Find out about the tools and powers we can use when responding to breaches of the overseas investment rules.

Deciding which tools to use

To make sure we select the most appropriate tool, we consider:

  • our strategic priorities
  • the seriousness of the conduct
  • the deterrence or disciplinary value of taking action
  • the educational value of taking action
  • our ability to give effect to any enforcement action, including any limitation issue
  • the precedent or clarification benefit of taking court action
  • the most effective use of our resources and, where applicable, court resources
  • whether the matter falls more appropriately within another agency’s jurisdiction.

Our priorities 

Our tools

Disposal notices

Where an investor can prove that they inadvertently breached the rules, and they agree to fully cooperate with us to sell the property, it may be more appropriate for us to issue a disposal notice than to seek a court-ordered disposal and penalty.

The disposal notice:

  • sets out our concerns, and how the investor’s interest should be disposed of
  • is issued at our discretion, when we believe it will be complied with.

The benefits of a disposal notice are:

  • the land is quickly returned to the New Zealand market, and
  • by cooperating with us to sell the property, the investor doesn’t face court-imposed penalties.

Enforceable undertakings

An enforceable undertaking is an agreement between us and the investor made under the Overseas Investment Act 2005. It is entered into voluntarily by the investor following a breach (or alleged breach) of the Act and, once in place, is legally binding.  The agreement may be to pay compensation, or costs, or take some kind of action to remedy the breach or alleged breach.

We may accept an enforceable undertaking in connection with a contravention or alleged contravention of the Act. Enforceable undertakings may be suitable in cases that don’t warrant court action.

Court action

We are more likely to take court action for serious breaches and where we have strong evidence. We may also take cases to court where that action would help to clarify the rules.  We can seek injunctions where a person has failed or refused to cooperate with us, and this refusal or failure is a breach of the Overseas Investment Act or Regulations.

Criminal or civil penalty?

Sometimes we can choose whether to seek a criminal penalty or a civil pecuniary penalty in court.

We will only lay charges for a criminal offence if we consider the Solicitor-General’s prosecution guidelines are met. We usually only take such action for very serious breaches of the rules, such as where there is a deliberate and reckless breach – particularly if imprisonment may be ordered.

If we are seeking a civil pecuniary penalty, we start from the position that effective deterrence requires that a wrongdoer does not benefit from their breach. If an investor stands to gain from their breach, we will usually seek a penalty that takes account of the gain they have by breaching the rules.

Solicitor-General’s Prosecution Guidelines

LINZ Prosecution Policy

Enforcement tools and when they may be used

The following table sets out the enforcement tools and when we might use them.  We can use more than one tool, depending on the circumstances.

 

Enforcement toolWhen tool may be used

1

No further action warranted

  • No breach or offence found
  • Insufficient evidence to pursue breach
  • Not in public interest to pursue
  • Breach not sufficiently serious to commit further resource
  • Limitation period expired and no other suitable enforcement option

2

Referral to another agency

  • Another agency has appropriate jurisdiction and/or more appropriate enforcement powers

3

Referral to disciplinary body, such as Law Society or Real Estate Agents Authority

  • Another agency has appropriate jurisdiction
  • Protection of the public

4

Administrative penalty if late providing documentation (s52)

  • Late to provide documents required by notices, without good reason
  • Late to provide documents required as part of monitoring consent conditions, without good reason

5

Agreed variation to conditions (s27)

  • Amendment will deliver benefits in a timely way
  • Circumstances have changed beyond consent holder’s control

6

Retrospective penalty (s53)

  • Retrospective consent is appropriate (section 25(1)(f))

7

Compliance letter

  • Advise of breach, educate and/or warn the person who has broken the rules
  • Require action to remedy breach and/or develop compliance programme
  • Suitable for minor breaches, or in conjunction with other enforcement options

8

Formal warning

  • Breach of rules sufficiently serious to warrant public attention
  • Deterrence value

9

Revoke consent (s26)

  • Before investment has been given effect
  • Consent obtained by fraud

10

Seek court order to require compliance with condition, exemption, exemption certificate, direction order or interim direction order (s51)

  • Failure to meet or comply with condition, exemption, direction order, interim direction order or exemption certificate and no indication of commitment, or continued failure to remedy
  • Indications investor will act in breach of condition and there will be difficulties undoing action

11

Settlement agreement, such as involving payment for public good and/or agreement to dispose of property

  • Breach of rules but court action is not the appropriate response
  • Can include contribution to our costs

12

Issue a notice to get a person to dispose of their property within a specified period, and thereby avoid any further penalty

  • Breach of the rules
  • We have discretion to issue such a notice
  • Is likely to be appropriate where the person obtained the property by relying on incorrect advice and is willing to fully cooperate with us, including to actively market the property or otherwise dispose of their interest in a timely way to an independent party
  • Not suitable in property speculation situations, or where an investor has sought to disguise the overseas ownership, or where a person does not cooperate with us

13

Order disposal of property (s47)

  • Breach of rules
  • Failure to comply with conditions of consent, an exemption, or a direction order
  • Can be sought where notice to dispose is not complied with
  • Can be sought alongside orders for penalties

14

Seek court order to cancel transaction

  • Breach of rules
  • Failure to comply with conditions of consent
  • Level of co-operation will dictate if an agreement or court order appropriate

15

Seek court order for a mortgage to be registered over land (s49)

  • To secure performance of an obligation or the repayment of any money under a term or condition of the consent, the exemption, the exemption certificate, the direction order, the interim direction order, the prohibition order, or the disposal order or payment of a civil pecuniary penalty

16

Civil pecuniary penalty for being involved in the contravention of the Act or commission of an offence or failure to comply with the Act (ss 6(7), 48 and 48A)

  • If a person has helped another person to breach the Act
  • Defences are available where someone has acted reasonably

17

Conveyancers must obtain and keep residential land statements relating to whether transactions require consent (ss 51A, 51C and 48)

  • Instruments of sale cannot be lodged without statement or if reasonable grounds exist to believe it is not correct
  • Penalty up to $20,000

18

Civil proceeding. Can involve penalty (for instance, up to $500,000 for an individual and up to $10 million in any other case – or three times the quantifiable gain) and/or disposition of property (s48)

  • Serious breach of rules
  • Failure to comply with conditions of consent
  • Clarification of the rules
  • Any quantifiable gain made (or to be made) from the investment in breach of the rules will be relevant to assessing penalty. A person can expect to be stripped of any gain

19

Prosecution for criminal offence. Penalties can include up to 12 months prison or fine up to $300,000 (s42-46)

Very serious and/or deliberate or reckless breach of the rules, such as:

  • deliberately or recklessly making false or misleading statements to us or material omission in communication with us
  • deliberately or recklessly defeating, circumventing, or evading the Act
  • resisting, obstructing, or deceiving someone exercising a power or function under the Rules

20

Accept an enforceable undertaking to:

  • pay compensation
  • take action to avoid, remedy, or mitigate any actual or likely adverse effects arising from a contravention or possible contravention of the Act or
  • pay to the regulator all or part of the regulator’s costs (ss46A-G)
  • Breach of the rules, or likely breach of the rules
  • If an enforceable undertaking is contravened, a civil pecuniary penalty of not more than $50,000 for an individual $300,000 in any other case may be payable

21

Application to the Court for an injunction to restrain a person from engaging in conduct contravening the Act (s51AAA)

  • Very serious and/or deliberate or reckless breach of the Act. Likely to be used rarely for deliberate or recklessly attempts to circumvent or evade the Act

22

Statutory management

The Governor General can, on the recommendation of the Minister declare a person, or their associate, who owns sensitive assets is subject to statutory management. This can only be used in relation to a transaction of national interest or a call-in transaction

  • Only used where there is likely to be a significant risk to national security and/or public order

 

Last Updated: 31 May 2021