Lance Jones hopes further review will help prospective investors proceed with confidence
Lance Jones, corporate partner at Anthony Harper, has welcomed New Zealand’s stated intention to overhaul its Overseas Investment Office (OIO) regime, including through the planned passage of amending legislation by the end of next year.
“Despite prior attempts to alleviate the issue, the Overseas Investment Act remains overly complex, with significant compliance costs and uncertainty for investors,” Jones commented.
“We hope that this review will result in significant simplification, to enable prospective investors to proceed with confidence and encourage greater flows of offshore capital to our local businesses to help them grow and be more productive,” Jones added.
Jones, who advises on matters relating to the Act, was closely involved in the government’s 2018–21 reform process, which simplified the legislation and narrowed its scope in some areas but complicated it and expanded its scope in other areas.
The firm expressed its support of the changes introduced to the regime so far, which have led to much swifter processing times on consent applications.
Government’s overhaul plans
Associate Finance Minister David Seymour announced last Saturday the government’s contemplated changes relating to the OIO regime, with a view to encouraging inbound investment.
Seymour noted that New Zealand’s restrictive foreign direct investment regime has led to international investors benching New Zealand, which has been lagging in terms of its GDP growth, productivity, and wage growth.
To address the issues in the regime, the government intends to reverse the presumption that investing in New Zealand is a privilege, which means that investors should justify their transaction to the government.
Potentially replacing this presumption will be the principle that overseas investment, being beneficial, can move forward as long as there is no identified risk to New Zealand’s interests.
Three core principles will inform the planned legislative and regulatory changes to the OIO regime. First, the government intends to maintain the legislation’s broad scope so that it can preserve the legal option of screening all investments currently subject to screening.
Second, the government will consolidate the core tests of the Overseas Investment Act – specifically, the investor test, the benefit to New Zealand test, and the national interest test – with a starting presumption that an investment can proceed except if there are identified risk factors.
Third, the government will have flexibility to call in any investments for detailed scrutiny on a case-by-case basis and, upon identifying risks to New Zealand’s national interest, will impose conditions or will block the investment.
This planned overhaul is the final stage of the current government's three-stage process to encourage overseas investment.