On 10 June 2024, the Associate Minister of Finance, Hon David Seymour, issued a new Ministerial directive letter relating to the processing of applications by the Overseas Investment Office (OIO).

This clearly indicates the Government’s desire to encourage foreign investment by instructing the OIO to expedite the consent processing timeframes, limiting the considerations the OIO takes into account and minimising compliance costs with the aim of making it more attractive for foreign investors to invest in New Zealand.

A summary of the directives is set out below our commentary.

Our comments

Compared to the previous directive issued in November 2021, this new letter is focused on efficiency, reducing the processing burden for investors, and starts from the assumption that overseas investment is in the national interest.

By aiming to reduce processing times and compliance costs, the new directive addresses two of the main barriers that have historically deterred investors. However, while a focus on shorter processing time for 80% of applications is positive step, it fails to provide the certainty investors need, as they will not know in advance whether they fall within that 80%. Without fixed timeframes, investors will not have sufficient certainty for this to translate into shorter commercial timeframes. It will also take time to see the impact of the directive on the processing of applications.

In terms of encouraging investment in the energy sector, this directive is likely to prove beneficial for investors in utility-scale solar generation projects, as the OIO has processed many solar applications and is now familiar with the solar investment process. However, for less familiar or novel renewable energy developments, such as offshore wind, battery energy storage systems and hydrogen, these are likely to fall within the longer timeframes.

Overall, it will be a matter of waiting for the statistics to show whether the OIO is able to comply with this directive on processing timeframes and whether these are being achieved by the OIO. It is not clear whether there was consultation with the OIO as to whether the directed timeframes are actually achievable. 

LINZ has been directed to carry out less verification in low-risk applications by relying more on applicants’ statutory declarations and limiting external verification to cases where there are reasons to suspect information is unreliable. This is a positive move that will save time and better direct resources towards high-risk applications.

The application of the existing exemption from the Act for persons, transactions, rights, interests or assets that are majority owned and substantially controlled by New Zealanders, being generally granted to non-listed companies, managed investment schemes and limited partnerships where they meet certain criteria is another positive step, but we would like to have seen extended to include NZX-listed companies that are substantially New Zealand-operated. This would have encouraged both investment and listings on the NZX.

The directives on the farm land advertising exemption are also positive, particularly in relation to property that is not up for sale, but we suggest the Government should carry out a more fulsome review of the situations when farm land advertising is required. We frequently deal with situations where the advertising for a particular transaction has no reasonable basis in the context of the transaction and consultation with practitioners on these would likely provide useful guidance for legislative change in this area. We would also like to see consideration given to creating an overall exemption from the farm land advertising requirement where the obtaining of an exemption has become a well-trodden path, for example for a lease of less than 35 years for a solar farm development. Investors now are obtaining these as a matter of course and it seems an unnecessary administrative and financial hurdle to jump through, that is no longer justified.

Next steps

The directive letter is part of a broader three-step strategy to improve overseas investment in New Zealand. The first step was to reduce decision-making by Ministers, other than decisions involving national interest and national security transactions. The final step will be a comprehensive rewrite of the Overseas Investment Act to further streamline processes and reduce barriers to investment, but the Government has not yet indicated the scope or timeframe of the rewrite.

The new directive letter is now in force. Investors seeking information on how this could benefit their investment strategies in New Zealand should consult one of our experts.