OVERSEAS INVESTMENT REGIME
Crafar Farm Consent
The long running bids by foreign investors to purchase the large area of dairy farming land that make up the Crafar Farms have had recent developments with the New Zealand Government approving the sale to a subsidiary of Shanghai Pengxin Group Co. Limited on 20 April 2012.
Despite approval, the deal will be held up by legal challenges by the Independent Crafar Farms Purchase Group which competed against Shanghai Pengxin to buy the farms but lost out. The Group is challenging the Overseas Investment Office (“OIO”) recommendation to approve the deal.
The Group says that the OIO erred in finding that Shanghai Pengxin’s partnership with the state-owned Landcorp, which will run the farms, satisfied the Oversea’s Investment Act’s requirement for relevant experience. Instead, it should have focused on the relevant experience of Shanghai Pengxin and its acumen, being that of Jiang Zhaobai, a billionaire who has ultimate control of the corporation.
The practical implications of the recent High Court and OIO approval of the Shanghai Pengxin Group’s application involving sensitive land are, in summary:
- Vendors and overseas bidders will need to spend more time and resources on the OIO application and process.
- Ministers of the Crown have a wide discretion when applying the overseas investment criteria and a challenge is unlikely to be successful if they have applied the correct legal test.
- Vendors and overseas bidders will need to show a greater degree of specificity about and evidence of, benefits to New Zealand in their applications.
- The High Court held that contrary to the OIO’s past practice of a “before and after” comparison when establishing economic benefit to New Zealand it is now to be based on a “with or without” assessment. It has been noted that this may not result in a substantive change to the way the OIO process applications as in many cases the “status quo” may still be the correct “counterfactual test”.
- Non-economic benefits will also have strong weighting in an application and it may not be necessary for the applicant to have a strong economic case.
- The application will take longer especially if there are complex applications which involve politically sensitive assets, which in particular are large rural holdings.
Financial Markets Authority (FMA) Releases Final guidance on Effective Disclosure
The guidance note is for issuers, directors and advisers on Effective Disclosure. It sets out the approach the FMA will take when reviewing prospectuses and investment statements for compliance. It also sets out what the FMA considers good practice for preparing the disclosure documents.
The guidance note focuses on:
- · Explaining what the “clear, concise and effective” standard that is now expected from disclosure documentation entails. This will help issuers determine if their offer documents meet the current statutory tests not to mislead, deceive or confuse.
- Providing useful examples of factors relevant in relation to specific categories of offerings.
- Discussing how the required information can be set out.
After conducting consultation with industry and consumer groups, it is anticipated that the guide will encourage the market to develop best practice disclosure. This will assist the industry in preparing to meet the upcoming changes under the Financial Markets Conduct Bill.
The guidance note applies to new issues from 9 July 2012 and for continuous issues, from 1 January 2013.
The guidance note can be found here.
Commencing business in New Zealand and employing staff has now become a little easier. A recent Department of Labour report can be found here on the amendment to the Employment Relations Act 2000 which allows all businesses operating in New Zealand to hire new employees on a trial period of up to 90 calendar days. The report discusses the employer’s perspectives on the trial periods and why the uptake of trial periods has been so extensive.
Under the trial period, if the employee is dismissed within 90 calendar days, there is no ability to raise a personal grievance based on reasons of unjustified dismissal but the rights to protection against discrimination, sexual and racial harassment, duress or unjustified action by the employer remain.
The report states that, overall, 60 percent of employers hiring used the trial period. Employers reported that the trial period was used to reduce hiring risks, such as the potential costs associated with dismissing an employee, checking an employee’s ability for the job before making a permanent commitment and ensuring the employee fits into the workplace. In the result four out of five employers reported retaining employees who were on a trial period.
Dairy Industry Restructuring Act
Of interest to foreign investors seeking to enter the New Zealand Dairy industry is a Bill that has just had its second reading in Parliament and will set how Fonterra (New Zealand’s major dairy industry co-operative) sets the farm gate milk price and will ensure a more transparent and efficient dairy market.
Fonterra was formed due to the introduction of the Dairy Industry Restructuring Act in 2001. Ten years on, the Amendment Bill ensures the Act remains a durable platform for the continued growth of the dairy sector and maximise its potential for the New Zealand economy. The Bill is important because of Fonterra’s dominance in the New Zealand market and the price it pays its farmers for milk at the farm gate will effectively become the default price that all dairy processors must pay to attract supply from farmers. Fonterra controls about 90 percent of the market share.
The Bill will embed Fonterra’s current milk price governance amendments into legislation and require it to publicly disclose information on its milk price setting and introduce an annual milk price monitoring regime to be undertaken by the Commerce Commission.
The bill will also ensure that the farmer suppliers can freely enter and exit Fonterra and that independent dairy processors can compete for the farm gate milk.
There are a number of new provisions which allow for Fonterra’s proposed ‘Trading Among Farmers’, or TAF, regime. Under TAF, farmers wanting to purchase or sell Fonterra shares would trade in a market rather than transacting directly with Fonterra, as is currently the case. In addition, an external fund will be established and farmers will be able to sell a portion of their shares to the fund in exchange for cash. External investors would be able to purchase the beneficial rights, in other words the dividend and any changes in value to shares that farmers have sold into the fund.
Fonterra will remain 100% farmer supplier-owned as voting will stay with the Fonterra farmer supplier.
TAF also provides the opportunity for Fonterra to raise additional capital to pursue growth opportunities in New Zealand and overseas markets.
On 1 July the Ministry of Economic Development, the Ministry of Science and Innovation, the Department of Labour and the Department of Building and Housing will merge into a new “Super Ministry” called the “Ministry of Business, Innovation and Employment”. It will take over 24 months for full integration. The merger aligns with other international public sector consolidations in the United Kingdom and Australia.
The intention of the merger is to make it easier for businesses to engage with the Government.
The current ministries will initially form a ‘federation’ with a new chief executive. Eventually the functions of each department will be integrated. Recent New Zealand experience of governmental mergers includes the Financial Markets Authority which resulted in a well-managed consolidation of functions with minimal disruption of the day to day delivery of its functions.
I-Govt Logon Services
Over the past few years the New Zealand Government has introduced a service called I-Govt Logon Service which allows the use of the same logon to access various government online services. This eliminates the need to remember multiple usernames and passwords for different services.
The service is secure and maintains the user’s privacy; see here how this is achieved.
The basic I-Govt Logon comprises a username and password. For Government services that require an extra level of security there is also a requirement to enter an I-Govt Code. Each participating Government service provider will decide whether their service requires this extra level of security.
I-Govt Logon services can be used with a wide variety of agencies, which at present include; Auckland Council, Department of Building and Housing, Department of Internal Affairs, Department of Labour, Elections New Zealand, Ministry of Agriculture and Forestry, Ministry of Economic Development, New Zealand Police, New Zealand Transport Agency, Statistics New Zealand, The Treasury and Wellington City Council. See here for what you can do using the Service at each participating agency.
The I-Govt Logon Service is a significant step to simplifying the way business is conducted in New Zealand and through a series of directions, in effect, all public service departments and Crown agencies are directed to adopt the I-Govt Service when implementing any system or service that requires online credential management or identity verification in preference to any other.
All legal staff at Clendons North Shore are I-Govt accredited.
This publication is necessarily brief and general in nature. You should seek further information before taking any action in relation to the matters dealt with in this publication. If you have any questions on the matters discussed in this update please contact the New Zealand Mackrell Partner, Brian Joyce at Clendons North Shore by email to email@example.com or phone 64 9 377 8419