NEW ZEALAND Law and Practice Contributed by: Ben Paterson, Cath Shirley-Brown and David Hoare, Russell McVeagh
form of consideration to be provided), the FMCA may be relevant. Overseas Investment Office Private equity buyers proposing to invest directly or indirectly in New Zealand will need to be aware of the country’s inbound foreign direct investment regime, contained in the Overseas Investment Act 2005 (OIA), and associated regulations, which are overseen by the Overseas Investment Office (OIO). New Zealand’s overseas investment regime is known as one of the more complex at the global scale; how - ever, in the vast majority of cases, well-advised buyers can generally expect to navigate it successfully. OIO consent is not always required, but when it is required, the application process is relatively intensive, and the time required to obtain consent will need to be fac - tored into the relevant transaction’s overall timetable. Where it is determined that OIO consent is required, the 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 around 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 transactions for the purpose of ensuring New Zealand’s interests are adequately protected, but at the same time to encour - age 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 more than 25% ownership or con - trolling 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 more than 25% ownership or controlling interest in an entity that holds a qualifying interest in “sensitive land” (what constitutes “sensi - tive land” is relatively complex, 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 acquisition occurs offshore, further up the corporate chain. In each case, consent is also required if a buy - er proposes to increase its existing direct or indirect ownership of more than 25%, or its controlling inter - est, in “significant business assets” or “sensitive land” to or over the 50% and 75% control thresholds, up to 100%. This consent requirement for creep trans - actions 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. On average, significant business assets consent takes between one and two months to obtain, and a sensitive land consent can take between three and four months from submission – since the change in government in 2023, the government has tasked the OIO with reducing consenting timeframes, and OIO consents are now being issued significantly more quickly than in recent years. In the case of regulated offshore transactions and large multinational trans - actions where the New Zealand business is a small component, the OIO can be persuaded to prioritise the application, and consent can often be obtained in four to six weeks for significant business assets applications. In addition to the significant business assets and sensitive-land consent pathways, there is a separate “national-interest” test, which grants the Minister of Finance broad discretion to prohibit or impose condi - tions on transactions that otherwise require consent, and which are considered contrary to New Zealand’s national interest. The national interest test will man - datorily apply (in addition to the applicable significant business assets or sensitive land consent require - ment) where either the buyer is a “non-New Zealand
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