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.
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.
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.
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.
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 tool||When tool may be used|
No further action warranted
Referral to another agency
Referral to disciplinary body, such as Law Society or Real Estate Agents Authority
Administrative penalty if late providing documentation (s52)
Agreed variation to conditions (s27)
Retrospective penalty (s53)
Revoke consent (s26)
Seek court order to require compliance with condition, exemption, exemption certificate, direction order or interim direction order (s51)
Settlement agreement, such as involving payment for public good and/or agreement to dispose of property
Issue a notice to get a person to dispose of their property within a specified period, and thereby avoid any further penalty
Order disposal of property (s47)
Seek court order to cancel transaction
Seek court order for a mortgage to be registered over land (s49)
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)
Conveyancers must obtain and keep residential land statements relating to whether transactions require consent (ss 51A, 51C and 48)
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)
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:
Accept an enforceable undertaking to:
Application to the Court for an injunction to restrain a person from engaging in conduct contravening the Act (s51AAA)
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