Following on from our update on 31 March 2020, this alert covers preliminary matters raised by the Treasurer in relation to amendments to the thresholds associated with foreign investments into Australia subject to the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) and the requisite approval by the Foreign Investment Review Board (FIRB).
Who is affected by the changes?
The changes will apply to all foreign persons subject to FATA, irrespective of:
- their country of origin; and
- whether they are a private foreign investor or a foreign government investor.
The definition of foreign person under FATA is very broad and includes, amongst other things:
- an individual not ordinarily resident in Australia;
- a foreign government;
- a foreign corporation;
- an Australian corporation in which a foreign corporation, resident or government holds a substantial interest; and
- a foreign trust.
Does the alteration of the monetary thresholds alter the meaning of ‘significant action’ or ‘notifiable action’ under FATA?
The only amendment has been to the monetary threshold, meaning, if an investment does not constitute a ‘significant action’ or ‘notifiable action under FATA, there will be no requirement to submit an application to the FIRB. To determine whether there is a significant action, or a notifiable action, requires detailed consideration of the acquisition, however, this broadly involves transactions involving:
- Australian entities and business;
- land and land rich entities; and
- agricultural land and agribusiness.
What about investing into ASX-listed entities?
The Treasurer has advised that private foreign investors may not require approval for acquisitions of less than 20% of a publicly listed entity. Exceptions to this include:
- acquisitions of 10% or more in an Australian agribusiness or land entity, or where the foreign person has a legal arrangement in place with the entity or is in a position to participate, influence or control the management of the entity;
- acquisitions of 5% or more in an Australian media business (as defined under FATA); and
- acquisitions of 10% or more in any Australian entity by a foreign government investor or where the foreign government investor has a legal arrangement in place with the entity or in a position to participate, influence or control the management of the entity.
What will FIRB impose?
The Treasurer has advised that the type of conditions that will be imposed on applications will still be determined on a case-by-case basis and will be applied to address a specific risk to the national interest.
At this juncture, it has been forewarned that the Government will be particularly mindful of the impact on employment and the community as one of the national interest factors that will be considered when screening applications.
What happens to existing agreements?
The Treasurer has advised that if the agreement was entered into prior to 10:30PM AEDT on 29 March 2020, even where the agreement has not yet completed or there is unmet conditions, there will be no need to seek FIRB approval (provided that the agreement did not meet the previous monetary thresholds).
What if I have already lodged an application with the FIRB?
The Treasury has advised that the proposed six-month extension will not be applied to all existing applications. Further, should the Treasury seek an extension, it does not follow that the FIRB will require six months.
If you have any questions regarding FIRB applications, please contact our Mergers and acquisitions team.