Overseas investors will now need to notify the Overseas Investment Office (OIO) of all overseas investments, regardless of value, resulting in:

• More than 25% overseas ownership of a New Zealand business or its assets; or
• An increase to an interest in an existing business holding up to or beyond 50%, 75% or up to 100%.

Property purchases, regardless of the value, will also require OIO approval in certain cases. A foreign investor must notify the OIO if a proposed transaction falls within the scope of the new regime by providing basic information about the transaction.

When notification is required either under the new regulations or under the usual consent pathway, the proposed transaction will be reviewed by the relevant Minister to decide whether it is contrary to New Zealand’s national interest. The term ‘national interest’ is not defined in legislation, but the Government’s guidance on the application of the national interest test states that the Minister may consider a broad range of factors, depending on the investment. 

For example, businesses operating in sensitive areas of the economy may raise more national interest concerns, while investments that enhance New Zealand’s economic prosperity are less likely to be contrary to the national interest.

Businesses and property can still be sold without consent under the new regulations, as long as the agreement is conditional on the purchaser obtaining consent.

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Mike Toepfer is a Director of Aspiring Law.

Please remember, this information is designed as a general guide, and should not replace specific legal advice on a particular issue.