Changes to Foreign Investment in the Wake of Coronavirus

20 April 20

Changes to Foreign Investment in the Wake of Coronavirus

 

On Sunday the 29th of March 2020, the National Treasurer announced a number of changes to Australia’s foreign investment framework in anticipation of a possible threat from cashed up foreign investors seeking to capitalise on the devastation being wrought to Australian businesses and investors by the coronavirus. These changes affect the purchase of businesses and land in Australia by an individual, company or trust that is considered a Foreign Person, as defined in the Foreign Acquisitions and Takeovers Act 1975.

 

What is changing?

 

Ordinarily a foreign person may invest in an Australian business or purchase land in Australia subject to the approval of the Foreign Investment Review Board (FIRB). The approval of FIRB is not needed however if an exemption applies. The most common exemptions that apply are monetary screening thresholds, i.e. if the purchase price is below a threshold amount the purchaser does not need FIRB approval. $275 million was the threshold amount that would have applied to many Management Rights purchases prior to these changes being implemented. Now however, until said otherwise the threshold amount is $0.

 

What does this mean for Management Rights?


If you enter a contract to acquire an interest in a business or land from 10:30pm 29 March 2020 onwards, and you or one or more of your investment partners is a person who does not ordinarily reside in Australia, it is now likely that you will not be able to complete that transaction until you have the approval of FIRB. This will apply to the purchase of a Management Rights business, the purchase of a commercial or residential lot, and may also apply to the entering of a lease or licence for the business (including leasebacks). Any affected transactions that you enter in the near future should be made subject to obtaining FIRB approval and should give consideration to the time it will take to complete the application process.

 

How do you obtain FIRB consent?

 

To obtain FIRB consent to a purchase you must make an application to FIRB which provides details of the business and land you intend to purchase, and provides details of the foreign person making the purchase. There is a substantial amount of information you need to give with your application to enable FIRB to process it efficiently, which depending on your circumstances may take some time to prepare. There is also an application fee payable to FIRB, which for most Management Rights will be $5,700.


How long does an FIRB application take to process?

 

Ordinarily FIRB allowed no more than 30 days to process an application. Now however, FIRB is allowing up to 6 months to process an application, with priority given to urgent matters.

 

Will this affect you?

 

If you suspect these changes to foreign investment in Australia will affect you, we recommend you seek advice specific to your circumstances.

 

Article Written by Ben Ashworth of Small Myers Hughes Lawyers

Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.
  

Additional Documents

Click here to download: 2020_05_May___Changes_to_Foreign_Investment_in_the_Wake_of_Coronavirus.pdf

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