NEW OIO INVESTOR TEST: CHARACTER AND CAPABIILITY
Posted by Thomas Barnaby on April 21 2021 in News
In our previous article, we explained the measures expedited under the Overseas Investment (Urgent Measures) Amendment Bill which were introduced to protect vulnerable firms and assets from ‘fire sales’ to overseas investors. Further to that article, a new ‘investor test’ has since come into force on 22 March 2021 as part of a collection of various other measures in the Overseas Investment (Urgent Measures) Amendment Act 2020.
This new investor test replaces the previous test criteria which was broadly framed around applicants being of ‘good character’ and showing financial commitment and business acumen. The new investor test comprises a two-part test focussing on twelve ‘character’ and ‘capability’ factors. The purpose of the investor test is to determine whether investors are unsuitable to own or control any sensitive New Zealand assets by assessing whether they are likely to pose risks to New Zealand.
The test ‘character’ factors include (but are not limited to):
- Convictions resulting in imprisonment,
- Corporate fines both in New Zealand and overseas, and
- Being ineligible to come to New Zealand.
The test ‘capability’ factors include (but are not limited to):
- Prohibitions on being a director, promoter, or manager of a company,
- Penalties for tax avoidance or evasion; and
- Unpaid tax of five million dollars or more.
The new test is met by the ‘relevant overseas person’ and any ‘individuals with control’ satisfying the relevant Ministers that none of the investor test factors are established or, if one or more are established, the relevant Minister being satisfied that such factor does not make the investor unsuitable to own or control sensitive New Zealand assets.
Where the relevant overseas person is not in control of the investment, the individuals with control are subject to the investor test. Note that the investor test now applies to:
- Any investors who applied for consent before 22 March 2021 but have not yet entered into a transaction, and
- to all applications from 22 March 2021.
These changes will hopefully continue to bolster the Government’s objectives by balancing the needs of the business sector to attract overseas investment, while maintaining a robust yet agile regulatory regime that protects businesses important to New Zealand.
The investor test provides well-needed clarity regarding the type of behaviour that the government takes into consideration when evaluating the potential risk of an investor. These changes should streamline the consenting process and ultimately make it easier for those wishing to invest in New Zealand.
We recommend that overseas investors seek legal advice about how these changes may affect them.
Kellie Bright | Special Counsel | Kellie.Bright@shieffangland.co.nz
Jessica Belgrave | Associate | Jessica.Belgrave@shieffangland.co.nz
Thomas Barnaby | Solicitor | Thomas.Barnaby@shieffangland.co.nz
This paper gives a general overview of the topics covered and is not intended to be relied upon as legal advice.