2 August 2017
Nau mai haere mai
This is my first edition of the PeriOIOdical as the Deputy Chief Executive Policy and Overseas Investment.
I am honoured to lead the Overseas Investment Office at this exciting time. The changes made in the last twelve months have positioned the OIO well and I am arriving at a very positive time.
I join Land Information New Zealand, having worked in a number of senior roles in the public service, most recently at the Ministry of Transport and Ministry of Business Innovation and Employment.
I am very aware of the OIO’s role in making sure overseas investment benefits New Zealand. We will continue to rigorously assess applications in a timely and efficient way and our new enforcement team will be making sure people are following the rules and keeping their promises.
This edition of the PeriOIOdical includes information about a number of changes we are making as we continue to improve the way we work.
Later this year we will start an education programme: working with organisations and people to increase understanding across New Zealand of the rules, purpose and benefits of the Overseas Investment Act.
I look forward to meeting with a number of you as together we continue to identify improvements that can be made that will benefit both investors and New Zealanders.
Ka kite ano
Deputy Chief Executive Policy and Overseas Investment
This issue covers:
- Request and receipt of application fees
- Updates to application templates
- Anticipating consent
- When is a partnership an overseas person?
- Enabling employee share programmes with consent
The Overseas Investment Office
The process for paying application fees is changing. Currently fees accompany an application when first submitted to the OIO. If an application is not accepted for assessment or the incorrect fee is paid, a refund or a request for the balance is made. This is inefficient so from 1 August 2017 the process has changed.
We will no longer require the application fee to accompany the application but will request the correct fee when an application has been accepted for assessment.
The information on our website and our application templates will be updated to reflect this change.
Updates to our application templates have been made and are now available. The key changes are:
- ROP/IWC Good Character Appendix – the table will be updated to indicate that the native characters for non-English names and companies are required. This is to enable us to undertake full searches of the relevant individuals and entities for an application.
- Sensitive land details – we are including the details of the existing owner and the territorial authority in the list of required information.
- Ownership and control details – we are adding ‘formation documents’ such as trust deeds and constitutions to the list of required attachments.
- Business applications – a separate section will be added for the description of the business activities of the target/intended business to be operated.
PDFs of the forms with tracked changes, so you can see what has changed, are available in the Attachments section at the bottom of this page.
From time to time we receive applications where the applicant has obtained early access to sensitive assets under a short term lease or licence.
The purpose is often so the applicant can commence the proposed development works in anticipation of gaining consent. This is both risky and inappropriate, and may be seen as an attempt to defeat, avoid or circumvent the Act (see section 43).
Anticipating consent in this way may breach the Act. It will also complicate and slow down an application for consent because these arrangements are likely to influence the counterfactual and limit the benefits that can be claimed in support of the investment. It can also prove very costly for the applicant if consent is not granted and the arrangements must be unwound.
Applicants should avoid entering into such arrangements in advance of consent.
The rules for partnerships are a little different from those for bodies corporate, and this sometimes causes confusion.
A partnership is an overseas person when 25 percent or more of the partners are overseas persons. A partnership will be an overseas person when one of the four partners is an overseas person.
Compare this to the rules for a body corporate which look not to the number of shareholders, but their relative shareholding. This is particularly relevant where the partners each have different shares, sometimes referred to as an ‘unequal partnership’.
For example: three investors form a partnership: two New Zealanders have 40 percent each, while an overseas person has 20 percent. The partnership is an overseas person as more than 25 percent of the partners are overseas persons.
The result would have been different if the partners had invested through a company rather than a partnership. In the case of a company, what is important is not the number of shareholders, but the shareholders relative interest in the company.
In some circumstances the OIO will consider flexible consent wording to allow overseas investors to operate employee share schemes. This provides flexibility for overseas investors to sell a minority shareholding in a land-owning subsidiary to employees and to reacquire those shares within a certain time frame.
This flexibility enables applicants to deliver the benefits they have proposed. In some instances the investment of personal equity by employees may be tied to the delivery of benefits outlined in an applicant’s investment plan.
Any application for flexibility to allow for employee share schemes, will be assessed on its merits. The degree of flexibility sought must be connected to an applicant’s investment plan and the delivery of benefits to New Zealand.
The enforcement team has reviewed more than 100 incidents since the beginning of this year.
These are matters that have either been identified through our own surveillance or where the public have reported suspected breaches to us.
The team has also had a number of discussions with other regulators, such as the Real Estate Authority, about providing people with the information they need to ensure overseas people and their advisors comply with the overseas investment requirements.
Some of you will have also seen that Charles Banks has now been sentenced in America for a term of 4 years imprisonment.
Charles Banks was the majority shareholder in Terroir Capital LLC which manages the Terroir Winery Fund. Terroir Winery Fund was granted consent to acquire the Trinity Hill vineyard in 2014. Terroir’s advisers have been co-operating with all our inquiries around this matter and are in discussions about removing Mr Banks from having any interest in Terroir’s investment in New Zealand. Mr Banks has already resigned as director of Trinity Hill Limited.
This is a good reminder to inform the OIO of any matters that might impact on an investor’s continuing obligation to remain of good character and to co-operate with our inquiries.
We have introduced a new page on our website about the enforcement action undertaken by the OIO. The action listed is from 1 January 2015 and is updated regularly as we take further action.
The Overseas Investment Office
We have recently released a brochure introducing some of the rules for overseas investors looking to purchase New Zealand land. The strong message is for overseas people to get expert advice before purchasing land in New Zealand.
The brochure is available in the following languages:
- Spanish/Latin American
- Chinese: both simplified and traditional.
There is an on-line version of each. There is also a printable version.
From 1 July the OIO has been working to new performance measures that better reflect the work we do and how we are now operating.
We have five performance measures which will be reported in the Land Information New Zealand 2017/18 annual report:
- Minister’s satisfaction with Land Information New Zealand's advice on overseas investment matters is at least 7 out of 10
- At least 90 percent of incidents are reviewed for possible breach of the Overseas Investment Act within 10 working days of receipt
- Applications are decided within agreed timeframes:
- 20 percent of applications are decided within 20 working days of acceptance
- 55 percent of applications are decided within 30 working days of acceptance
- 90 percent of applications are decided within 50 working days of acceptance
- Stakeholder satisfaction with Land Information New Zealand's Overseas Investment Office performance is at least 7 out of 10
- At least twenty enforcement actions are taken by Land Information New Zealand's Overseas Investment Office, each year.
There have been some recent appointments to the OIO, so here is the current senior team:
|Lisa Barrett||Deputy Chief Executive Policy and Overseas Investment|
|Jenna Reid||Manager Applications|
|Lizzie Barone||Manager Applications|
|Kirsty Millard||Manager Enforcement|
|Katy Cook||Acting Manager Operational Policy|
The newest addition to the management team is Lizzie, who joins us from Inland Revenue where she held a number of positions ranging from frontline service delivery through to corporate services management.
Lizzie was Manager Governance & Integrity and led a team of Senior Advisors who were responsible for IR’s Executive Level Governance System, and providing advice relating to the integrity of the tax system.
Lizzie is leading one of our two application teams.