Tessa Baker (Chapman Tripp) authored this publication.

The current regime is set out in the Overseas Investment Act 2005 (OIA) and is regulated by the Overseas Investment Office (OIO). Currently, the tenet of the regime is that it is a privilege for overseas persons to own or control sensitive New Zealand assets. Changes proposed to the OIA are anticipated to reverse this principle, with the starting assumption anticipated to be that the investment may proceed unless there is an identified risk to New Zealand's interests.  

Summary of major changes in 2024

• In June 2024, the government issued a directive letter to the OIO setting out its clear intention to promote overseas investment in New Zealand.
• The 2024 Directive Letter directs the OIO to assess applications faster, with the expectation that 80 percent of assessments would be completed in half of the statutory timeframe. 96 percent of consent applications assessed since July 2024 have been completed within half the statutory timeframe.
• The 2024 Directive Letter also requires the OIO to administer the OIA in a manner reflecting that overseas investment is beneficial to New Zealand, and that the focus of the regime should be managing risks.  
• Further announcements from the government have signaled that broad changes to the OIA will be made in 2025, with the intention of making foreign investment in New Zealand less stringent.  

Who files?

An overseas person making an acquisition that requires consent must apply to the OIO for that consent or clearance (as applicable) before completion of the acquisition. Any agreement for an acquisition must be subject to receiving such consent or clearance. The applicant is required to provide details of its structure, decision-making processes, details of how the investment will be funded, and controlling individuals; and for land applications, the benefits to New Zealand that would result from the investment.

An individual or entity will be considered an overseas person if they are not a New Zealand citizen, not ordinarily a resident of New Zealand, or in the case of an entity, incorporated overseas or more than 25 percent-owned or controlled by overseas persons. A New Zealand citizen or entity will also be considered an overseas person if they are investing on behalf of an overseas person.

A consent application includes a filing fee that varies according to the type and complexity of a transaction and whether a national interest assessment is required.

Types of deals reviewed

Consent under the OIA is required for a range of acquisitions by overseas persons, including an acquisition of a more than 25 percent ownership or control interest in a target entity—or an increase in an existing interest to or through 50 percent, 75 percent or 100 percent.

Consent is required where the value of the applicable New Zealand assets, or consideration attributable to those assets, exceeds NZD 100 million (or an alternative monetary threshold for investors from certain jurisdictions); or the target owns or controls, directly or indirectly, an interest in sensitive land. The definition of sensitive land is detailed and requires analysis from qualified advisors.

An overseas person, establishing a business in New Zealand must obtain consent if before commencing business, the expected expenditure incurred in establishing the business exceeds NZD 100 million (US$57.4 million), or the relevant alternative monetary threshold.

Direct acquisition of interests in sensitive land will also require consent, including the acquisition of a leasehold interest of three years or more for residential land, and ten years or more for other sensitive land, together with the acquisition of forestry rights and fishing quotas.

Consent requirements can be triggered for transactions occurring upstream of the New Zealand assets, as well as for direct acquisitions in New Zealand.

Investments in strategically important businesses, where a consent requirement is not already triggered, can, and in some cases must, be notified to the OIO for ministerial clearance. Mandatory notification is required for investments in critical direct suppliers to New Zealand's intelligence or security agencies and businesses involved in military or dual-use technology, but is otherwise optional. Non-notified transactions may be reviewed by the minister before or after completion of the investment.

Scope of the review

Overseas investors and the controlling individuals are required to meet a bright-line investor test comprising a closed list of character and capability factors. This test applies whether the investment is in significant business assets, sensitive land, forestry rights or fishing quotas. Parties must wait until the assessment is complete and consent is granted before a transaction can be completed.

Examples of the investor test factors include whether the overseas investor has convictions resulting in imprisonment; corporate fines; prohibitions on being a director, promotor or manager of a company; penalties for tax avoidance or evasion; and unpaid tax of NZD 5 million or more in New Zealand or an equivalent amount in another jurisdiction.

Where the overseas investment is an investment in sensitive land, the overseas investor must also satisfy the benefit to New Zealand test. The requirements under the test differ depending on the nature of the land—for example, stricter provisions apply where the land is farmland. The OIO will assess the benefits that will be delivered by the transaction and consider factors including economic, environmental, public access, protection of historic heritage and advancement of government policy, and assess whether that benefit is proportionate to the sensitivity of the land and the nature of the transaction. A specific test must be met for investments in residential land—either increased housing, non-residential use or incidental residential use.

A national interest assessment applies to transactions involving strategically important businesses or being undertaken by foreign government investors. Supported by a cross-government committee, the minister has broad discretion to determine whether to block a transaction on the basis that it is contrary to New Zealand's national interests.  The minister may address national security or public order risks by imposing conditions, prohibiting incomplete transactions, or requiring disposal if completion has already occurred.

Consent to a transaction is granted with standard conditions prescribed by the OIA and in many cases special conditions specific to the transaction. Investors are required to report to the OIO on progress in relation to the condition. If an overseas investor fails to comply with the conditions, the OIO can require the investment to be sold, and in cases of serious and deliberate breaches, criminal or civil penalties may be sought.

Review process timeline

Timeframes under the regulations differ depending on the nature of the application. The statutory timeframe for a farmland application is 100 working days, while the timeframe for a business application is 35 working days. These timeframes can be paused or extended by the OIO. These timeframes do not create any legal obligation enforceable in a court of law, and there is no recourse for any applicant where the specified timeframe is not met. The 2024 Directive Letter has resulted in faster review timeframes.

Where the investment relates to a strategically important business, an initial review period of 15 working days applies, after which the OIO will inform the applicant of whether the transaction has been cleared or is being subjected to a more detailed assessment. If required, a full assessment must be completed within 55 working days.

How foreign investors can protect themselves

In most circumstances, it is difficult to obtain consent under the OIA in advance of agreeing to a transaction, as the consent regime operates to screen specific transactions rather than simply to identify the investor. It is possible for an investor to apply on a standalone basis to be screened against the investor test, but this does not negate the need to seek consent for a relevant transaction, although in theory it would make that consent application easier and quicker.

Where consent under the OIA is required, or the investor is required or wishes to make a notification, the transaction should be conditional on receiving the relevant consent or clearance and must not proceed to completion until such consent or clearance is received.

Investors should assess early in a transaction process whether consent or notification under the OIA will be required. In some (but not most) circumstances, a discussion with the OIO ahead of filing can be helpful to gauge the OIO's reaction to aspects of the transaction.

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