Commercial Law Service & Specialist Foreign Investment Expertise
Variation of Consent Conditions
Issue
A company holds an existing OIO consent. It was experiencing issues complying with its consent conditions. This was due to general economic changes that had made some of its capital development plans untenable in the original timeframes
Christina assisted the consent holder in obtaining a variation to its OIO consent conditions
Action & Result
This variation allowed the company significantly more time to complete its capital works programme.
Where compliance with an OIO condition has become difficult due to circumstances outside a consent holder’s control, Lefever Law can assist the consent holder in working through the issues with the OIO and, where necessary, in making a formal application for a variation to the OIO consent conditions.
Restructuring Minority Investments
Issue
The OIO legislation is designed to ensure that investors do not structure their arrangements in a way that circumvents the OIO regime.
For example, even where an overseas investor has an ownership interest at or below the 25% threshold, the regime may still apply if they have too much involvement in the governance or day to day management of the business.
If the level of control that an overseas investor has is not reflective of their 25% shareholding and is closer to something that would be associated with a greater shareholding, then the OIO may investigate the arrangements.
Lefever Law is experienced at navigating this complex area of legislation and assisting with the structure of minority investments
Action & Result
This is a complex area of the OIO regime and requires in-depth consideration of:
- the legislation itself
- the history of previous OIO enforcement in this area and commentary on how this applies to your minority shareholding
- a sound commercial understanding of investment transactions.
Christina has provided advice to numerous investors to assist them in navigating the complexity of structuring minority equity investments so they are compliant with the law.
OIO Consent Exemption Application
Issue
An international corporate group held residential land in New Zealand through its New Zealand subsidiaries. The group was ultimately owned by family interests, including one individual personally holding 90%.
The residential land had been acquired by the group before residential land was brought into the OIO regime in 2018.
This group wished to carry out a corporate restructuring that would result in A’s ownership increasing from 90%.
Despite A’s high level of ownership and control under both the existing and the proposed structure, this minor shareholding change triggered an OIO consent requirement*.
However, it would have been difficult to satisfy any of the residential land tests necessary to obtain OIO consent.
*Please note that recent legislation changes would now allow this restructure to occur without an OIO consent or an exemption application. However, there are still some restructure scenarios that would be caught by the legislation.
Christina successfully assisted the client in applying for an exemption from the OIO consent regime
Action & Result
In this situation, the way forward involved demonstrating to the OIO that because a minor shareholding change would not have an impact on the ownership and control of the business, it was appropriate for an exemption to be granted. The application satisfied the OIO that is was appropriate for the OIO to exercise its discretion to grant an exemption from the consent requirement in this instance. This allowed the restructuring to proceed without the need to obtain OIO consent first.
Special Benefits Test for Forestry
Issue
Christina has advised on a number of applications submitted under the new Special Benefits Test for Forestry that was first introduced in 2018.
While the new forestry tests can streamline OIO consent applications where an investor is looking to acquire land for forestry purposes, the strict criteria can raise different issues to be managed in the OIO consent process.
Key issues to consider in the Special Benefits Test for Forestry:
- The forestry tests impose greater restrictions on the use of existing dwellings than in other land purchases. This can impact the structure of the purchase or the nature of the OIO consent conditions
- If the investor wishes to carry out any other activities on the land, these need to be carefully considered against the consent criteria.
- Dealing with transitional arrangements that may be necessary to sustainably manage the property and protect the dwellings while the land is being transitioned into a forestry block.
- Maintaining flexibility for the applicant to delay making final decisions about some land uses until they have settled the purchase and had an opportunity to become familiar with the property and fully consider the potential land uses.
Christina has advised on a number of applications submitted under the new Special Benefits Test for Forestry that was introduced in 2018
Result
Christina has worked with international clients on addressing all of the above issues, resulting in successful decisions without overly restrictive conditions.
Christina also advised a forestry company in respect of one of the first applications for a standing consent made under the new regime. This allows them to purchase future properties without needing to obtain a specific OIO consent each time.
Navigating OIO Policy Changes
Issue
An application for OIO consent was lodged in 2017 in respect of a rural land purchase.
In late 2017 a new Ministerial Directive was issued, effectively “raising the bar” for rural land consents.
The new directive was applied retrospectively, so while the application was prepared and submitted under the earlier regime, it was assessed against a new test
Christina and the client worked alongside the OIO to revise the business case to address new issues and reflect the new directive
Action & Result
This involved a lot of work with the OIO as they themselves became more familiar with what the new thresholds meant. Ultimately, the client was granted consent for the transaction.
Ensuring Future Consent Flexibility
Issue
OIO consents are issued subject to conditions that must be complied with by the consent holder. If the conditions are not complied with, the OIO can take enforcement action, which could (among other things) result in fines/penalties or disposal orders. The consent conditions will generally reflect the claims that have been made by applicants in their consent application, so applicants need to ensure those claims are realistic and achievable.
In addition, issues can arise if a consent holder restructures their business after having obtained an OIO consent. Minor shareholding changes (at any level in the ownership structure) could trigger requirements for new OIO consent applications. Not only does this involve significant time and cost, but it may be difficult to meet the OIO consent criteria in respect of minor ownership changes.
Lefever Law works with applicants to maintain future flexibility in business operations and structuring
Action & Result
Lefever Law works with applicants to help ensure that their applications for OIO consent, the claims made in them, and the associated consent conditions are (to the extent practicable) framed in a way that recognises any risks to them being achieved (outside of the applicant’s control).
Lefever Law also works with applicants to anticipate likely future changes and incorporate them into the applicant’s OIO consent and decisions, to ensure there is future flexibility.
