Thinking | 7 April 2022

FIRB rule changes relating to moneylending agreements and unlisted land entities

By Conrad Smith

The Federal Government continues to refine and tinker with Australia’s foreign investment review rules, with changes to the Foreign Acquisitions and Takeovers Regulation 2015 (Cth) (Regulation) now in force (as of 1 April 2022).

These changes are aimed at clarifying certain aspects of the foreign investment framework and streamlining the processing of less sensitive types of investment.

In this article, we outline the key changes foreign investors, their advisors and counterparties should be aware of.

Amendments to the definitions of moneylending agreement

To align with common industry practice, the ‘moneylending agreement’ definition has been replaced with a definition which clarifies that a relevant agreement entered into by a new entity will meet the definition where the new entity was created by an existing moneylending business for the predominant purpose of lending money (or otherwise providing financial accommodation).

With the new definition of ’moneylending agreement’ comes the requirement that:

  • the agreement entered into by the newly created entity must not deal with any matter unrelated to:
    • the purpose of moneylending; and
    • the carrying on of the moneylending business of the person or entity that created the new entity.
  • the newly created entity must not have carried on a business unrelated to the purpose of moneylending or otherwise providing financial accommodation.

The changes to the moneylending agreement definition also broadens the class of persons who can acquire an interest arising from the enforcement of a moneylending agreement to include a subsidiary or holding entity of the person who entered into the moneylending agreement.

Finally, entities which do not have securities on issue (such as non-stock and mutual entities) but have at least 100 members, and are not foreign government investors, have been added to the class of moneylenders covered by the exemption in respect of the acquisition of interests in residential land. Previously this was limited to non-government foreign investors which are licensed financial institutions with at least 100 shareholders.

Australian media business

The threshold test for investments in Australian media businesses has been revised to align the threshold for acquisitions of Australian media businesses with the threshold that generally applies to more sensitive investments, including acquisitions of national security businesses and acquisitions by foreign government investors.

As a result, the previous requirement that a foreign person obtain FIRB approval before acquiring an interest of 5% or more in a media business has been replaced with a requirement that approval be sought prior to the foreign person acquiring a ‘direct interest’, being:

  • an interest of at least 10% in the entity or business; or
  • an interest of at least 5% in the entity or business if the person who acquires the interest has entered a legal arrangement relating to the businesses of the person and the entity or business; or
  • an interest of any percentage in the entity or business if the person who acquired the interest is either in a position:
    • to influence or participate in the central management and control of the entity or business; or
    • to influence, participate in or determine the policy of the entity or business.

Unlisted Australian land entities

The threshold for acquisitions by a foreign person of a passive interest in unlisted Australian land entities that do not invest in established dwellings has been increased from 5% to 10%. This amendment aligns the percentage control thresholds for acquisitions of unlisted Australian land entities with listed Australian land entities.

Acquisitions of interests where the proportionate share or unit holding will not increase

Following the amendment to the Regulation, an exemption now exists which means notification provisions of the Foreign Acquisitions and Takeovers Act do not apply to foreign persons who acquire an additional interest in an entity, provided their proportional percentage interest holding would not generally increase post-acquisition.

Hall & Wilcox has a FIRB app which has been designed to help foreign investors, investees and advisors determine whether FIRB approval is required before a proposed transaction or acquisition is implemented.

The app is updated as the FIRB rules and requirements change and is a useful tool.


Conrad Smith

Conrad is a corporate & commercial lawyer with experience in mergers & acquisitions, restructures, succession, and insolvency.

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