The Overseas Investment Act 2005 imposes various requirements and conditions on “overseas persons” when investing in New Zealand assets. A recent case* illustrates the costly consequences of failing to comply with this Act.
In December 2019, the High Court fined two property development companies, FFG Investment Limited and Grand Sky Limited, for failing to comply with the Overseas Investment Act 2005. Under section 10 of the Act, an overseas person must get government consent when making an:
- investment in sensitive land; or
- investment in significant business assets
In this case, both companies had the same three shareholders and were considered to be an overseas person for the purposes of the Act. FFG purchased sensitive land in
Auckland and later sold it to Grand Sky. However, neither party obtained consent from the Overseas Investment Office. While Grand Sky was an overseas person when they entered into the agreement to purchase the property, it was no longer an overseas person when the purchase was completed.
Both companies were found to have breached the Act by failing to obtain consent. While Grand Sky was no longer an overseas person when the purchase was completed, it was sufficient that they had obtained an interest in the property when entering into the agreement. The companies were fined $123,000 and ordered to pay court costs.
This case highlights the importance of the Overseas Investment Act 2005 and the ramifications of non-compliance.
If you have any questions or concerns arising out of this article, please contact Kris Morrison or Steven Moe at Parry Field Lawyers (+64 3 348 8480).
