Source: http://www.legislation.govt.nz/regulation/public/2018/0154/latest/whole.html
Timestamp: 2018-09-24 21:07:12
Document Index: 603208727

Matched Legal Cases: ['art 1', 'art 2', 'art 3', 'art 1', 'art 1', 'arts 7', 'art 7', 'art 2', 'art 2', 'art 1', 'art 3', 'art 1', 'art 3', 'art 3', 'art 3', 'art 1', 'art 3', 'art 4', 'art 4', 'art 4', 'art 9']

Overseas Investment Amendment Regulations 2018 (LI 2018/154) – New Zealand Legislation
At Wellington this 3rd day of September 2018
These regulations are made under sections 61 and 61C of the Overseas Investment Act 2005—
to the extent that they are made under section 61C of that Act, on the recommendation of the Minister of Finance made in accordance with section 61E of that Act.
5 Regulations renumbered
Amendments to Part 1 of principal regulations (consent)
6 New regulations 29 to 32 and cross-headings inserted
Benefit test: special test relating to forestry activities
29 Special test may be applied and requirements to be met
Matters relating to sensitive land that is residential land
30 Types of overseas persons specified to be qualifying individuals
31 Factors for considering whether person remains committed to residing in New Zealand
32 Maximum percentage: dwellings in large apartment developments that are purchased off plans
7 Regulations 29 and 30 replaced
33 Fees and charges
34 When fees and charges are payable
8 Regulation 31 replaced (Administrative penalty for late filing)
35 Administrative penalty for late filing
9 Regulation 32 replaced (Administrative penalty for retrospective consent)
36 Administrative penalty for retrospective consent
Amendments to Part 2 of regulations (exemptions)
Exemptions from requirement for consent
10 Regulation 33 replaced (Certain transactions exempted from requirement for consent)
37 Exemptions for corporate dealing
38 Exemptions for shareholding creep
39 Exemption for redeemable preference shares
40 Exemptions for trusts
41 Exemptions for permitted security arrangements
42 Exemption for portfolios or bundles of permitted security arrangements
43 Exemption for life insurance
44 Exemption for retirement schemes
45 Exemptions for relationship property
46 Exemption for underwriting
11 Regulation 33A amended (Exemption for overseas custodians acquiring certain rights and interests in custodial property)
Exemptions from requirement for consent in respect of overseas investments in sensitive land
12 Regulation 36AA amended (Exemption for certain land transactions commonly known as re-grants)
13 New regulations 54 to 56 inserted
54 Exemption for replacement of forestry right with new forestry right
55 Exemption for replacement of regulated profit à prendre with new regulated profit à prendre
56 Exemption for freeholder who acquires another interest in land included in freehold
14 New regulations 59 and 60 inserted
59 Exemption for diplomatic premises
60 Exemption for charitable entities
Exemption from definition of overseas person
15 Regulation 36B amended (Exemption for certain bodies corporate who are overseas persons only because overseas custodians have custodial securities)
16 Regulation 38 replaced (Requirements for application for exemption)
64 Requirements for application for exemption
Amendments to rest of regulations
17 Part 3 revoked
Exemptions in respect of overseas investments in sensitive land to implement obligations under international agreements
19 Schedule 1AA amended
20 Schedule 2 replaced
These regulations are the Overseas Investment Amendment Regulations 2018.
These regulations come into force on 22 October 2018 (immediately after the Overseas Investment Amendment Act 2018 comes into force under section 2(3) of that Act).
In these regulations, a reference to a regulation of the principal regulations is a reference to that regulation as it was numbered before the commencement of these regulations.
However, subclause (2) does not apply to a reference in the third column of the table in regulation 5 or to other references where the context otherwise requires (for example, in cross-references in regulations of the principal regulations that are inserted or replaced by these regulations).
permitted security arrangement has the meaning set out in regulation 41
Renumber each existing regulation shown in the first column of the following table as the regulation number set out opposite to it in the third column and reposition it in its appropriate numerical order and, if relevant, update the cross references as shown in the fourth column.
33A Exemption for overseas custodians acquiring certain rights and interests in custodial property 47
34 Exemption for persons connected to portfolio investors or New Zealand controlled persons 48 In examples 1 to 4, replace “regulation 34” with “regulation 48” .
35 Exemption for New Zealand controlled persons 49
36 Consequential exemption for other transactions 50 In subclauses (1) and (2), replace “regulation 34 or regulation 35” with “regulation 48 or regulation 49” .
36AA Exemption for certain land transactions commonly known as re-grants 51
36AB Exemption for certain transactions where relevant land of certain type and area is already in overseas ownership or control 52 In subclauses (4)﻿(c) and (5)﻿(a)﻿(iii), replace “regulation 33(1)﻿(a) or (e)” with “regulation 37(1)﻿(a) or regulation 40(1)﻿(a)” .
36AC Exemption for transactions consequential on certain actions under Public Works Act 1981 53
36AE Exemptions for network utility operators 57
36AF Exemptions relating to relationship property where spouse or partner granted consent under commitment to reside in New Zealand test 58
36A Exemptions in Schedule 5 apply 61
36B Exemption for certain bodies corporate who are overseas persons only because overseas custodians have custodial securities 62 In example 2, replace “regulation 36B” with “regulation 62” .
Part 1 Amendments to Part 1 of principal regulations (consent)
After regulation 28 (Other factors for assessing benefit of overseas investment in sensitive land), insert:
Special test may be applied
For the purposes of section 16A(4) of the Act, the benefit to New Zealand test is also met if the relevant Ministers are satisfied of the matters listed in section 16A(4)﻿(a) to (g).
Requirements for purposes of section 16A(4)﻿(d) of Act
For the purposes of section 16A(4)﻿(d) of the Act, the requirements that must be met after the overseas investment is given effect to are as follows:
any existing arrangement in respect of the relevant land, or any part of the relevant land, that is for 1 or more specified purposes will be implemented and maintained, or will continue to be implemented and maintained:
anything that any existing conditions of a consent require to be done, or prohibit from being done, in respect of the relevant land, or any part of the relevant land, for 1 or more specified purposes will be done or not be done, or will continue to be done or not to be done:
logs will be supplied, or will continue to be supplied, as required by any existing supply obligation (so long as the obligation remains in place).
Subclause (2)﻿(a) does not apply to an arrangement to the extent that the arrangement will (in any event) have to be implemented and maintained, or continued to be implemented and maintained, after the overseas investment is given effect to because of—
a requirement imposed by or under an enactment, other than the Act or these regulations:
an interest in the relevant land, or any part of the relevant land, that is recorded in the register under the Land Transfer Act 1952 or the Land Transfer Act 2017 and that benefits or burdens the relevant land or the part of it.
Subclause (2)﻿(b)—
does not limit subclause (2)﻿(a):
applies in relation to a consent even if, because of the overseas investment or otherwise, the consent holder will cease to own or control (directly or indirectly) any interest in the relevant land or any part of the relevant land.
In subclause (2) (and this subclause),—
means an agreement or other arrangement or understanding, whether or not legally binding; and
includes (without limitation) a commitment that—
is given by a person to an organisation whose functions are or include the setting of standards or other requirements for 1 or more specified purposes; and
is a commitment to comply with a standard or other requirement set by the organisation for 1 or more specified purposes; but
does not include an agreement or other arrangement or understanding, or a commitment, that is exclusively oral
existing, in relation to an arrangement, the conditions of a consent, or a supply obligation, means the arrangement, conditions, or supply obligation is or are in place—
immediately before the overseas investment transaction is entered into; or
if the application for consent for the overseas investment transaction is made before the overseas investment transaction is entered into, immediately before the application is made
specified purpose means any of the following:
protecting areas of indigenous vegetation or habitats of indigenous fauna:
protecting areas of habitats of trout, salmon, wildlife protected under section 3 of the Wildlife Act 1953, or game as defined in section 2(1) of that Act:
protecting any historic place or historic area that is entered on the New Zealand Heritage List/Rārangi Kōrero under the Heritage New Zealand Pouhere Taonga Act 2014:
protecting any wāhi tapu or wāhi tapu area that—
is entered on the New Zealand Heritage List/Rārangi Kōrero under the Heritage New Zealand Pouhere Taonga Act 2014; or
is identified in the terms of any lease or forestry right, if the lease or forestry right is, in relation to the overseas investment, the interest in land, or one of the interests in land, described in section 12(a) of the Act:
protecting any land that is set apart as Māori reservation and that is wāhi tapu under section 338 of Te Ture Whenua Maori Act 1993:
providing access to land for members of the public or any section of the public
supply obligation means a contractual obligation under which logs from trees harvested on the relevant land must be supplied to a person who intends to have the logs processed in New Zealand.
In paragraphs (c) and (d) of the definition of specified purpose in subclause (5), terms defined in section 6 of the Heritage New Zealand Pouhere Taonga Act 2014 have the meanings given in that section.
For the purposes of the definition of existing in subclause (5), when deciding when the overseas investment transaction is entered into,—
entering into a contract or an arrangement is a transaction that must be treated as being entered into when the contract or arrangement is actually entered into even if it is subject to a condition precedent:
clause 1(5) of Schedule 1AA of the Act applies with any necessary modifications.
Paragraph (b) of the definition of existing in subclause (5) does not apply where a standing consent under clause 3 of Schedule 4 of the Act is being relied on for the overseas investment.
The requirement set out in subclause (10) applies for the purposes of section 16A(4)﻿(f) of the Act if—
the relevant land is or includes special land (as defined in section 16A(9) of the Act); and
the overseas investment falls within section 12(a) of the Act; and
the interest in land described in section 12(a) of the Act is a freehold estate.
The special land must be offered to the Crown in accordance with regulations 13 to 26.
In applying regulations 13 to 26 for the purposes of subclause (10), in regulations 15(2) and 23, the reference to the factor set out in section 17(2)﻿(f) of the Act must be read as a reference to the requirement set out in subclause (10).
The following persons are specified for the purposes of clause 4(2)﻿(d) of Schedule 2 of the Act:
an individual who is, under Australian law, an Australian citizen or a permanent resident of Australia:
an individual who is, under Singaporean law, a national of Singapore or a permanent resident of Singapore.
This regulation applies for the purposes of clause 8 of Schedule 2 of the Act.
The factors for considering whether a person (OP) remains committed to residing in New Zealand are the following:
the reason for OP’s absence from New Zealand on application days, including whether the reason is—
a qualifying reason; or
any other reason that the relevant Ministers consider is consistent with OP remaining committed to residing in New Zealand; and
whether the amount of time that OP was or will be absent from New Zealand on application days is reasonable given the reasons for OP being absent from New Zealand on those days; and
OP’s ongoing connection to New Zealand; and
the nature of OP’s connection to the other country or countries where OP was or will be on application days.
application days means any days in respect of which OP has applied for a waiver under clause 8 of Schedule 2 of the Act
qualifying reason means any of the following:
Crown service under the New Zealand Government:
service under an international organisation of which the New Zealand Government is a member:
service in the employment of a person, company, society, or other body of persons resident or established in New Zealand:
self-employment in a business that is ordinarily carried on in New Zealand:
attendance at a significant event relating to a family member that a person with OP’s relationship to the family member would reasonably be expected to attend (see subclause (4)):
absence because OP or his or her spouse or partner, dependent child, or sibling is receiving medical treatment overseas:
other absence for the purpose of obtaining any special medical or surgical treatment if the relevant Ministers are satisfied that there are good and sufficient reasons for the person leaving New Zealand to obtain that special treatment:
accompanying a spouse or partner who is overseas for one of the reasons in paragraphs (a) to (g)
In subclause (3), definition of qualifying reasons, paragraph (e),—
family member, in relation to OP, includes a person who is treated by OP as, and acknowledged by OP to be, a member of OP’s family
significant event, in relation to OP’s family member, includes the following events:
if OP has missed the family member’s funeral, a visit to pay respects to a family member of the deceased:
This regulation applies for the purpose of clause 4 of Schedule 3 of the Act.
The maximum percentage of new residential dwellings in a development that an exemption certificate may be applied to is 60%.
Replace regulations 29 (Fees and charges) and 30 (When fees and charges are payable) with:
The fees and charges set out in Schedule 2 are payable to the regulator for the matters to which they relate.
The fees and charges in Parts 7 and 8 of Schedule 2 are payable for every hour and, on a pro rata basis, for every part-hour of work that is carried out by or on behalf of the regulator.
The fees and charges include goods and services tax.
A fee or charge that is payable under regulation 33 must be paid on the making of an application, a notification, or a request, as the case may be.
However, a fee or charge in Part 7 or 8 of Schedule 2 is payable—
Replace regulation 31 (Administrative penalty for late filing) with:
For the purposes of section 52 of the Act, the administrative penalty that the regulator may require a person to pay if the person files, provides, or produces a document required by or under the Act, these regulations, or a condition of a consent, an exemption, or an exemption certificate with the regulator after the time when the document must be filed, provided, or produced is $500.
Replace regulation 32 (Administrative penalty for retrospective consent) with:
For the purposes of section 53 of the Act, the administrative penalty that the regulator may require an applicant for a retrospective consent to pay is an amount calculated in accordance with the following table:
Consideration provided for overseas investment
For consent for transaction on basis that only commitment to reside in New Zealand test is met
If the value of the consideration provided for the overseas investment is less than $2 million $5,000 $20,000
If the value of the consideration provided for the overseas investment is $2 million or more but not more than $10 million $10,000 $30,000
If the value of the consideration provided for the overseas investment is more than $10 million $10,000 $40,000
In determining whether to impose an administrative penalty under subclause (1), the regulator must consider whether requiring the applicant to pay that amount would be unduly harsh or oppressive given the nature of, and the reasons for, the retrospective consent.
Part 2 Amendments to Part 2 of regulations (exemptions)
Replace regulation 33 (Certain transactions exempted from requirement for consent) with:
The requirement for consent does not apply to the extent that giving effect to a transaction has any of the following effects:
Transactions within group where 1 overseas person owns 95% of group
the acquisition by an overseas person (A) of property—
from another member of the same group, being a group that comprises A and persons that are directly or indirectly at least 95% owned by A, as part of a reconstruction or reorganisation of that group; or
from an overseas person that directly or indirectly owns at least 95% of A:
Other acquisitions if no increase in ultimate ownership and control by overseas persons
the acquisition by an overseas person (A) of property from another overseas person (B) where one of the following applies:
A owns 100% of the securities in B; or
B owns 100% of the securities in A that are owned by overseas persons; or
another person (C)—
owns 100% of the securities in A and in B that are owned by overseas persons; and
owns a proportion of the total securities in A that is no greater than the proportion of the total securities that C owns in B; or
2 or more persons own in the same proportions 100% of the securities in A and in B that are owned by overseas persons,—
where owns means directly or indirectly owns:
Company acquiring own shares
the acquisition by a company incorporated under the Companies Act 1993 of its own shares if—
the acquisition does not alter the proportions in which shares in the company are held by the shareholders or the relative voting rights of the shareholders; or
the shares are acquired under sections 112 to 112C or section 118 of that Act:
the acquisition by an overseas person of securities or property in an amalgamated company under an amalgamation effected under the Companies Act 1993 if the overseas person has the same direct or indirect interest in or rights to the assets of that amalgamated company as that overseas person had in relation to those assets prior to the amalgamation.
If relying on an exemption in subclause (1)﻿(a), (b), or (d), see also subpart 1 of Part 3.
This regulation applies if the relevant Minister or Ministers have previously granted consent to A (A’s consent) for the acquisition of securities or rights or interests in securities of B (the initial consented securities).
the total number of further securities is less than 5% of the total number of initial consented securities; or
the resulting percentage of securities of the same class that A holds does not exceed by more than 10 percentage points the percentage of those securities that were initial consented securities; and
A’s level of control in B is less than A’s control limit.
A wants to acquire 20 further shares. A cannot under this exemption.
However, A could use paragraph (c)﻿(i) to acquire 3 further class Z shares (that is, 5% of 60).
Or, paragraph (c)﻿(ii) may allow A to acquire up to 10 further shares (that is, 60% plus 10 percentage points). The exact amount that A could acquire under paragraph (c)﻿(ii) depends on A’s level of control in B which, after the acquisition, would need to be less than A’s control limit.
A’s control limit is defined in relation to the investment in B that A has consent for as follows:
if A has consent to acquire less than 25% of a class of B’s securities, A’s control limit is 25%:
if A has consent to acquire 25% or more, but less than 50%, of a class of B’s securities, A’s control limit is 50%:
if A has consent to acquire 50% or more, but less than 75%, of a class of B’s securities, A’s control limit is 75%:
if A has consent to acquire 75% or more, but less than 90%, of a class of B’s securities, A’s control limit is 90%:
if A has consent to acquire 90% or more of a class of B’s securities, A’s control limit is 100%
holds includes has a beneficial entitlement to or a beneficial interest in
level of control in B, in relation to A and expressed as a percentage, is the highest of the following:
the proportion of the governing body of B of which A has power to control the composition:
the proportion of the voting power at a meeting of B that A has the right to exercise or of which A has the right to control the exercise
securities of the same class means that the securities have attached to them identical rights, privileges, limitations, and conditions.
If a person (A) relies on the exemption in this regulation, the conditions of A’s consent continue in effect as conditions of the consent as if the further securities were covered by the consent.
The requirement for consent does not apply to the extent that giving effect to a transaction has the effect of the acquisition by an overseas person of redeemable preference shares that are redeemable only in cash and that do not entitle the holder to exercise voting rights except if the dividend payable is in arrears.
the transfer of property from a trustee to an overseas person who is a trustee of the same trust on the appointment of a new trustee or the retirement of a trustee or on the resettlement of a trust if that appointment, retirement, or resettlement does not result in the trust becoming an overseas person:
the transfer by a trustee, executor, or administrator of the will or of the estate of a deceased person to an overseas person who is a beneficiary of property under that will or estate or under a trust established by that will or estate:
the transfer by a trustee of a trust to an overseas person who is a beneficiary of property under that trust if—
the trust is an overseas person; and
the acquisition of that property by the trust has been previously consented to under the Act; and
the transfer is not contrary to any conditions of that consent.
See also subpart 1 of Part 3.
the acquisition by an overseas person of property under a permitted security arrangement:
the acquisition by an overseas person of property as a result of the overseas person enforcing a permitted security arrangement in good faith:
the reacquisition by an overseas person of property as a result of the discharge of a permitted security arrangement.
A security arrangement (see section 6(1) of the Act) is a permitted security arrangement if it—
requires that the property be retransferred to the original transferor or extinguished on the payment or performance of the obligation; and
to the extent that the term is used in subclause (1)﻿(a),—
is entered into by the parties in good faith and in the ordinary course of business; and
is not entered into with the intention of using the security arrangement to make an overseas investment in sensitive land or an overseas investment in significant business assets or an overseas investment in fishing quota without consent.
The requirement to obtain consent under section 10(1)﻿(a) of the Act or section 57B of the Fisheries Act 1996 does not apply to a transaction to the extent that—
giving effect to the transaction results in the acquisition by an overseas person of—
2 or more permitted security arrangements that are acquired together as a portfolio or bundle; or
securities in a person (A), to the extent of A’s property under permitted security arrangements; and
the acquisition is in good faith and in the ordinary course of business; and
the transaction is not entered into with the intention of using 1 or more of the permitted security arrangements to make an overseas investment in sensitive land or an overseas investment in fishing quota without consent.
The requirement for consent does not apply to the extent that giving effect to a transaction has the effect of the acquisition of property from the investment of funds by an overseas person carrying on in New Zealand the business of life insurance if—
the investment of the funds is made for the benefit of policy holders at least 75% of whom are New Zealand citizens or persons ordinarily resident in New Zealand; and
the investment is of funds held in the overseas person’s—
Life Insurance Fund within the meaning of section 15 of the Life Insurance Act 1908 if the overseas person carries on any other business; or
statutory fund or funds (within the meaning of section 6(1) of the Insurance (Prudential Supervision) Act 2010).
The requirement for consent does not apply to the extent that giving effect to a transaction has the effect of the acquisition of property by or on behalf of an overseas person that is the supervisor or manager of a retirement scheme (within the meaning of section 6(1) of the Financial Markets Conduct Act 2013) from the investment of all or part of the assets of the scheme for the benefit of members at least 75% of whom are New Zealand citizens or persons ordinarily resident in New Zealand.
the acquisition by an overseas person of property if—
the property is, or will be as a result of the acquisition, relationship property of the overseas person and the overseas person’s spouse or partner; and
the overseas person’s spouse or partner is not an overseas person:
the acquisition by an overseas person of property as a result of a division of relationship property under the Property (Relationships) Act 1976:
the acquisition by a company incorporated in New Zealand (A Co) of property if—
B is not an overseas person.
See also regulation 58 for another relationship property exemption.
The requirement for consent does not apply to the extent that giving effect to a transaction has the effect of the underwriting by an overseas person of an issue of securities if that person—
is a person whose ordinary business includes entering into bona fide underwriting or subunderwriting contracts with respect to offers of securities; and
acquires the securities as a result of entering into a bona fide underwriting or subunderwriting contract in the course of that person’s ordinary business; and
holds the securities for less than 6 months; and
does not exercise any voting rights attached to those securities.
In regulation 33A(2), definition of custodial property, replace “securities or rights or interests in securities or property” with “property” .
In regulation 36AA(1), after “freehold estate” , insert “or a regulated profit à prendre” .
After regulation 36AC (Exemption for transactions consequential on certain actions under Public Works Act 1981), insert:
an overseas person (the original forestry investor) acquired a forestry right (the original forestry right) as a result of a transaction (the original transaction); and
consent was obtained for the original transaction for the purposes of section 10(1)﻿(a) of the Act to the extent that the original transaction resulted in the acquisition of the original forestry right; or
because of the exemption in clause 7 of Schedule 3 of the Act, consent was not required for the original transaction for the purposes of section 10(1)﻿(a) of the Act to the extent that the original transaction resulted in the acquisition of the original forestry right:
consent for the original transaction was not required as referred to in subparagraph (i)﻿(A) because the original transaction was entered into before the commencement of clause 1 of Schedule 1AA of the Act.
This regulation also applies if—
subsequent to the acquisition of the original forestry right, an overseas person acquired rights or interests in securities of the original forestry investor as a result of a transaction (the securities transaction); and
the acquisition of the rights or interests in securities of the original forestry investor was an overseas investment in sensitive land and, in relation to the original forestry right, consent was obtained for the securities transaction for the purposes of section 10(1)﻿(a) of the Act to the extent that the securities transaction resulted in the acquisition of the rights or interests in securities:
consent for the securities transaction was not required as referred to in subparagraph (i) because the securities transaction was entered into before the commencement of clause 1 of Schedule 1AA of the Act.
For the purposes of subclauses (1) and (2), it does not matter whether an acquisition of a forestry right, or of rights or interests in securities, was given effect to before, on, or after the commencement of this regulation.
Clause 1(4) and (5) of Schedule 1AA of the Act applies for the purposes of subclauses (1)﻿(b)﻿(ii) and (2)﻿(c)﻿(ii), with any necessary modifications, when deciding when a transaction is entered into.
A transaction does not require consent for the purposes of section 10(1)﻿(a) of the Act to the extent that it will result in an overseas investment in sensitive land if—
the term of the new forestry right (including rights of renewal, whether of the grantor or grantee) expires no later than 3 years after the end of the term of the original forestry right (see subclause (6)); and
the requirements of subclause (7) are met (if applicable).
For the purposes of subclause (5)﻿(c), the term of the original forestry right must be determined as at the time of its acquisition by the original forestry investor, but including rights of renewal, whether of the grantor or grantee, existing at that time.
If subclause (11) will apply (see subclause (10)), the rights conferred by the new forestry right—
must be sufficient to enable any relevant conditions of a consent to continue to be complied with:
must not include any right that was not conferred by the forestry right to which the consent related, if the absence of that right from that forestry right was the basis (wholly or partly)—
on which the relevant Ministers, when they granted the consent, did not apply or modified a requirement under section 16A(8) of the Act; or
if the consent is a standing consent under clause 3 of Schedule 4 of the Act, on which the relevant Ministers varied the conditions of the consent under clause 3(10) of that schedule in relation to a requirement set out in regulations made for the purposes of section 16A(4)﻿(d) of the Act.
Subclause (9) applies if—
the exemption in subclause (5) is relied upon for the acquisition of a forestry right (including in a case where the exemption is applied by virtue of subclause (9)); and
The exemption in subclause (5) may be applied to the subsequent acquisition, reading references in subclause (5)﻿(b)﻿(i) and (ii) to the original forestry right as references to the forestry right referred to in subclause (8)﻿(a).
Conditions of consents to continue in effect
If the exemption in subclause (5) is relied upon, subclause (11) applies to the conditions of a consent—
if the consent was obtained for the purposes of section 10(1)﻿(a) of the Act in relation to a relevant forestry right (see subclause (14)); and
to the extent that the conditions are in effect immediately before the acquisition of the new forestry right (including in a case where the conditions are in effect by virtue of subclause (11)).
The conditions continue in effect as conditions of the consent, with any necessary modifications, as if the new forestry right were the relevant forestry right (except to the extent that the area of land that was covered by the relevant forestry right is not covered by the new forestry right).
If the consent is a consent that was obtained for the transaction referred to in subclause (1)﻿(a) and the person who acquires the new forestry right is not a holder of the consent, that person is treated as a holder of the consent for all purposes.
However, that person is not required to comply with the conditions of the consent to the extent that they relate to any area of land that is not covered by the new forestry right.
In subclause (10)﻿(a), relevant forestry right means—
the original forestry right; or
another forestry right that was previously acquired in reliance on the exemption in subclause (5).
For the purposes of this regulation, a person (A) is related to the original forestry investor if—
the original forestry investor owns and controls 95% of A; or
A owns and controls 95% of the original forestry investor; or
a third person owns and controls 95% of the original forestry investor and of A.
For the purposes of subclause (15), a person (X) owns and controls 95% of another person (Y) if X has—
an overseas person (the original profit investor) acquired a regulated profit à prendre (the original profit) as a result of a transaction (the original transaction); and
the original profit is not a forestry right; and
the acquisition of the original profit was an overseas investment in sensitive land and consent was obtained for the original transaction for the purposes of section 10(1)﻿(a) of the Act to the extent that the original transaction resulted in the acquisition of the original profit:
consent for the original transaction was not required as referred to in subparagraph (i) because the original transaction was entered into before the commencement of clause 1 of Schedule 1AA of the Act.
a person (the original profit investor) acquired a regulated profit à prendre (the original profit); and
subsequent to the acquisition of the original profit, an overseas person acquired rights or interests in securities of the original profit investor as a result of a transaction (the securities transaction); and
the acquisition of the rights or interests in securities of the original profit investor was an overseas investment in sensitive land and, in relation to the original profit, consent was obtained for the securities transaction for the purposes of section 10(1)﻿(a) of the Act to the extent that the securities transaction resulted in the acquisition of the rights or interests in securities:
For the purposes of subclauses (1) and (2), it does not matter whether an acquisition of a regulated profit à prendre, or of rights or interests in securities, was given effect to before, on, or after the commencement of this regulation.
Clause 1(4) and (5) of Schedule 1AA of the Act applies for the purposes of subclauses (1)﻿(c)﻿(ii) and (2)﻿(d)﻿(ii), with any necessary modifications, when deciding when a transaction is entered into.
the overseas investment is the acquisition of a regulated profit à prendre (the new profit) by the original profit investor or a person related to the original profit investor; and
the new profit is not a forestry right; and
immediately before the new profit is acquired,—
the area of land covered by the new profit (the covered land) is fully covered by the original profit (whether or not the covered land is the only area of land covered by the original profit); and
the original profit is held by the original profit investor or a person related to the original profit investor; and
the subject matter of the rights conferred by the new profit in respect of the covered land is the same, or substantially the same, as the subject matter of the rights conferred by the original profit in respect of the covered land; and
the term of the new profit (including rights of renewal, whether of the grantor or grantee) expires no later than 3 years after the end of the term of the original profit (see subclause (6)); and
the requirement of subclause (7) is met (if applicable).
For the purposes of subclause (5)﻿(e), the term of the original profit must be determined as at the time of its acquisition by the original profit investor, but including rights of renewal, whether of the grantor or grantee, existing at that time.
If subclause (11) will apply (see subclause (10)), the rights conferred by the new profit must be sufficient to enable any relevant conditions of a consent to continue to be complied with.
the exemption in subclause (5) is relied upon for the acquisition of a regulated profit à prendre (including in a case where the exemption is applied by virtue of subclause (9)); and
the original profit investor, or a person related to the original profit investor, makes a subsequent acquisition of a regulated profit à prendre that is not a forestry right.
The exemption in subclause (5) may be applied to the subsequent acquisition, reading references in subclause (5)﻿(c)﻿(i) and (ii) to the original profit as references to the regulated profit à prendre referred to in subclause (8)﻿(a).
if the consent was obtained for the purposes of section 10(1)﻿(a) of the Act in relation to a relevant profit (see subclause (14)); and
to the extent that the conditions are in effect immediately before the acquisition of the new profit (including in a case where the conditions are in effect by virtue of subclause (11)).
The conditions continue in effect as conditions of the consent, with any necessary modifications, as if the new profit were the relevant profit (except to the extent that the area of land that was covered by the relevant profit is not covered by the new profit).
If the consent is a consent that was obtained for the transaction referred to in subclause (1)﻿(a) and the person who acquires the new profit is not a holder of the consent, that person is treated as a holder of the consent for all purposes.
However, that person is not required to comply with the conditions of the consent to the extent that they relate to any area of land that is not covered by the new profit.
In subclause (10)﻿(a), relevant profit means—
the original profit; or
another regulated profit à prendre that was previously acquired in reliance on the exemption in subclause (5).
For the purposes of this regulation, a person (A) is related to the original profit investor if—
the original profit investor owns and controls 95% of A; or
A owns and controls 95% of the original profit investor; or
a third person owns and controls 95% of the original profit investor and of A.
the overseas investment is the acquisition of an interest in land (the new interest) by an overseas person; and
the new interest is not a freehold estate; and
immediately before and after the acquisition,—
the freehold estate in the area of land covered by the new interest has a single (legal and equitable) owner; and
the overseas person is that single owner.
After regulation 36AF (Exemptions relating to relationship property where spouse or partner granted consent under commitment to reside in New Zealand test), as inserted by Schedule 5 of the Overseas Investment Amendment Act 2018, insert:
A transaction does not require consent for the purposes of section 10(1)﻿(a) of the Act to the extent that it will result in the acquisition by a foreign government of an interest in residential (but not otherwise sensitive) land that is to be used exclusively for both or either of the following:
for the purposes of a mission or consular post:
as a diplomatic or consular residence.
foreign government means a foreign government or an entity that is recognised by or under the Diplomatic Privileges and Immunities Act 1968 or the Consular Privileges and Immunities Act 1971 as having the privileges and immunities specified in either of those Acts
mission has the same meaning as in section 2 of the Diplomatic Privileges and Immunities Act 1968.
A transaction does not require consent for the purposes of section 10(1)﻿(a) of the Act to the extent that it will result in the acquisition of an interest in residential (but not otherwise sensitive) land by a person—
that is registered as a charitable entity under the Charities Act 2005; and
that is described in section LD 3(2) of the Income Tax Act 2007; and
that is not listed in Schedule 32 of that Act.
In regulation 36B (Exemption for certain bodies corporate who are overseas persons only because overseas custodians have custodial securities), subclause (3), example 2, first sentence, replace “custodial property” with “custodial securities” .
An application for an exemption under section 61D of the Act (Minister may grant individual exemptions) must—
Part 3 Amendments to rest of regulations
In Schedule 1AA, clause 1(2), delete “under regulation 37” .
In Schedule 1AA, clause 2(1), replace “Regulations 33A and 36AA to 36AC” with “Regulations 47 and 51 to 53” .
In Schedule 1AA, clause 2(2), replace “Regulation 36B” with “Regulation 62” .
Part 3 Provisions relating to Overseas Investment Amendment Regulations 2018
3 Existing transactions and applications not affected
The amendments to these regulations made by the Overseas Investment Amendment Regulations 2018 apply only to transactions entered into on or after commencement.
In particular, these regulations, as in force immediately before commencement, continue to apply to the following as if the Overseas Investment Amendment Regulations 2018 had not been made:
Clause 1(4) and (5) of Schedule 1AA of the Act applies for the purposes of this clause with any necessary modifications.
In this clause, commencement means the commencement of this clause.
4 Existing transactions: benefit to New Zealand test relating to sensitive land that will be used for forestry activities
Despite clause 3, these regulations, as amended by the Overseas Investment Amendment Regulations 2018, apply to an application that is to be considered under the benefit to New Zealand test applying section 16A(3) of the Act, or in accordance with section 16A(4) of the Act, under clause 2 of Schedule 1AA of the Act.
In Schedule 4, delete “TrustPower Limited” .
These regulations are made under sections 61 and 61C of the Overseas Investment Act 2005 (the Act) and amend the Overseas Investment Regulations 2005 (the principal regulations).
These regulations come into force on 22 October 2018, immediately after the Overseas Investment Amendment Act 2018 (the 2018 Amendment Act), but see below on regulation 20 about the fee for a transitional exemption.
The Act requires consent to be obtained for overseas investments in sensitive New Zealand assets. In particular, section 10(1)﻿(a) of the Act requires consent to be obtained for overseas investments in sensitive land (see section 12 and Schedule 1 of the Act). The Act also sets out criteria that must be met for consent to be given.
Some of the amendments made by these regulations arise from the 2018 Amendment Act and relate to forestry activities, regulated profits à prendre, and residential land. Some of the other amendments are more general. The regulations are also being renumbered, due to the extra regulations being slotted in.
Amendments relating to forestry activities and regulated profits à prendre
Regulation 6 inserts new regulation 29 into the principal regulations. New regulation 29 applies for the purposes of section 16A(4) to (8) of the Act (as inserted by the 2018 Amendment Act). New regulation 29 does the following:
permits the benefit to New Zealand test for an overseas investment in sensitive land relating to forestry activities to be met in accordance with section 16A(4) of the Act, instead of section 16A(1) (as inserted by the 2018 Amendment Act):
for the purposes of section 16A(4)﻿(d) of the Act, sets out requirements in accordance with section 16A(5) that the relevant Ministers must be satisfied will be met, or are likely to be met, after the overseas investment is made, including requirements relating to the following:
the maintaining of existing arrangements for the protection of areas of vegetation and habitats of fauna, the protection of historic heritage, the protection of wāhi tapu or wāhi tapu areas, and the providing of public access:
the performance of existing contractual obligations for the supply of logs to be processed in New Zealand:
for the purposes of section 16A(4)﻿(f) of the Act, requires any foreshore, seabed, riverbed, or lakebed that is included in the land to have been offered to the Crown in accordance with regulations 13 to 26 of the principal regulations if the overseas investment is the acquisition of a freehold estate.
Regulation 12 amends regulation 36AA of the principal regulations. Regulation 36AA exempts certain re-grants of leases, and other interests in land, from the requirement for consent under section 10(1)﻿(a) of the Act. The amendment excludes regulated profits à prendre from the scope of the exemption. Regulated profits à prendre are subject to similar exemptions in new regulations 54 and 55 of the principal regulations as inserted by regulation 13 of these regulations (see below).
Regulation 13 inserts new regulations 54 and 55 into the principal regulations. New regulation 54 exempts certain acquisitions of forestry rights from the requirement for consent under section 10(1)﻿(a) of the Act where the forestry right is essentially replacing an existing forestry right and provides for relevant conditions of existing consents to continue in effect in relation to the newly acquired forestry right. New regulation 55 gives a corresponding exemption for acquisitions of regulated profits à prendre that are not forestry rights.
Also, see new regulation 76, which exempts certain Australian investors in respect of profits à prendre.
Amendments relating to residential land
Regulation 6 inserts new regulations 30 to 32 into the principal regulations.
New regulation 30 specifies that Australian citizens and permanent residents and Singaporean nationals and permanent residents are qualifying individuals for the purposes of the commitment to reside in New Zealand test. This means that these groups are in the same position as New Zealand citizens and permanent residents under that test, which requires that every key individual be a qualifying individual.
New regulation 31 sets out factors for considering whether a person remains committed to residing in New Zealand. The factors are a non-exhaustive list of reasons (eg, employment, medical, and other compassionate reasons) why a person may be absent from New Zealand but still be regarded as committed to residing in New Zealand. If a factor applies, it means that a person who is absent from New Zealand for more than 183 days in any 12-month period, and who would otherwise be required to dispose of all relevant interests in residential land as a consequence of that, may apply for a waiver from that requirement to dispose of the land.
New regulation 32 sets 60% as the maximum percentage of new residential dwellings in a development that an exemption certificate may be applied to. This links to the provision (see clause 4 of new Schedule 3 inserted by the 2018 Amendment Act) that allows developers of large multi-storey apartment buildings of 20 or more units to apply for an exemption to sell a percentage of the units to overseas buyers “off the plans” without the need for consent or the requirement to on-sell once the unit is complete. However, buyers would not be allowed to occupy the units themselves.
Regulation 14 inserts new regulations 59 and 60 into the principal regulations. Those regulations provide exemptions from the requirement for consent in respect of residential (but not otherwise sensitive) land for diplomatic premises and charities.
Regulation 13 inserts new regulation 56 into the principal regulations. New regulation 56 exempts acquisitions of interests in land, other than freehold estates, from the requirement for consent under section 10(1)﻿(a) of the Act in cases where the person acquiring the interest in land holds the freehold estate in all of the area of land covered by the newly acquired interest in land.
Regulation 18 inserts new subpart 1 of Part 3 into the principal regulations. The new subpart is made under section 61(1)﻿(ka) of the Act, which relates to section 61G of the Act. The main effect of the new subpart and section 61G is that, if a person acquires property in reliance on an exemption that is listed in the new subpart, the person will be treated as being subject to certain existing conditions (if any). For example, there may be conditions of a consent that was granted at an earlier date to another person to acquire the property that have not yet been met and that apply in connection with the property.
Regulation 20 replaces Schedule 2 of the principal regulations, which relates to fees and charges. New fees are included in respect of matters relating to residential land and forestry activities and regulated profits à prendre. The new fee in respect of the exemption relating to dwellings in large apartment developments where sales of dwellings have begun before the date of Royal assent of the 2018 Amendment Act applies from the date of the expiry of the 2-week period that starts on the date of Royal assent (see new section 80 of the Act).
Australians and Singaporeans
Regulation 18 inserts new Part 4 into the principal regulations. New Part 4 is made under section 61(1)﻿(i) of the Act for the purpose of implementing obligations that have entered into force for New Zealand under—
the Protocol on Investment to the New Zealand–Australia Closer Economic Relations Trade Agreement done at Wellington on 16 February 2011, the text of which can be found at https://www.mfat.govt.nz/assets/FTAs-agreements-in-force/Australia/CER-investment-protocol-16-2-11.pdf
the Agreement between New Zealand and Singapore on a Closer Economic Partnership done at Singapore on 14 November 2000, the text of which can be found at https://www.mfat.govt.nz/assets/FTAs-agreements-in-force/Singapore-FTA/NZ-Singapore-CEP-full-text.pdf
New Part 4 exempts 6 groups from the requirement for consent in respect of residential (but not otherwise sensitive) land. The groups are—
Singaporean nationals:
Australian and Singaporean permanent residents who meet the relevant definition of “ordinarily resident in New Zealand” from section 6(2) of the Act, other than the requirement to hold a residence class visa granted under the Immigration Act 2009. For example, to the extent that a transaction will result in an overseas investment in sensitive land where the relevant land is or includes residential land, the person must have been residing in New Zealand for the last 12 months, be tax resident in New Zealand, and have been present in New Zealand for 183 days or more in total in the immediately preceding 12 months:
spouses and partners of the above if the land is acquired as relationship property (and companies incorporated in New Zealand in which all of the securities are held as relationship property by those same couples):
Australian and Singaporean enterprises.
New regulation 76 exempts those same groups of Australians from the requirement for consent in respect of an interest in land that is a regulated profit à prendre.
Also, see above for regulation 6 which inserts new regulation 30 into the principal regulations. New regulation 30 specifies that Australian citizens and permanent residents and Singaporean nationals and permanent residents are qualifying individuals for the purposes of the commitment to reside in New Zealand test. This means that these groups are in the same position as New Zealand citizens under that test, which requires that every key individual be a qualifying individual.
Amendments of a general nature
Regulation 9 increases the administrative penalty for retrospective consent. The regulator may require an applicant for a retrospective consent to pay an administrative penalty before the consent is granted. The current penalty is an amount that is not more than $20,000. The new regulation provides for a sliding scale between $5,000 and $40,000 depending on the type of consent and the value of the consideration provided for the overseas investment.
Regulation 10 inserts new regulations 37 to 46 into the principal regulations. New regulations 37 to 46 replace regulation 33 of the principal regulations, which contained the main exemptions from the requirement for consent. Regulation 33 applied to all overseas investments in sensitive New Zealand assets (ie, all of sensitive land, significant business assets, and fishing quota). New regulations 37 to 46 do too, with the exception of new regulation 42 (exemption for portfolios or bundles of permitted security arrangements) which does not apply to overseas investments in significant business assets. Substantive changes are made in respect of the following:
acquisitions if there is no increase in ultimate ownership and control by overseas persons (such as moving property around a corporate group) (see new regulation 37(1)﻿(b)):
shareholding creep (see new regulation 38):
portfolios or bundles of permitted security arrangements (see new regulation 42):
relationship property acquired by New Zealand incorporated companies (see new regulation 45).
Otherwise, the current exemptions in regulation 33 of the principal regulations are carried forward with no change in effect. In particular, no change to the law is effected by—
the replacement of the term “securities or rights or interests in securities or property” with a simpler term “property” . Both terms have the same meaning—see the definition of property in section 6(1) of the Act:
the replacement of some of regulation 33 by new separate regulations with their own headings.
Other regulations make other minor changes.
This statement sets out the Minister’s reasons for recommending the exemption regulations in the Overseas Investment Amendment Regulations 2018 and why the Minister considered each exemption to be necessary, appropriate, or desirable.
Under the Act the Minister may recommend exemption regulations only if the Minister considers—
When considering whether to recommend that an exemption regulation be made, the Minister must have regard to the purpose of the Act: that it is a privilege for overseas persons to own or control sensitive New Zealand assets and that it is therefore appropriate for overseas investments in those assets to be made only after meeting a number of consent criteria and subject to prescribed conditions.
The Minister may also have regard to all or any of the factors set out in section 61E(2)﻿(b) of the Act, including any other factors that seem to the Minister to be relevant to the circumstances.
Reasons for exemptions for corporate dealings—other acquisitions if no increase in ultimate ownership and control by overseas persons (new regulation 37(1)﻿(b))
This exemption would allow companies and other entities that are overseas persons and own sensitive assets to transfer the sensitive assets to different entities in a corporate group without consent, as long as the ultimate ownership and control of the sensitive assets by overseas persons does not increase. For example, under this exemption the creation of a wholly-owned subsidiary company interposed between the initial consent holder and the relevant sensitive assets would not require consent.
This exemption is for the matters referred to in section 61B(a) and (b) of the Act. It is minor and technical in nature and provides an exemption where compliance with the Act would be inefficient and unduly burdensome, but where the purpose of the Act can still be substantially achieved through the terms and conditions of the exemption.
I consider this exemption is appropriate and desirable because requiring overseas persons to obtain consent in these circumstances would be inefficient and unduly burdensome for affected overseas persons. This is because there is no increase in the ultimate ownership and control of the sensitive assets by overseas persons (having regard to the Act’s purpose and general requirements, and the factors in section 61E(2)﻿(b)﻿(i) and (ii) of the Act).
I further consider that this exemption is not broader than reasonably necessary because it is limited to situations where there is no increase in the ultimate ownership and control of the sensitive assets by overseas persons. The exemption only operates where the ownership and control by overseas persons is either unchanged, or is diminished because of increased ownership and control by non-overseas persons (New Zealand citizens and persons ordinarily resident in New Zealand). This reflects the fact that non-overseas persons never require consent under the Act. In circumstances where there is an increase in ultimate ownership and control of the assets by overseas persons, overseas persons would still be required to obtain consent according to the usual rules in the Act.
For those reasons the terms and conditions of the exemption also substantially achieve the purpose of the Act.
Reasons for exemption for shareholding creep (new regulation 38)
This exemption is to allow overseas persons to increase their degree of ownership or control in another person (P), such as a company, by acquiring additional securities in P without obtaining consent, so long as—
the overseas person already has consent to own securities in P; and
the overseas person is acquiring securities of the same type that they have already received consent to own (for example, an overseas person that owns ordinary shares in a company will only be able to use this exemption to acquire additional ordinary shares); and
the transaction involves the acquisition of no more than 10% of all securities in each relevant class (for example, if the overseas person already has consent to own 55% of the company’s ordinary shares, the overseas person would only be able to increase its shareholding to 65% of the company’s ordinary shares); and
the transaction does not result in the overseas person’s overall control interest reaching key control thresholds of 25, 50, 75, or 90% (for example, if the overseas person has consent to own 45% of the company’s ordinary shares, the overseas person could only use the exemption to acquire less than 5% further ordinary shares—that is, their total shareholding of ordinary shares remains below 50%); and
the transaction occurs within 5 years of the overseas person receiving consent for the initial acquisition of securities in P.
This exemption is for the matter referred to in section 61B(c)﻿(iii) of the Act—minor increases in ultimate ownership and control by overseas persons if consent has already been granted for those overseas persons to own or control sensitive assets.
I consider that this exemption is appropriate and desirable because, having regard to the Act’s purpose, the overseas person has already obtained consent to acquire securities in P and requiring them to obtain a new consent in these scenarios where there is only limited change in the ultimate ownership and control of P would be inefficient and unduly expensive.
This is especially so in cases where the overseas person has no control over the increase in their ownership or control interest in P. For example, if an overseas person does not participate in a company share buy-back and other shareholders do, the overseas person’s relative shareholding in the company would increase, which, without an exemption, could trigger the need for the overseas person to obtain consent.
I consider that this exemption is not broader than is reasonably necessary because the exemption is limited in the following ways:
The transaction must not result in the overseas person’s overall control interest reaching key control thresholds of 25, 50, 75, or 90%. Passing those thresholds could respectively give the overseas person: negative control (such as being able, unilaterally, to prevent special resolutions of a company); majority control; ability, unilaterally, to approve special resolutions of a company; and the option to more easily complete a full takeover of a company:
The exemption limits the additional ownership interest an overseas person can acquire without consent to no more than 10% of the securities in the relevant class. This means that obtaining greater ownership interests would still require the overseas person to demonstrate that allowing the further increase in ownership or control would provide additional benefits to New Zealand (if consent were to be obtained under the benefit to New Zealand test):
Accordingly, there is limited increase in the ultimate ownership and control of the sensitive assets by overseas persons who already have consent (having regard to the Act’s purpose and general requirements, and the factors in section 61E(2)﻿(b)﻿(i) and (ii) of the Act):
The exemption could be used only within 5 years of the consent being granted. This means that the overseas person would have passed the investor test in the Act (if it applied to the consent being obtained) relatively recently. Whereas over time an overseas person may change its character or composition and fail the investor test (after previously passing the test), this is less likely to occur relatively closely to when consent was granted. This condition therefore balances the need to obtain consent against imposing undue burden on overseas persons in situations where ultimate ownership and control of the sensitive assets has not materially changed.
Reasons for exemption for portfolios or bundles of permitted security arrangements (new regulation 42)
This exemption is to allow an overseas person to acquire 2 or more “permitted security arrangements” , or to acquire securities in a person that owns 1 or more “permitted security arrangements” , relating to sensitive land or fishing quota without obtaining consent. This would replace existing regulation 33(1)﻿(ja).
Regulation 33(1)﻿(ja) previously provided an exemption for the transfer of portfolios or bundles of security arrangements if the total value of consideration provided was $100 million or less. This effectively meant that relevant transactions over $100 million required consent and that this exemption could therefore not be used in respect of the acquisition of significant business assets (because the threshold for the screening of those assets is $100 million). However, because of the way that transaction size was measured in the regulations compared to the more detailed provisions in the Act, this outcome was not as clear as it could have been.
Consequently, I consider that providing such an exemption for acquiring “permitted security arrangements” , or interests in “permitted security arrangements” , in respect of sensitive land or fishing quota is appropriate and desirable, having regard to the Act’s purpose, because an overseas person holding a permitted security arrangement (given how that term is defined) is not likely to change the effective ownership and control of the secured asset (having regard to the factor in section 61E(2)﻿(b)﻿(i)) and have little impact on the secured asset (having regard to the factor in section 61E(2)﻿(b)﻿(iv)).
This is particularly so given that security arrangements of the nature covered by the exemption are typically traded as debts (like mortgages over residential property), without a genuine intention to use the security arrangements to acquire a controlling interest in the secured asset (and it is a requirement of the exemption that the acquisition is made in good faith and in the ordinary course of business).
Further, given that facilitating the trading of mortgages and other security arrangements is important to support access to finance on reasonable terms, the exemption is also desirable to avoid limiting overseas persons’ willingness to lend money to people acquiring property in New Zealand.
I consider that this exemption is not broader than is reasonably necessary to address those circumstances, because of the following limitations within the exemption:
The transaction must be entered into in good faith and in the ordinary course of business with no intention of using the security arrangement to acquire sensitive land or fishing quota without consent (instead, the interest is taken as security that secures the performance of the obligations associated with that security arrangement). This means that under the terms and conditions of the exemption, for example, an overseas person could not (without consent) intentionally acquire security arrangements securing debts with debtors that are struggling to meet their obligations and then enforce the security arrangements in order to acquire the secured assets:
The exemption only removes the requirement for consent under section 10(1)﻿(a) of the Act (for an overseas investment in sensitive land) and under section 57B of the Fisheries Act 1996 (for an overseas investment in fishing quota). The exemption applies regardless of the value of consideration (that is, the $100 million cap in the current regulations has been removed), but the exemption cannot be relied on to avoid consent for an overseas investment in significant business assets. Relying on the Act’s provisions regarding whether there is an overseas investment in significant business assets is more consistent with the policy of the Act (than the regulations containing a different measure of the size of a transaction):
Where the exemption is being used to acquire securities in a person (A) that owns 1 or more “permitted security arrangements” , the exemption from consent only applies in relation to A’s permitted security arrangements, and not any other sensitive assets A may own.
Reasons for exemption for relationship property—wholly owned company incorporated in New Zealand (new regulation 45(1)﻿(c))
This exemption is for the matter referred to in section 61B(c)﻿(v) of the Act—relationship property as defined in section 8 of the Property (Relationships) Act 1976.
The exemption would allow a couple (married, civil partnerships, or de facto), where one partner is an overseas person and the other is not, to use a company to acquire property without consent, as long as—
the property is being acquired by a company registered under the Companies Act 1993 (so is a New Zealand incorporated company); and
the company making the acquisition is wholly owned and controlled by the couple as relationship property under the Property (Relationships) Act 1976.
This effectively extends an existing exemption that allows couples to acquire sensitive assets (either directly or through the acquisition of securities) as relationship property without the overseas person in the couple requiring consent. I have chosen to first provide reasons for the existing exemptions, then the reasons for the proposed extension.
First, I consider that the existing exemption, which allows couples to acquire sensitive assets as relationship property without the overseas person in the couple requiring consent, is appropriate and desirable for the following reasons:
the non-overseas person (New Zealander) in the couple would not require consent to acquire sensitive assets by himself or herself; and
relationship property is governed by the Property (Relationships) Act 1976 and is underpinned by the principle that both partners/spouses have an interest in relationship property; and
not providing such an exemption would place New Zealanders that are in a relationship with an overseas person at a disadvantage when seeking to acquire sensitive assets relative to if they were not in a relationship or were in a relationship with a non-overseas person. Without an exemption, New Zealanders in relationships would face the burden of not being able to acquire some property in the usual way (that is, as relationship property) without their partner or spouse obtaining consent; and
the overseas person partner/spouse is holding his or her interest in sensitive assets with a New Zealander and as relationship property affected by the Property (Relationships) Act 1976. Having regard to the factor in section 61E(2)﻿(iv) (about the extent of time an overseas person is likely to have ownership or control of a right or an interest, for what purpose, and the likely impact on the sensitive asset of that overseas ownership or control), and the Act’s purpose, I consider it is not appropriate and desirable to require the overseas person partner/spouse to obtain consent in these circumstances.
I consider that this current exemption is not broader than necessary. This is because of its terms and conditions and because to access the exemption an overseas person would need to enter into a verifiable marriage, civil union, or de facto relationship with a New Zealander. If the overseas person entered into a marriage or civil union for the purposes of evading the Act, then it would be an offence under the anti-avoidance provision of the Act (section 43). The potential consequence of these types of offences include the court ordering the overseas person to dispose of the property. Furthermore, the cost and effort of entering a marriage or civil union, ending it, and dividing relationship property also provide a barrier to entering into a marriage or civil union for the purposes of evading the Act.
Second, I consider that this exemption should be expanded. While the existing exemption allows a couple to acquire, without consent, sensitive assets directly, or securities in a company (or other person) that already owns sensitive assets, it is not clear that a company owned by the same couple could acquire the same sensitive assets (where the shares in the company are relationship property) without consent. This is despite the fact that in both scenarios the ultimate ownership and control of the sensitive assets is the same.
Consequently, I consider it is appropriate and desirable, having regard to the Act’s purpose, to amend the exemption to ensure that when a company wholly owned by a couple acquires sensitive assets it does not require consent. It would be inefficient and unduly burdensome to require the company in such circumstances to obtain consent.
I further consider that the extension to the exemption is not broader than is reasonably necessary to address those circumstances. This is because the exemption could be used only by companies incorporated in New Zealand that are wholly owned by the couple as relationship property, rather than companies that are, for example, only partly owned by the relevant couple. In those circumstances, while it is the company acquiring the legal interest in the property, the couple, through the company, have ultimate control of, and the beneficial entitlement to, the property.
Reasons for exemption for replacement of forestry rights with new forestry rights (new regulation 54)
This exemption will allow existing forestry rights to be replaced with new forestry rights on the same key terms without obtaining consent, such as when a forestry right is sub-divided into 2 new, separate forestry rights (but the owner of both new forestry rights is the same as the owner of the original forestry rights, or is closely related). At the same time, the duration of the forestry rights could be extended by no more than 3 years from the original consented duration.
The exemption is for the matters referred to in section 61B(a) and (b) of the Act. It is minor and technical in nature, and provides an exemption where compliance with the Act would be inefficient and unduly burdensome, but where the Act’s purpose can still be substantially achieved through the terms and conditions of the exemption.
I consider that this exemption is appropriate and desirable for the following reasons:
having regard to the Act’s purpose, the owner of the forestry rights would have already obtained consent to acquire the right (or been exempted or not required consent at the time) and taking replacement forestry rights does not change the level of overseas ownership or control of the interest in land (having regard to the factors specified in section 61E(2)﻿(b)﻿(i) and (ii) of the Act); and
while the new forestry rights are a new interest in land that could technically re-trigger the Act’s requirement to obtain consent, it would be inefficient and unduly burdensome to require additional screening; and
if any of the terms and conditions of the new forestry rights were changed in the ways allowed by this exemption (discussed below), such changes would not on their own require consent in cases where consent had already been obtained for the original forestry rights.
I also consider that this exemption is not broader than is reasonably necessary for the following reasons:
the exemption only allows for forestry rights to be replaced on essentially the same terms as the original forestry rights, specifically—
the new owner of the forestry rights must be the same person or a closely related person, with a 95% relation rule (as a new overseas person acquiring a 5% interest in the forestry rights owner would only require consent if its acquisition resulted in the rights owner becoming 25% or more owned or controlled by overseas persons—but if that was the case then the rights owner would have previously not been an overseas person so would probably not have required consent for the original forestry rights); and
the duration must be the same, shorter, or extended by no more than 3 years from the original duration (as the Act only screens interests in land of 3 years or longer); and
the rights must be over the same geographic area of land or a sub-set within it:
conditions of the consent for the original forestry right will be carried over as conditions of the new forestry rights, and there can be no changes to other terms and conditions of the forestry rights that would prevent compliance with those consent conditions:
the new forestry rights cannot contain new terms and conditions that would have changed the exercise of discretion by the relevant Ministers (or the regulator under delegation) to waive certain requirements of obtaining consent under the special benefits test (that is, when consent was given in accordance with section 16A(4)).
For those reasons, the terms and conditions of the exemption also substantially achieve the purpose of the Act.
Reasons for exemption for replacement of regulated profit à prendre with a new regulated profit à prendre (new regulation 55)
Similar to new regulation 54, this exemption will allow existing non-forestry profits à prendre to be replaced with new profits à prendre on the same key terms without obtaining consent.
The exemption is also for the matters referred to in section 61B(a) and (b) of the Act.
I consider this exemption to be appropriate and desirable because—
having regard to the Act’s purpose, the owner of the profit à prendre would have already obtained consent to acquire the profit à prendre (or not required consent at the time) and taking a replacement profit à prendre does not change the level of overseas ownership or control of the interest in land (having regard to the factors specified in section 61E(2)﻿(b)﻿(i) and (ii) of the Act); and
while the new profit à prendre is a new interest in land that could technically re-trigger the Act’s requirement to obtain consent, it would be inefficient and unduly burdensome to require additional screening; and
if any of the terms and conditions of the new profit à prendre were changed in the ways allowed by this exemption (discussed below), such changes would not on their own require consent in cases where consent had already been obtained for the original profit à prendre.
the exemption only allows for profits à prendre to be replaced on essentially the same terms as the original profits à prendre, as set out in the first bullet point of paragraph 33 above:
in addition, the subject matter of the profit à prendre must be the same or substantially the same:
conditions of the consent for the original profit à prendre will be carried over as conditions of the new profit à prendre, and there can be no changes to other terms and conditions of the profit à prendre that would prevent compliance with those consent conditions.
Reasons for exemption for freeholder who acquires another interest in land included in freehold (new regulation 56)
Under this exemption, an overseas person that holds the freehold estate in land can also acquire any other interest in that land (for example, forestry rights) without consent.
The exemption is for the matters referred to in section 61B(a) and (b) of the Act. It is minor and technical in nature, and provides an exemption where compliance with the Act would be inefficient and unduly burdensome, but where the purpose of the Act can still be substantially achieved through the terms and conditions of the exemption.
I consider this exemption is appropriate and desirable because, having regard to the Act’s purpose, the overseas person would have already obtained consent (or been exempted or not required consent at the time) to acquire the freehold estate in the land. As such, requiring additional consent to be granted to take a lesser interest in the relevant land would be inefficient and unduly burdensome on the overseas person.
I consider this exemption is not broader than necessary given that this exemption will only apply where the overseas person who acquires the new interest is the single legal and equitable owner of the freehold estate. For that reason, the terms and conditions of the exemption also substantially achieve the purpose of the Act.
Reasons for exemption for diplomatic premises (new regulation 59)
This exemption allows a foreign government to acquire residential (but not otherwise sensitive) land for the purposes of a mission or consular post, as a diplomatic or consular residence, or a combination of those things.
The exemption is for the matter referred to in section 61B(c)﻿(i) of the Act—interests in land to be used for diplomatic or consular purposes.
I consider it appropriate and desirable, having regard to the the Act’s purpose, that such transactions be exempted from the requirement for consent to support foreign governments (who will always be overseas persons under the Act) to have a diplomatic or consular presence in New Zealand. Also, having regard to the factor in section 61E(2)﻿(b)﻿(iv), the use of residential land for diplomatic or consular purposes is unlikely to have a major physical impact on the land, because using land as embassies, high commissions, or diplomatic residences is similar to using land for residential purposes.
I consider this exemption is not broader than is reasonably necessary to address those circumstances because of the following limitations within the exemption:
the exemption only removes the requirement for consent under section 10(1)﻿(a) of the Act (for an overseas investment in sensitive land), and only applies to residential (but not otherwise sensitive) land; and
a foreign government can only acquire land using the exemption if it has a diplomatic presence in New Zealand, using the land for the purposes of a mission or consular post, as a diplomatic or consular residence, or a combination of those things.
Reasons for exemption for charitable entities (new regulation 60)
This exemption would allow certain charitable entities conducting activities within New Zealand to acquire residential (but not otherwise sensitive) land without consent. To qualify for the exemption, the charitable entity must be registered under the Charities Act 2005 and also have donee status under the Income Tax Act 2007 (but not through the Schedule 32 list). This means that the charity’s funds must be applied wholly or mainly within New Zealand, or that the charitable entity has assets and activities based in New Zealand.
The exemption is for the matter referred to in section 61B(c)﻿(ii) of the Act—persons registered as a charitable entity under the Charities Act 2005.
I consider that this exemption is appropriate and desirable, having regard to the Act’s purpose, for the following reasons:
There are special rules constraining the ownership and control interest that a charitable entity has over its assets. In particular, for a body to be a registered charitable entity, then either the body is not carried on for the private pecuniary profit of any individual (so that if the body is wound up any remaining assets must be distributed to other charities or charitable purposes, and not back to any donors to the charity), or is a trust in relation to which an amount of income is derived by the trustees in trust for charitable purposes (section 13 of the Charities Act 2005). Consequently, in term of ownership, to the extent that any individuals could be said to have beneficial entitlement to, or enjoyment of, the assets of a charitable entity, it would be the people within New Zealand (predominantly New Zealanders)—that is, those that benefit from the charity’s activities:
Further, in terms of control, the charitable entity must deal with assets consistently with its charitable purposes, and have donee status (including in the case of trusts), the charity’s funds must be applied wholly or mainly within New Zealand or the charity must have assets and activities based in New Zealand. Consequently, irrespective of whether the charity is controlled by overseas persons (with that control being constrained by New Zealand charities law), people within New Zealand (predominantly New Zealanders) effectively have beneficial entitlement to those assets. The Act is only concerned with the interests overseas persons have in assets:
Finally, charities are most likely to be “overseas persons” under the Act not because of overseas persons having any ‘ownership’ interest in the charity’s assets, but instead because—
overseas persons control the composition of the governing body of the charity or have voting power over the charity—as explained above, the control of the charity’s assets is constrained by charities law; or
the charity is incorporated or organised under the law of another country—in any such cases where that charity nonetheless had donee status, its New Zealand activities would be regulated by the New Zealand charities law discussed above.
Consistent with the factors listed above, I consider that requiring charitable entities to obtain consent would be unduly burdensome and an inefficient use of the charitable entity’s assets, which are for the benefit of New Zealand-focused operations.
I consider this exemption is not broader than reasonable necessary to address those circumstances for the following reasons:
The exemption would only apply to charitable entities with donee status under the Income Tax Act 2007. That is, broadly,—
societies, institutions (whether public or private), associations, organisations, and trusts (whether public or private) that are not carried on for the private pecuniary profit of an individual but rather apply their funds wholly or mainly to charitable, benevolent, philanthropic, or cultural purposes within New Zealand; and
community housing entities operating in New Zealand under New Zealand tenancy law; and
tertiary education institutions and Boards of Trustees constituted under Part 9 of the Education Act 1989 (which will be operating in New Zealand):
The exemption would not apply to charitable entities listed in Schedule 32 of the Income Tax Act 2007. The Schedule 32 list allows charitable entities that do not meet those tests above (from section LD 3(2) of the Income Tax Act 2007) to still obtain donee status. That is, those charitable entities are not required to apply their funds wholly or mainly within New Zealand, or have assets and activities based in New Zealand, so cannot use the exemption.
I recommend that “TrustPower Limited” be deleted from Schedule 4 of the principal regulations. This deletion is at the request of the company and means that TrustPower Limited will no longer get the benefit of the exemptions in regulations 34 to 36. This will reduce the number of persons that could rely on those exemptions, so I consider it is appropriate as a technical matter and having regard to the Act’s purpose.
I recommend that the following minor or technical amendments be made to existing exemptions, or that the following existing exemptions be replaced with only minor or technical amendments:
the exemptions contained within existing regulation 33 be split out into topic groups in new regulations 37 to 46, and the existing exemption contained in regulation 33(1)﻿(p) be inserted into new regulation 38 (see in particular new regulation 38(2)﻿(c)﻿(i)):
the existing regulations’ language of “securities or rights or interests in securities or property” be replaced with the term “property” (which is defined in section 6 of the Act) to simplify the text:
existing regulation 36AA of the regulations be amended to clarify that it does not apply to forestry rights and non-forestry profits à prendre, as those interests in land are subject to the new exemptions in new regulations 54 and 55 respectively. Existing regulation 36AA includes an exemption from screening for overseas persons acquiring sensitive leasehold land as a result of the “re-granting” of a lease as long as the new lease is on essentially the same terms and will expire within 20 years of the commencement of the lease for which consent was first granted:
example 2 in regulation 36B(3) be amended so that “custodial property” is replaced with “custodial securities” , to correct a typographical error.
The Treasury produced the following 2 regulatory impact assessments about matters that are affected by these regulations, to help inform the decisions taken by the Government relating to the contents of this instrument:
Commitment to Reside in New Zealand dated 16 January 2018 and published on 15 August 2018, which is relevant to new regulation 31 (factors for considering whether person remains committed to residing in New Zealand):
Amendment to the Overseas Investment Act: Forestry land and other profits à prendre dated 27 February 2018 and published 20 March 2018, which is relevant to new regulation 29 (special test may be applied and requirements to be met).
Copies of those assessments can be found at—
In addition, Land Information New Zealand produced a cost recovery impact statement dated 2 June 2018 about the new fees and charges to help inform the decisions taken by the Government relating to the contents of this instrument.