The Overseas Investment Amendment Bill now going through its final stages in Parliament should be seen as a curtain raiser, not the main game in relation to the reform of our overseas investment regime, says Chapman Tripp.
“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,” partner Roger Wallis says.
“The current amendments do not address – indeed may 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.
“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.”
Chapman Tripp partner Bill Sandston says the effects of the anomaly are not small and are an anchor 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.
“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,” he says.