Thinking | 16 December 2020
Pre-COVID foreign investment thresholds to be reinstated from 1 January 2021, as major FIRB reforms take effect
By Conrad Smith
The across-the-board $0 monetary screening threshold for all foreign investments will be lifted on 1 January 2021, as part of the much-anticipated reforms of the Foreign Acquisition and Takeovers Act 1975 (Cth) (FATA) and Foreign Acquisitions and Takeovers Regulation 2015 (Cth), confirmed to take effect on that date.
We provide a round-up of the key changes foreign investors should be aware of.
- As of 1 January 2021 the pre-COVID monetary thresholds for 'notifiable actions' and 'significant actions' will be reinstated and indexed for 2021.
- ‘Notifiable national security actions’ will need to be notified to the FIRB regardless of value. Broadly, a notifiable security action is an action to:
- start a 'national security business' (a business, carried on wholly or partly in Australia, for profit or not, and which it is publicly known or could be known upon the making of reasonable inquiries that the business is involved in or connected with a critical infrastructure asset, telecommunications, defence or a national intelligence community or their supply chains);
- acquire a 'direct interest' (usually 10% or more) in a 'national security business' or an entity that carries on a 'national security business'; or
- acquire an interest in 'national security land' (generally land which is defence premises or where a national intelligence agency is known to have an interest).
- The Treasurer will, subject to a number of requirements having been met, have the power to make divestment orders and unilaterally impose conditions or vary existing conditions after a FIRB approval has been given in respect of a significant action taken after 1 January 2021.
- The Treasurer will also have the ability to review, or ‘call-in’, an action that is a ‘reviewable national security action’ or a significant action that has not been notified to FIRB. The Treasurer will have 10 years following the action in which to exercise their ‘call-in’ power.
- The definition of a ‘foreign government investor’ has been narrowed to exclude some passive investments in funds where the investors have no influence or control over the investment or operational decisions of the entity or any of its underlying assets.
- The existing moneylending exemption will extend to acquisitions of security interests in a national security business or national security land. However, the moneylending exemption will not apply to the enforcement of a security interest over the assets of, or shares/units in an entity carrying on, a national security business or over national security land unless the acquirer a receiver, the moneylending exemption will not apply to acquisitions upon enforcement of a security interests unless the acquisition involves the appointment of a receiver.
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.
If you have any questions about how the FIRB reforms will affect your business and transactions, please get in touch.
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