The Overseas Investment Amendment Bill “had a limited remit,” a senior partner says
Chapman Tripp believes that more needs to be done in the overhaul of New Zealand’s overseas investment regime.
The Overseas Investment Amendment Bill, which is on its final stages in the House, “should be seen as a curtain-raiser, not the main game,” the firm said.
“The bill had a limited remit – essentially to reduce foreign competition in the residential property market and to change the rules on forestry acquisitions. But the government has signalled that it has a wider and deeper review coming, and it is very important to the quality of New Zealand’s capital markets that this proceeds,” said Roger Wallis, a corporate and commercial partner at Chapman Tripp.
Wallis, who stepped down as firm chair last year, said that the current amendments do not address and may even exacerbate serious issues with the Overseas Investment Act.
“In particular, the definition of ‘overseas person’ is too broad, capturing any company with 25% or more overseas ownership, regardless of whether those shares are widely held and whether effective control remains very firmly within New Zealand,” he said.
“Mercury, Meridian and Genesis are caught by this, even though they are 51% government-owned. Private sector examples include Fletcher Building, Ryman Healthcare and Metlifecare – all of which have their corporate headquarters in New Zealand, are chaired by New Zealanders and have New Zealand-centric boards,” he said.
Bill Sandston, a property and real estate partner, said the issues of the amendment bill could significantly weigh on growth.
“By putting up obstacles to land acquisition for retirement villages they are prolonging the housing crisis. And, more generally, they impose significant compliance costs through the need to go through the OIA screening processes for transactions which are beyond the ambit that the Act is intended to address,” he said. “This problem could be easily resolved. The equivalent Australian legislation, for example, doesn’t include portfolio investments of less than 5% in a listed issuer in their threshold test. Other problems with the act could also be dealt with reasonably simply.”