Which notification regime applies to my transaction?
The national security and public order (NSPO) notification regime took effect on 7 June 2021. This means that any transaction entered into:
- on or after 7 June 2021 (even if it was notified before then) falls under the national security and public order (NSPO) regime
- before 7 June 2021 (even if it is notified after) falls under the emergency notification regime (ENR).
The NSPO regime applies to overseas investments in strategically important businesses. Notification is mandatory for investment in some industries, and voluntary for others.
‘Strategically important businesses’ (SIBs) are defined in the Overseas Investment Act and Regulations.
Notification of a transaction is mandatory if the target business or entity:
- researches, develops, produces, or maintains military or dual-use technology, or
- is a critical direct supplier (published or unpublished) to the New Zealand Defence Force, the Government Communications Security Bureau, or the New Zealand Security Intelligence Services.
For mandatory notifications you must notify us (and the transaction must not be prohibited) before the transaction is given effect to.
Investing in an unpublished critical direct supplier
If you’re investing in an unpublished critical direct supplier (CDS) you must notify us:
- before giving effect to the transaction, or
- as soon as reasonably practicable after you receive a notice from the CDS under section 20E(2) of the Act.
You may choose to notify us of a transaction if the target business or entity is:
- involved in airports
- involved in ports
- involved in electricity generation, distribution, metering, or aggregation
- involved in drinking water, wastewater, or stormwater infrastructure
- involved in telecommunications infrastructure or services
- a financial institution or is involved in financial market infrastructure,
- a media business with significant impact
- develops, produces, maintains, or otherwise has access to sensitive information.
Voluntary notification can be done either before or up to 6 months after the transaction is given effect to.
Why notify voluntarily?
If you notify voluntarily, and we find that your investment does not pose significant risks to New Zealand’s national security and public order, you will obtain ‘safe harbour’ from later government intervention.
‘Safe harbour’ means that once we have made a decision about the transaction, we won’t look at the investment again – unless this is warranted for another reason (for example, if we learn that your notification contained false or misleading information).
If you choose not to notify:
- your transaction may be scrutinised at any later point, and
- if it is found to pose a significant risk to New Zealand’s national security and public order, the government can block the transaction, impose conditions, or order the disposal of assets.
Level of interest that requires notification
The NSPO notification regime applies to any transaction to acquire an interest in strategically important businesses or property.
In most cases the regime has a $0 and 0% ownership and control threshold, but there are some exceptions to that general rule. These are:
- investments that result in an investor holding less than 10% of a publicly listed entity's shares – unless the investment grants disproportionate access to, or control of, that entity (for example, the right to appoint a board member)
- investments in media entities or related property, where the threshold for screening is:
- more than 25% ownership or control interest in the entity, or
- the value of the target property (used by the media business) being more than 25% of the value of all property owned by the media business
- investments in assets or property, where the threshold is acquisitions that could make the buyer a strategically important business in their own right (for example, significant electricity generation capacity, or large volumes of sensitive information).
Overseas investor increasing existing ownership or control interest
If an overseas investor is increasing their existing ownership or control interest in the target strategically important business (SIB), the thresholds are 25%, 50%, 75% and 100%.
Ownership or control interest in the target SIB
Acquiring a further…
Total will be…
Exceeds 25% - transaction must be notified
*Even if the investor is only acquiring a further 10% - taking their total interest to 25% -this equals the control limit and so they must notify us.
These limits don’t apply if the investor:
- is acquiring a different class of securities/shares in the SIB to the type of shares they already hold, or
- gets any or more disproportionate access to or control of the SIB.
For more detail, see section 82 of the Act.
Why is notification needed?
The Act gives ministers the ability to manage significant national security and public order risks posed by investments into strategically important businesses (SIBs), and requires notification of these transactions under sections 85 and 86.
The Supplementary Ministerial Direction and Delegation Letter for NSPO
The Supplementary Ministerial Direction and Delegation Letter for NSPO:
- directs us, as the regulator of overseas investment in New Zealand, on the government’s policy approach to NSPO, and
- delegates relevant powers to us, so we can give effect to these policies.
How to notify us
What happens after I notify my transaction?
Once you notify us, we will complete an initial assessment within 15 working days. This assessment is to determine whether the transaction could pose a significant NSPO risk, and therefore needs to be considered by the Minister of Finance.
At the end of this period, we will either:
- send you a direction order that allows the transaction to proceed either unconditionally or subject to conditions, or
- advise you that your transaction will be subject to a full assessment and then reviewed by the Minister of Finance.
If your transaction requires a full assessment, we will contact you for any additional information we need. The Act allows 40 days for this assessment, plus a potential extra 30 days extension.
If the full assessment determines that the transaction poses a significant risk to New Zealand’s national security and public order, the government can block the transaction, impose conditions, or order the disposal of assets.
Treasury’s guidance document has more information about what the government considers when determining whether a transaction poses a significant risk to New Zealand’s national security and public order.
The temporary emergency notification regime (ENR) call-in power was established to check that transactions taking place at a time of economic uncertainty are not contrary to New Zealand’s national interest. It was recently in force due to the COVID-19 pandemic.
The ENR has been replaced by the NSPO regime, but still applies to transactions that were entered into before 7 June 2021.
Who needs to notify us under the ENR?
If you are an overseas person, the ENR requires you to notify us of all proposed investments that:
- regardless of value, would result in you having:
- more than 25% overseas ownership or control of a New Zealand business or its assets, or
- an increase to an existing more than 25% holding beyond 50% or 75%, or up to 100%, and
- do not already require consent under section 10 of the Overseas Investment Act 2005.
You must notify us before the transaction takes place. If necessary, you can enter into a transaction before notifying us, as long as it is conditional on a direction order being made.
Why is notification needed?
This temporary call-in power was established to check that transactions happening after the COVID‑19 emergency were not contrary to New Zealand’s national interest.
What happens after I notify my transaction?
Once you notify us, we will complete an initial assessment within 10 working days to assess whether the transaction is not contrary to New Zealand's national interest.
Some notifications will need to be assessed further against the national interest assessment, which may take up to a further 30 working days, and could result in conditions being imposed or the investment being stopped.
If an application is particularly complex or sensitive, we may extend the timeframe another 30 days. We will be in contact throughout if this is the case.
We publish direction orders with conditions, prohibition orders, and disposal orders. Transactions that proceed without conditions are not published.
How to notify us
What if I have already received a direction order under the ENR?
Direction orders issued under the ENR remain in effect, and any transactions that:
- received conditional direction orders under the ENR remain subject to those conditions after 7 June 2021
- were prohibited under the ENR remain prohibited after 7 June 2021.
Could the ENR come into force again in the future?
The government has decided to discontinue the ENR from 7 June 2021, because the economic conditions in New Zealand no longer necessitate that level of protection of our national interest.
Should this change in the future – due to COVID-19, or for another reason – the government can reinstate it.