FIRB changes - Australian land corporations
Australia's foreign investment rules have been rewritten
The Foreign Acquisitions and Takeovers Legislation Amendment Act 2015 (Cth) (Act) received Royal Assent on 25 November 2015 and the Foreign Acquisitions and Takeovers Regulation 2015 (Regulation) was approved on 26 November 2015.
As we have previously written, these constitute an almost complete rewrite of Australia's foreign investment regime.
One of the main changes to the previous Foreign Acquisitions and Takeovers Act 1975 (Cth) (Old Act) is the impact on the concept of an 'Australian land corporation' (previously called an 'Australian Urban Land Corporation' under the Old Act). An Australian land corporation is generally a corporation where the value of its interests in Australian land exceeds 50 percent of the value of its total assets.
An acquisition of an interest in a share in an Australian land corporation is generally a notifiable action under the Act with a zero threshold value. This means the acquisition of a single share in an Australian land corporation could require notification to the Foreign Investment Review Board (FIRB) unless an exemption applies.
Exemptions from zero threshold
Some of the exemptions are new and provide a solution to the practical difficulties parties have encountered in the past.
The exemptions from the zero threshold limit are:
Less than 10 percent residential land & vacant commercial land
For land held by an Australian land corporation, the total value of interests in residential land (based on a reasonable assessment), and commercial land that is vacant, is less than 10 percent of the value of the total assets of the corporation.
Less than 10 percent interest in the Australian land corporation
All of the following apply:
- the Australian land corporation is or will be listed for quotation in the official list of a stock exchange (whether or not in Australia). A foreign company may be an Australian land corporation where its interest in Australian land (eg. through the holding of shares in an Australian land corporation) exceeds 50 percent of the value of the foreign company's total assets)
- after the acquisition, the foreign person, alone or together with one or more associates, holds an interest of less than 10 percent in the Australian land corporation
- the foreign person is not in a position:
- to influence or participate in the central management and control of the Australian land corporation
- to influence, participate in or determine the policy of the Australian land corporation.
Effect of exemptions
Previously, there were limited exemptions on the acquisition of shares in an Australian land corporation. They mainly involved acquisitions of shares in Australian land corporations listed on the Australian Stock Exchange.
In particular, the new exemption for Australian land corporations listed or to be listed extends to listings beyond the Australian Stock Exchange. Therefore, Australian land corporations (which can include foreign companies) proposing to list in a foreign stock exchange may do so, as the acquisition of shares below 10 percent of the total issued shares in the corporation will no longer require prior FIRB approval. This will facilitate trading on the relevant stock exchange.
Acquisitions of 10 percent or more
The significant investors who wish to acquire 10 percent or more of the shares in an Australian land corporation listed on a stock exchange will still require prior FIRB approval.
Note the acquisition is by 'the foreign person, alone or together with one or more associates'. 'Associates' is broadly defined in the Act and includes relatives, persons with whom the person is acting in concert, persons with whom the person carries on a business in partnership, directors of the corporation, a person who holds a substantial interest (being at least 20 percent) in the corporation etc. Prior to any acquisition, care must be taken to consider the shareholding of associates.
New point of law: What can be considered as a protected document?
A look at Environment Protection Authority v Sydney Water Corporation  NSWLEC 119.
Applications to replace trustees in bankruptcy: Insights for trustees from the bankrupt estate of Salim Mehajer
By Marelda Hibberd & Michael Wells
The Court’s judgment and insights to assist trustees navigate difficult estates and deal with recalcitrant bankrupts.
Australian Modern Slavery Act Review: what you need to know and how you can prepare
By Sonia Sharma, Chloe Tutt, Javvad Jaffry, Colin Yuan
Our anti-modern slavery compliance experts outline some of the key recommendations from the Report.
Stormy weather delays Microsoft’s acquisition of Activision Blizzard
Global regulators out of sync on Microsoft's $69 billion purchase of video game giant.