Publication of Ministerial Directive Letter Under Section 35 of the Overseas Investment Act 2005
To: Gaye Searancke, Chief Executive, Land Information New Zealand, Private Box 5501, Wellington 6145
Dear Ms Searancke
1. This Ministerial directive letter is made pursuant to section 34 of the Overseas Investment Act 2005 (“Act”). It directs you, as the regulator, on:
1.1 the Government’s general policy approach to exempting persons, transactions, rights, interests, or assets that the Minister considers to be majority owned and substantively controlled by New Zealanders from requiring consent to invest in sensitive New Zealand assets;
1.2 removal of conditions on completed transactions that would not require consent if entered into under the new regime;
1.3 conducting regular fee reviews, and
1.4 other changes from the Overseas Investment Amendment Act 2021 (“Amendment Act”).
2. This letter reflects the delegation to you from the Minister of Finance, Minister of Fisheries, and the Minister for Land Information, dated 17 October 2018, to make decisions on individual exemptions.
3. The terms used in this letter have the meaning given to them in the Act, unless otherwise specified.
4. Directions relating to exemptions for fundamentally New Zealand entities (paragraphs 5 to 12) in this letter apply to the regulator’s consideration of all new and existing applications at the date it comes into force.
5. The Act defines “overseas person” in a way that results in some entities and managed investment schemes that are majority owned/funded by New Zealanders and have a strong connection with New Zealand, being required to obtain consent.
6. The Act permits exemptions to be granted for persons, transactions, rights, interests or assets that the Minister considers to be majority owned and substantively controlled by New Zealanders (section 61B(c)(viii)). Under section 61D, a decision-making power delegated to you, the regulator may grant individual exemptions to applicants that satisfy this threshold. This aligns with the Act’s purpose, as it is clear that the degree of New Zealand ownership and control is what determines whether an entity is an overseas person, not other matters such as New Zealand employees or having headquarters in New Zealand.
7. I consider that such exemptions should generally be granted to non-listed bodies corporate, managed investment schemes (MIS) and limited partnerships, where they meet the criteria specified below, unless good reason exists not to.
8. In order to be eligible for an exemption from consent requirements, the Government considers a domestically incorporated non-listed body corporate will generally:
8.1 not be majority owned by overseas persons. That is, be less than 50 percent owned by overseas persons;
8.2 not be substantively controlled by overseas persons. That is, 25 percent or less of the entity’s total securities are cumulatively controlled by overseas persons, each of whom hold 10 percent or more of the entity’s total securities; and
8.3 not be open to access or control by a foreign government. That is, no foreign government (or its associates) holds 10 percent or more of the entity’s total securities.
9. In order to be eligible for an exemption from consent requirements, the Government considers a MIS will generally:
9.1 not be majority owned by overseas persons. That is, less than 50 percent of the value of the managed investment products in the MIS are invested on behalf of overseas persons;
9.2 not be substantively controlled by overseas persons. That is, 25 percent or less of the managed investment products in the MIS that entitle holders to vote are invested on behalf of overseas persons, each of whom have 10 percent or less of those products1; and
9.3 not be open to access or control by a foreign government. That is, no foreign government (or its associates) holds 10 percent or more of the value of the managed investment products in the MIS.
10. In order to be eligible for an exemption from consent requirements, the Government considers a limited partnership will generally:
10.1 not be majority owned by overseas persons. That is, less than 50 percent of the limited partnership interest is held by overseas persons;
10.2 not be substantively controlled by overseas persons. That is, 25 percent or less of the general partner is cumulatively controlled by overseas persons that each hold a 10 percent or less of the interests in the general partner; and
10.3 not be open to access or control by a foreign government. That is, no foreign government (or its associates) holds 10 percent or more of the partnership interest.
11. In addition to the specified criteria, in determining whether to grant an exemption to these kinds of entities, the Government would expect the regulator to consider:
11.1 the entities’ character (in accordance with how character is assessed under investor test in the Act); and
11.2 the degree of access or control foreign governments (or their associates) hold in the entity.
12. The Government would expect the exemption to depend on compliance with conditions being maintained, including the condition that the investor remain not unsuitable to own or control the assets.
13. Section 27 of the Act provides that a condition of consent can be revoked by the relevant Minister or Ministers or be varied or added to by the relevant Minister or Ministers with the agreement of the consent holder.
14. Clause 37(2) of Schedule 1AA of the Act, as introduced by the Amendment Act, provides that relevant Ministers may revoke a condition of a consent that the Act required to be imposed. This relates to a person who ceases to be an overseas person on commencement of new section 7 of the Act (clause 5 of the Amendment Act) and who applies to the regulator under section 27 of the Act for a variation of a consent granted to them while they were considered an overseas person under the Act.
15. I generally expect you, as the regulator, when processing such applications, to revoke the conditions of those consents unless good reason exists not to.
16. I expect you to exercise your discretion having regard for, amongst other things:
16.1 the purpose of the Act;
16.2 the Government’s view that some investors are no longer considered overseas persons under the Act and therefore their ownership of sensitive New Zealand assets is unlikely to pose risks to New Zealand.
17. Section 61 of the Act provides that regulations can prescribe fees and charges for the purpose of meeting (or assisting in meeting) costs of Ministers and the regulator in exercising functions and powers, performing duties and generally providing services under the Act.
18. New section 61(1)(e) of the Act, as introduced by the Amendment Act, provides that fees can be set at a level which recovers the true cost of assessing an application by:
18.1 clarifying that the government can set fees to ensure that under or over-collections can be distributed among fee payers on a rolling four year basis;
18.2 requiring the Minister to commence a fees review at least once every four years; and
18.3 confirms that any existing deficit for the regulator can be recouped through fees that are set after commencement of these changes, to the extent that the deficit arose in the preceding four financial years.
19. Where you are assisting with future fees reviews, consistent with the Government’s Cost Recovery Policy, I do not expect cost recovery from investors that can not be reasonably ascribed to processing that investor’s application (other than as a consequence of reasonable under-collections across a four year basis).
This Ministerial directive letter takes effect from the commencement date of the Amendment Act, 5 July 2021.
Yours sincerely,
Hon GRANT ROBERTSON, Minister of Finance.
1 A MIS that has an overseas person as manager or trustee should not be considered to have substantive control for the purpose of this directive.