18 May 2018

Nau mai haere mai

Welcome

Kia ora      

The old adage that the only thing that is constant is change seems to be holding true for the Overseas Investment Office (OIO)!

In November we received the new Ministerial Directive Letter, which is now incorporated into our application assessment process. This Directive Letter has raised the bar for applicants, in particular those seeking to purchase sensitive rural land. The letter has meant the reassessment of a number of applications; taking regard of the further submissions received from applicants.

The changes in the Overseas Investment Amendment Bill are expected to alter the shape and size of our team in the future. Although this policy work is led by Treasury, we are preparing, as much as we can, for the implementation. We’re excited about the work ahead of us and what it means for both LINZ and the Overseas Investment Office.

Of course the proposals signal significant changes for you too, and while we do not yet have policy certainty, we are beginning work with our Government colleagues and your own professional bodies so that when the time comes, we are able to reach as wide an audience as possible.

In the meantime, the team continues to make improvements to our processes: our latest refinement is the introduction of new consent conditions. The new conditions will secure the most important benefits overseas investors bring for New Zealand. They are written to be clearer to help consent holders understand and meet the conditions.

Our Enforcement Team had a great result recently, with a High Court judgment which resulted in four overseas investors being penalised $847,000. This is a great result for the team and is a timely reminder that overseas people must get consent under the Overseas Investment Act if before they buy sensitive land in New Zealand.

We had a high number of applications lodged just prior to Christmas. These, together with the reassessment of applications under the new Ministerial Directive Letter, have led to assessment timelines being longer than we would like. We are starting to get on top of the applications on hand and I would like to thank you for your patience as we work through this.

The Applications Team have asked me to acknowledge the great improvement in the ownership and control information applicants are providing us. There are a growing number of applications where we agree with the ROP/IWC assessment in the application.

I will be in touch again when we have more certainty about the implementation of the Overseas Investment Amendment Bill.

Lisa Barrett
Deputy Chief Executive, Policy and Overseas Investment

 

This issue covers:

Consent conditions

Timeframe updates

Enforcement Update

Auditor-General’s report into the OIO released

Overseas Investment Amendment Bill

Quick updates

The Overseas Investment Office

 

Consent conditions

We are introducing a new consent and conditions template.

As reported in the December PeriOIOdical, we’ve been looking at how we select and record the conditions that apply to consents. We want to make sure they:

  • secure the most important benefits overseas investors bring for New Zealand, and
  • are written in a way that is clear and effective to help consent holders understand and meet the conditions.

The new consent and condition template includes:

  • Special conditions that apply only to the particular consent, and were the most important considerations that particularly influenced the decision for consent to be granted.
  • Standard conditions that we expect will apply to all overseas people who are given consent to acquire sensitive New Zealand land or significant business assets.
  • Reporting conditions that require the consent holder to provide information to us, either regularly or when particular events occur.

You can find more information about consent and conditions at How the OIO assesses your application, including copies of our consent and condition templates:

You can expect to see conditions based on the new format for all applications where we haven’t already sent you a draft based on the current format.

New annual reporting template

You’ll notice our new-style conditions will require new consent holders to follow the format of our template annual report. You can find a copy of the template at Howwe take action.

While we don’t require existing consent holders to report in this format, we strongly recommend you do - this will help you provide the information we need to satisfy ourselves you are complying with the conditions of your consent.

If you have any questions about how to use the new format annual report, please contact OIOmonitoring@linz.govt.nz.

 

Timeframe updates

Quality Assurance Checks

When we receive an application, senior OIO staff undertake a Quality Assurance (QA) check to make sure all required information has been provided and form initial views on various matters including the risk and complexity of the application. Recently, a surge in new applications has made it challenging for staff to complete QA checks within our 7 working day target.

We have been working hard to address this issue and are pleased to confirm that turnaround times are returning to normal.

Low risk / complexity applications

We apply a risk-based and proportionate approach to application assessment.  This is reflected in our processes which allow for the streamlined assessment of applications we identify as being of low risk and complexity (e.g. a small, or typical, investment by a quality investor).  However, we have found that when we experience high workloads our staff may not have the capacity to commence work on these applications as soon as we would like.

We are currently exploring new ways of allocating our resources to reduce assessment times for low risk and low complexity applications.  For example, dedicating some of our resource to assessing these types of applications and applications we have granted urgency.  We hope these initiatives will result in noticeable improvements for applicants.

 

Enforcement Update

The High Court has ordered the former owners of a cliff-top property in Glendowie, Auckland to pay $847,000 in penalties and costs for failing to get consent under the Overseas Investment Act before buying the property.

Mr Tang, an overseas person under the Overseas Investment Act, purchased the property in 2013 and then transferred it to other overseas people. Neither transaction went through the required Overseas Investment Act consent process.

Justice Lang stated that the defendants should have been aware of the restrictions on purchasing property in New Zealand.

This is a great example of how the Overseas Investment Office’s enforcement programme is making sure people who should get consent, do so.  

Mr Wenbing Tang has been penalised $110,000 for his role in the transaction and the further 3 defendants (Xianghua Huang, Binghan Zhou and Binzhi Ouyang) have received a penalty based on the gain they otherwise stood to make from disposing of the property.

The penalties imposed on Xianghua Huang, Binghan Zhou and Binzhi Ouyang included a deduction to recognise their co-operation once proceedings were filed. 

The judgment establishes that where an overseas person stands to make gain from buying sensitive land without consent, any penalty imposed will focus on the gain they make by failing to follow the overseas investment rules.

 

Auditor-General’s report into the OIO released

The Office of the Auditor-General has released a report into how the OIO uses information to assess applications from overseas people seeking to acquire sensitive New Zealand assets.

LINZ welcomes the report and thanks the Office of the Auditor-General for undertaking the review. The report generally confirms that the OIO’s use of information provides decision makers with appropriate information to support its recommendations. We consider the report is balanced and fair.

We acknowledge the suggestions made on how we could make improvements in our use of information and will look at how we can adapt these in the current months.

The OIO has implemented a number of changes over the last 18 months in the operational areas of the business and continue to improve our processes and information provided to applicants, their advisors and other interested parties.

You can read the report on the Auditor-General’s website.

 

Overseas Investment Amendment Bill

The Finance and Expenditure Committee recently advised that it will now report back to the House on 21 June. The Bill will then need to pass through the next stages including second reading, Committee of the whole House, third reading and if passed, Royal Assent.

Minister David Parker, who is in charge of the Bill, has announced that Forestry registration rights will be brought into Overseas Investment screening regime. You can read the press release on the Beehive website.

Submissions are now closed on the Supplementary Order Paper – Overseas Investment in Forestry. They are published on the Parliamentary website.

The Minister also announced a new streamlined approval path will be opened for overseas investors buying forestry rights that will make it easier to gain approval.

The New Zealand Treasury is responsible for the detail of how the changes in the Bill will operate, and their website has the most up to date information about it.

The Overseas Investment Office is unable to answer queries about how the regime will affect individual situations as the law has not yet been passed, and so details may change. The new rules would not apply to property sales made before the law comes into force.

 

Quick updates

Pre-application meetings

The OIO recommends that applicants arrange a pre-application meeting with the OIO before submitting an application. Among other things, these meetings provide an important opportunity to identify potential issues early in the process and often help applicants understand the areas the OIO is likely to focus on its assessment.  We have observed that applicants who do not attend a pre-application meeting are more likely to overlook, misunderstand, or underestimate the significance of, potential issues and have their application returned at QA review.

Some points about pre-application meetings:

  • The OIO is happy to meet before an applicant has entered into a binding agreement for sale and purchase provided they can provide sufficient details of their proposed investment plan;
  • They are not only for applicants - vendors selling significant assets also find value in meeting with the OIO before commencing a sales process which is likely to involve overseas persons;
  • Meetings can be held by teleconference and in person at LINZ.

To organise a meeting, please email oio@linz.govt.nz with an agenda, list of attendees (which should include both the investor and their advisor) and a brief summary of the investor and the investment.  Applicants should come prepared to talk about the investment and how they intend to meet consent requirements.

Ministerial Directive Letter

The new Ministerial Directive Letter which came into effect in December last year, has raised the bar for applicants seeking to buy sensitive land.

We are developing guidance for applicants about the new Directive Letter which will be available shortly.

Variation and exemption templates

We have recently published new templates for variation and exemption applications. We expect the new templates will assist applicants provide all the information required to assess applications of these types. 

Vendor due diligence

It is important for vendors to consider (before entering into a binding agreement) the likelihood of a proposed overseas purchaser obtaining consent.  We have observed some transactions where better vendor due diligence would have identified matters which became issues during the application assessment process.

Vendors can reduce the chances of entering into a transaction which is unlikely to gain consent by understanding the consent process as it applies to their assets, the overseas person they are selling to (including their character), and (for sensitive land) whether the investor’s plans are likely to result in sufficient benefit to New Zealand.  This may involve consulting with an advisor experienced in overseas investment matters and undertaking their own searches on the overseas purchaser.

 

The Overseas Investment Office

Current management structure is:

Lisa Barrett

Deputy Chief Executive Policy and Overseas Investment

Jenna Reid

Implementation Lead

Lizzie Barone

Manager Applications

Anneke Cockerell

Acting Manager Applications

Kirsty Millard

Manager Enforcement

Anna Wilson-Farrell

Manager Operational Policy

 

Media enquiries

Email: media@linz.govt.nz or phone: 027 566 5251