The Overseas Investment Office (OIO) assesses all applications from overseas persons who intend investing in “sensitive New Zealand assets” – defined in the Overseas Investment Act 2005 (“the Act”)-as  “sensitive land” and “significant business assets”. All non-urban land with an area greater than 5 hectares and/or land greater than 0.2 hectares that adjoins the foreshore, is defined under the Act as “sensitive land”.

The OIO administers the New Zealand government’s investment policies, and reviews the OIO’s legislation – (“the Act”) – and delegated powers.  Consent must be obtained from the OIO before any such overseas investment is given effect under the transaction. The OIO has a statutory duty to enforce the law when “sensitive land” that has been purchased without consent is brought to its attention.

A serious offence is committed under the Act if such a transaction is  ‘effected’ without the puchaser or his agent  having first sought and subsequently gained, OIO consent.  Upon conviction, fines of up to $300,000 can be imposed by the Courts on any offending body corporate or a term of imprisonment of up to one year imposed on any peson convicted of such an offence. In addition the Crown is entitled to forfeit all assets acquired in such illegal trasactions.

Yesterday, the Dominion Post reported that the OIO had announced it had approved the “sensitive sale” of the Wairarapa’s historic Mataikona Station – a 1394-hectare (3427 acre) coastal sheep and beef run – to Zurich property broker Robin Haab – for $6 million, in July. In this case the purchaser did comply with the law.

Under the Act a foreign-owned company must gain OIO consent before it can acquire “sensitive land”. If the company purchasing this asset is a NZ-registered company that itself is wholly owned by an overseas registered company, consent must also be gained before the transaction is deemed to have been lawfuly effected. If the person directing such a foreign-owned NZ-registered company holds joint citizenship, such as NZ-US citizenship,  this fact does not allow him and/or his agent to ignore his obligations to the OIO under the Act. If such a person is director and owner of both companies he must comply with the law and obtain consent.

The Act itself received the Royal asent on 21 June 2005 and came into force on 25 August 2005. Prior to that the 1973 version of the Act was in force and it was administered by the Overseas Investment Commission (now called the OIO). The earlier Act also made it a serious offence for any overseas investment in the assets outlined above to be ‘effected’, without the consent of the OIC.

The OIO website summarises 24 decisions it issued in September 2005 with respect to consent applications made after the 2005 Act came into force on 25 August 2005.  Overseas based property investors seeking a slice of the New Zealand market at the time, had no excuse for not seeking consent – given the wide publicity given to the Act leading up to its enactment into law.

The Auckland High Court reinforces interpretation of Act by OIO……..

On 11 June 2010 the Auckland High Court dismissed the application by UBNZ Assets Holdings Limited and Natural Dairy (NZ) Holdings Limited for a declaration that they do not require consent under the Overseas Investment Act 2005.

This followed sale and purchase agreements for 16 Crafar farms signed in late May, which were conditional on consent under the Act.

Annelies McClure, Manager of the Overseas Investment Office, said the Court’s reasons for dismissing the application for the declaration supports the OIO’s view that consent may be required by UBNZ Assets Holdings Limited to purchase the farms.

“The Overseas Investment Act clearly sets out the requirements for overseas persons and associates of overseas persons seeking to purchase sensitive New Zealand land,” said Ms McClure. “The Court’s judgment further reinforces our interpretation of the provisions in the Act.”

References:

http://www.stuff.co.nz/dominion-post/news/5562597/Wairarapa-station-sold-for-6m-to-Swiss-family

http://www.linz.govt.nz/overseas-investment

Schedule 1 – Sensitive Land

http://www.legislation.govt.nz/act/public/2005/0082/latest/DLM358552.html?search=ts_act_overseas+investment_resel&p=1