The Australian Government has made amendments to the foreign investment review board (FIRB) process with the view to tighten regulations relating the acquisition of properties and businesses which are connected to Australia’s national security. By contrast, certain initial restrictions on foreign investment regulations have been loosened as the effect of the COVID 19 pandemic on Australia eases.
The Foreign Acquisitions and Takeovers Fees Imposition Amendment Bill 2020 and the Foreign Investment Reform (Protecting Australia's National Security) Regulations 2020 (Regulations) were passed in parliament in late 2020 with the changes coming into effect on 1 January 2021.
The key points are:
The zero monetary threshold for mandatory screening of foreign investments has been removed with the exception to investments that are deemed sensitive to the Australia’s national security.
Foreign persons require FIRB approval for a “Notifiable National Security Action”.
The Treasurer has been granted new powers to review current or proposed investments that pose a national security risk.
The regulations in relation to Foreign Government Investors have been (slightly) relaxed.
1. Zero monetary threshold removed
From 29 March 2020, there has been a zero monetary threshold for all acquisitions that are covered under the FIRB process. This restriction on foreign investment which was introduced as a blanket measure to safeguard Australia’s national security during the COVID-19 has been loosened with the reinstatement of pre 29 March 2020 thresholds for both ‘notifiable actions’ and ‘significant actions’. These thresholds range depending on the percentage acquired and the nature of the acquisition.
2. Notifiable National Security Action
From 1 January 2021, FIRB approval will be required for actions deemed a “notifiable national security action”. Such actions include:
Starting a “national security business”;
Acquiring a direct interest in a “national security business”; or
Acquiring an interest in “national security land”.
The comprehensive definition of a “national security business” can be found in section 8AA of the Regulations. In summary, it is a business that is carried out wholly or partly in Australia and relates to telecommunications, defence or intelligence.
“National security land” is defined in the Regulations and includes defence premises or land that the Commonwealth as represented by a national intelligence agency has an interest in.
3. New powers for the Treasurer
From 1 January 2021, the Treasurer will be granted a 'last resort power' to impose new conditions and/or vary existing conditions after a FIRB approval has been granted. The Treasurer is required to satisfy various steps before this power can be exercised. Such requirements include:
The Treasurer being satisfied that a national security risk is present in relation to that action; and
Either the applicant made a false or misleading statement in relation to national security or the business or market has materially changed since the FIRB approval was granted and a national security risk has arisen as a result of that change.
4. Foreign Government Investors & Offshore transactions
A foreign government investor (FGI) is an entity within which a foreign government, agency or enterprise own more than 20% of the interest or two or more of FGI’s own more than 40% of the total interest.
Currently any offshore transactions by FGIs require FIRB approval unless the Australian assets of the FGI is less than $55 million. From 1 January 2021, this threshold is increased to $60 million.
Henry William Lawyers are here to assist individuals and businesses in respect of the effects of the changes to FIRB legislation for both property and company acquisitions. Do not hesitate to contact us.