Overview of this pathway
The Overseas Investment Act 2005 recognises that it is a privilege for overseas investors to make significant investments in New Zealand businesses by requiring them to get consent before giving effect to a transaction.
This pathway is used for the acquisition of business assets of a certain dollar threshold (usually $100 million, see below for other thresholds) whether by value, by consideration, or by expenditure prior to commencing a business.
There are 3 ways to acquire significant business assets:
- Acquisition of rights or interests in the security of an entity eg purchasing shares in a company
- Where a business is established, eg developing a new hotel
- When property is acquired eg buying a paper mill
A business asset is considered significant if it is worth more than the dollar threshold outlined in the Act (usually $100 million). For some Australian investors the threshold for 2023 is $586 million and for 2024 is $618 million (updated annually by Gazette), and for parties to certain other free trade agreements the threshold is $200 million.
Who needs consent to acquire significant business assets
You must apply for consent if you are an overseas person, and you want to:
- invest in a significant New Zealand business asset, or
- invest in a significant New Zealand business asset worth less than $100 million and the assets also involve sensitive land or fishing quota.
If you are investing on behalf of an overseas person, you must also apply for consent.
Who doesn’t need consent
You do not need to apply for consent to invest in a significant New Zealand business asset if:
- you are a New Zealand citizen, or
- you are an overseas person and the value of the asset is less than $100 million or applicable alternative monetary threshold
Even if you do not need consent, you may still need to notify us of the investment if it is:
- in a strategically important business, or
- in property used in carrying on a strategically important business.
Acquisition of securities
Consent is required where an overseas person, or an associate of an overseas person, acquires rights or interest in the security of a person if as a result:
- the overseas person, or the associate, gains a more than 25% ownership or control interest in that entity
- increases an existing more than 25% interest over and above an ownership and control limit, and
- exceeds the dollar threshold ($100 million or alternative applicable threshold).
The dollar threshold will be met if:
- the value of the securities acquired exceeds $100 million (or alternative monetary threshold), or
- the purchase price of the securities exceeds $100 million (or alternative monetary threshold), or
- the gross assets of the issuer and its more than 25% subsidiaries exceed $100 million (or alternative monetary threshold), including:
- all of the assets of a New Zealand person, for example a company incorporated under the Companies Act 1993, wherever those assets are located
- the New Zealand assets of a non-New Zealand person, for example a company incorporated in Australia
- goodwill and other intangible assets.
Establishing a business
Consent is required where an overseas person, or an associate of an overseas person, establishes a business in New Zealand (either alone or with any other person) if:
- the business is carried on for more than 90 days in any year, whether consecutively or in aggregate, and
- the total expenditure expected to be incurred, before commencing the business, in establishing that business exceeds $100 million (or alternative monetary threshold).
When a business is considered to be ‘established’ will depend on the circumstances of each case.
- if you are building a power station, the business will be established when power is being generated for sale
- if you are building a residential development, the business will be established when lots are capable of being transferred to buyers.
In some cases it will be hard to pre-empt when the business will be established and when the applicable monetary threshold would be met. Given this we would recommend you seek consent before embarking on the investment so that no inadvertent breaches of the Act occur.
Applicants can seek consent for the establishment of a business earlier than when the actual establishment occurs. If so they should note this in their application and advise how long they consider it will be until the business is actually established. If consent were to be granted the consent wording can include a longer period to establish the business if sufficient justification has been included in the application.
Acquisition of assets
Consent is required where an overseas person, or an associate of an overseas person , acquires assets if the total value of consideration provided exceeds $100 million (or alternative monetary threshold).
- must be located in New Zealand
- must be used in carrying on business in New Zealand, and
- may be acquired in one transaction or in a series of related or linked transactions.
Examples of related or linked transactions include:
- buying assets in tranches from a vendor
- buying assets from different vendors who are closely connected with one another
- buying assets from different vendors, where the agreements are interdependent on one another.
You will need to meet the investor test. In some instances your application may be subject to the national interest assessment.