The Overseas Investment Office says it has had queries about how to determine the level of overseas ownership in a company that owns sensitive New Zealand land, and whose shares are held by overseas person custodian companies.
This follows comments by law firm Russell McVeagh that the OIO has advised that its interpretation of "overseas person" is markedly different from what Russell McVeagh and, to its knowledge, the market generally, has adopted.
The OIO says the Overseas Investment Act 2005 says that if an overseas person or persons have 25% or more of any class of such a company's securities, then the company will become an overseas person itself.
"This will trigger the need for consent under the Act. According to statutory interpretation principles, the OIO has always interpreted 'have, as meaning legal and beneficial ownership," it says.
"Overseas-owned custodian companies are usually 'overseas persons' under the Act. The OIO has previously exempted some companies that provide custodian services in cases where the beneficial ownership and control of the securities held by the custodian company remains with the underlying investors.
"These exemptions remove the custodian company's need for consent, but not that of any underlying overseas investors. This is consistent with the approach of other regulators who have granted exemptions to bare trustees who do not have any beneficial ownership or control over the securities they hold."
The OIO says it is now looking at how it can provide greater clarity and certainty on this issue for companies, nominee companies and investors.
"Affected custodian companies can apply to the OIO for individual exemptions under regulation 37 of the Overseas Investment Regulations 2005. The OIO doesn't have the power to issue a regulation 37 class exemption," it says.
"In the meantime, the OIO will not be taking any action against custodian companies that haven't applied for an exemption, or target companies that may have been affected."