Alert

Who does this affect?

All foreign persons or entities with foreign ownership proposing to invest in Australia. This includes all entities who deal with foreign investors.

What do you need to do?

Consider whether any proposed investment in Australia will require notification under the new indexed thresholds.

Authors
Malcolm Brennan  
Special Counsel

Katherine Urbanski  
Solicitor

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Malcolm Brennan  
Special Counsel
T +61 2 6217 6054

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中文版

Following amendments to the Foreign Acquisitions and Takeovers Regulations 1989 (Cth), overseas interests wanting to invest in Australia will now need to consider new indexed thresholds.

The Foreign Acquisitions and Takeovers Amendment Regulations 2009 (No. 1) 2009 (Amending Regulations) involve:

• a single threshold of 15% in a business worth A$219 million for private business investment. This means private foreign investment in Australian businesses (including Australian corporations, off-shore corporations with Australian assets, and non-corporate Australian businesses) below A$219 million can proceed without FIRB review. (Note : the threshold will continue to apply to the higher of the gross assets of the target, the consideration (or where appropriate the market capitalisation)), and

• indexing the new unified threshold on 1 January every year to keep pace with inflation which will prevent foreign investment screening from becoming more restrictive over time.

With these amendments, the Foreign Investment Policy (Policy) has also been changed. The need for private investors to notify the Commonwealth Government when establishing a new business in Australia valued above A$10 million has now been removed.

There have been no changes to the foreign investment rules regarding Australian urban land, foreign government investors and the media sector. These areas clearly remain sensitive.

When announcing the Amending Regulations, the Federal Treasurer stated the amendments would “increase the monetary thresholds, and thus exempt from the screening process, certain foreign investment proposals which are not considered contrary to the national interest and are currently routinely approved”.

The Amending Regulations are in contrast to the recent Foreign Acquisitions and Takeovers Amendment Bill 2009 (Bill), which could broaden the application of the Foreign Acquisitions and Takeovers Act 1975 to cover a wider range of acquisition structures and this may also impact the definition of what is a foreign person.

Together, the new Amending Regulations and the Bill reflect a shift in the focus of the Government (and the Foreign Investment Review Board) from smaller, private, corporate acquisitions to larger or more sensitive (involving land or foreign government ownership) acquisitions.

The Opposition, Greens or independent Senators on the Senate Economic References Committee Inquiry on Foreign Investment by State Owned Entities (Senate Inquiry) may challenge the Amending Regulations. The Senate Inquiry released its report recently and the majority made three recommendations:

• FIRB develop a more effective communication strategy

• FIRB produce its annual report more timely. (This year’s report was several months late.)

• The Government tighten the legislation so that acquisitions of less than 15% interests not be able to be used to mask a takeover.

The majority also approved the flexible, case by case “national interest” test approach.

A minority report, by Senators Joyce, Ludlam and Xenophon, was also released. They predictably call for greater control on State Owned Entity acquisitions and criteria for the national interest test. Though the minority did not discuss the increase of the notification thresholds to $219 million, the majority report notes that there may be community concern at the increased thresholds.

The Amending Regulations are in force now. They are required to be tabled in Federal Parliament where they may be disallowed if a motion is made within 15 sitting days of tabling. As the Government faces a hostile Senate, there is a real possibility that a Senator may give notice to disallow the instrument, either in whole or in part. The Senate next sits on 26 October 2009 and the 15 sitting days after tabling may not expire until the first sitting in 2010 (although that will depend on whether Parliament is recalled in December).