NEW ZEALAND Law and Practice Contributed by: Ian Beaumont, Tom Gillespie and Sam Kember, Russell McVeagh
be required. This approval can be incorporated into transaction documentation as a condition to the con - tract being completed. NZX In the context of a transaction involving a sale or pur - chase by, or of, an NZX-listed entity, the NZX will have a role in monitoring compliance with the NZX Listing Rules (for example, rules relating to continuous disclo - sure and approval of material transactions). Other Sector-Specific Regulators Depending on the nature of the target business, other New Zealand regulators may be relevant. 2.3 Restrictions on Foreign Investments Acquisitions by overseas investors of certain New Zealand businesses and assets must comply with the OIA and associated regulations. The regime is over - seen by the OIO. New Zealand’s overseas investment regime is known as being one of the more complex on a global scale; however, in the vast majority of cases, well-advised buyers can expect to navigate it successfully. Where required, the application process is relatively inten - sive and the time required to obtain consent will need to be factored into the relevant transaction’s overall timetable. Where it is determined that OIO consent is required, the share purchase agreement (SPA) will need to be expressly conditional on the receipt of the relevant OIO consent. Current market practice is to file an OIO consent application shortly after signing the SPA. OIO consent can take from as little as five business days to two-and-a-half months (or longer, in some cases) to obtain, depending on the nature of the target asset, the consent required and the buyer. The regime is structured to ensure that the OIO has the power to review a relatively large proportion of trans - actions for the purpose of ensuring New Zealand’s interests are adequately protected, but at the same time to encourage beneficial overseas investment. In a very small proportion of cases, the OIO will decline consent if the factors for consent are not met. Whether a transaction requires consent depends on one or a combination of the value and/or nature of the New Zealand assets that are affected by the transac -
tion. A transaction that will directly or indirectly result in the acquisition of a more than 25% ownership or control interest in a New Zealand business or New Zealand assets will require OIO consent if the gross value of the New Zealand assets or the purchase price for (or which is attributable to) the New Zealand busi - ness or assets exceeds NZD100 million. Higher mon - etary thresholds apply for buyers from countries with trade agreements with New Zealand that meet certain requirements. OIO consent will also be required if a buyer directly or indirectly acquires a more than 25% ownership or control interest in an entity that holds a qualifying interest in “sensitive land” (what constitutes “sensi - tive land” is relatively detailed but, broadly speaking, includes any residential land, land directly adjacent to the foreshore, any non-urban land over five hectares and certain forestry rights). The consent requirement is triggered even if the acqui - sition occurs offshore, further up the corporate chain. In each case, consent is also required if a buyer pro - poses to increase an existing more than 25% direct or indirect ownership or control interest in “significant business assets” or “sensitive land” to or through the 50% and 75% control thresholds, or to 100% if the target is a strategically important business. This consent requirement for creep transactions can catch out upstream investors in global businesses that have significant downstream assets or land interests in New Zealand where the buyer increases its proportionate interest by participating in a non-pro rata fundraising or buy-back transaction. The primary test that applies to almost all applications for OIO consent is the national interest test, where the regulator considers whether the transaction or inves - tor could be contrary to New Zealand’s national inter - est. More comprehensive regulatory scrutiny will be given to transactions where either the buyer is a “non- New Zealand government investor” or the transaction involves land or assets that are used in a “strategi - cally important business”. The definition of a “non- New Zealand government investor” is complex, but in broad terms the test will apply if the buyer is, or its upstream owners are, more than 25%-owned, direct - ly or indirectly, by one or more government-related
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