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OIO Consent process to be improved
Changes are in the pipeline for the Overseas Investment Act 2005 (Act) and the Overseas Investment Office (OIO). Discussions and review surrounding both the Act and OIO processes are underway in order to ensure that the OIO is effectively vetting investments that may pose a risk to New Zealand, while making sure that the process does not deter beneficial investment in New Zealand. It has become apparent that further clarity needs to be afforded in order to improve the application of the Act. It has been criticised for arguably overreaching effects with regard to the land sensitivity provision, whilst the OIO has been criticised for the length of time it takes to process applications for consent. The Treasury and the OIO are liaising with stakeholders in the form of workshops in order to develop potential changes and regulations so that the appropriate balance between restricting harmful and encouraging overseas investment is struck. Perhaps the most significant of the proposed changes are the targeted exemptions to the investment screening requirements. The proposed exemptions according to the Treasury draft regulations are as follows:
- Exempt from the requirement to first advertise land on the open market acquisitions of leasehold farmland, where the cumulative duration of the lease is for a term of not more than twenty years.
- Exempt leasehold land from screening where a previously consented lease is being re-granted on substantially the same terms and conditions, and the substantive ownership of the property in question is unchanged.
- Exempt transactions from one overseas person to another for specified land that is of a small scale and that has previously been screened.
- Exempt certain transactions where consent is required as a result of certain Public Works Act 1981 actions.
- Exempt custodians who are overseas persons but who hold investments on behalf of New Zealand investors from the requirement for consent for those investments only. The exemption seeks to focus on the beneficial owner of the investment rather than screening the custodian.
Some technical amendments to the regulations are also being discussed as well as whether clearer guidance should be included in the Ministerial Directive letter regarding how the factors in the benefits test should be weighted in the decision making process. The Government intends to finalise the regulations by the end of 2016 with the intention that the new regulations will help to streamline what can be a convoluted process to gain consent as an overseas investor, decreasing delays and the cost for the OIO. If you are an overseas person looking to invest in New Zealand, contact Fortune Manning for legal advice and guidance on how to navigate the consent process.