The Treasurer, Josh Frydenberg, announced on 29 March 2020 immediate and temporary changes to Australia’s foreign investment review framework. The changes are intended to affect foreign investments made on or after 10.30pm 29 March 2020, however the Treasurer has also indicated that the timeframe for considering existing and new applications may be extended.
David Irvine, chair of the Foreign Investment Review Board (FIRB), has said that the FIRB supports these temporary changes and the changes have been necessitated by extraordinary economic circumstances.
THE BIG ISSUE
These changes require an immediate review of:
- existing advice regarding the application of the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) to a proposed action as the action may now require FIRB approval;
- the structure of any transaction that may involve a “foreign person”, including any alternatives that may not require FIRB approval;
- existing and new contracts that are conditional upon FIRB approval should be reviewed ASAP to ensure that sufficient time has been provided to allow for a delayed application process.
SO WHAT HAS CHANGED?
All proposed foreign investments into Australia subject to the FATA will require approval, regardless of the value or the nature of the foreign investor. This will be achieved by reducing to $0 the monetary screening thresholds for all foreign investments.
To deal with this additional administrative load on the FIRB and the ATO, the Treasurer has stated that there will be an increase in the timeframe to review applications from 30 days to 6 months to ensure the FIRB and the ATO have enough time to screen applications. Despite this, the FIRB has said it will seek to accommodate commercial deadlines wherever possible and will prioritise investments which the FIRB views to be in the nation’s interest by building business and maintaining or creating Australian jobs.
The specific mechanics of the proposed changes are yet to be released, however David Irvine, has indicated that there may be a temporary change as to how the FIRB applies the national interest test “these temporary measures are necessary to protect the national interest during an historically challenging time for the economy, businesses and the broader community”.
We will provide a further update as and when further detail of the changes and the application of national interest test comes to hand.
SO WHAT HASN’T CHANGED?
Australia is still open for business - the Treasurer and the FIRB Chair have stated that these measures are not intended to be a block on foreign investment, and will prioritise investments which is in the FIRB views to be in the nation’s interest. Practically delays in approvals may hinder foreign investment.
The FIRB and ATO will continue applying the national interest test in considering whether a significant action to be taken by a foreign person will be approved, or any conditions on the acquisition.
It also appears that there are still avenues for foreign investment that may not require FIRB approval, including the limited exemptions available in respect of certain actions by certain persons (i.e. money lending arrangements, acquisitions of certain interests in Australian land by persons with a close connection to Australia etc.), however as always, extreme care should be taken in pursuing these options.
HOW CAN WE HELP YOU?
- Advising on the application of the FATA, including whether FIRB approval is required in respect of a proposed action to be taken by a foreign person (despite the $0 threshold that now applies).
- Drafting agreements that provide for FIRB conditionality or are designed not to trigger the application of the FATA.
- Making an application to the FIRB or the ATO in respect of a significant and notifiable action.
- Assisting you with your existing or new application and making submissions to the FIRB and the ATO that they accommodate commercial deadlines or that the action is in the nation’s interest as it will protect Australian businesses and jobs.
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