COVID-19: All Foreign Investments to Require FIRB Approval

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By Warren Scott, Partner, Scott Colvin, Lawyer and Elly Randall, Law Graduate

On Sunday, the Treasurer announced immediate and drastic changes to all foreign investment into Australia as the coronavirus wreaks havoc on the national and international economy.

All foreign investments into Australia will now require approval from the Foreign Investment Review Board (FIRB), regardless of the nature of the investment, the industry to which it relates or the size of the investment.

Previously, monetary thresholds for referral to the FIRB were generally:

  • $0 for the acquisition of interests in media entities;
  • $275 million for acquisitions in industries of national interest (including telecommunications, transport, defence and intelligence);
  • $1.192 billion for acquisitions of ‘non-sensitive’ businesses; and
  • a range of amounts for land depending on the country of the acquirer, and the nature and status of the land, ranging again from $0 to $1.192 billion.

Now the screening threshold for all foreign investments is $0, regardless of the value or nature of the acquisition, making every investment into Australia that crosses the proportionate ownership thresholds conditional on FIRB approval.

The change comes amid growing concern of the handling of foreign takeovers of struggling Australian businesses, particularly after Australian-based Chinese companies were found to have sourced bulk supplies of medical equipment in January and February, which they then shipped back to China.

To help with the expected increased FIRB workload, the decision period for foreign investment applications or exemption certificates will be extended by up to six months from the date the application fee is paid. However, the Treasurer has indicated that the government will prioritise investments that will protect and support Australian businesses and jobs.

The Treasurer has reiterated that the measures are not intended to halt foreign investment, but to safeguard national interests given the immense pressure COVID-19 has placed on the Australian economy, leaving Australian businesses vulnerable to predatory behavior by foreign entities.

“Even in these uncertain times, Australia continues to welcome foreign investment, which remains vital to our long-term economic success and stability. The Government recognises that foreign investment will play an important part in helping many businesses get to the other side – securing jobs and supporting our economic recovery,” Treasurer Josh Frydenberg said.

These measures are earmarked as temporary, but will remain in place for the duration of the current coronavirus crisis. The FIRB was consulted upon and fully support the changes.

For agreements that were signed prior to the 10.30 PM 29 March 2020 enactment of the changes, but have not yet settled, the interest is deemed to have been acquired under the previous threshold, and as long as the contract is binding on the foreign purchaser then FIRB notification is not necessary.

If the foreign entity is able to terminate the agreement or provide a basis for re-negotiation, the FIRB have indicated that notification is necessary, and that further guidelines are to be released in the coming days.

Australia is still very much open for business and Mills Oakley looks forward to working with investment into the country. We are on hand to assist with any advice to help you with the current landscape, including helping with buying into Australia.

For further information, please do not hesitate to contact us.

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