On Sunday 29th March 2020, the Australian Treasurer, Josh Frydenberg announced temporary changes to the Foreign Investment rules, including that:
- the threshold amount which determines whether particular foreign investments are subject to official review has been reduced to $0.;
- the statutory timeframe for reviewing each application is extended from 30 days to 6 months after payment of the FIRB fee – this applies to both new and existing applications;
- Australia remains open for business; and
- priority is given to “urgent applications for investments that protect and support Australian business and Australian jobs”.
In doing so, the Government was responding to growing concerns that Australian business assets, heavily discounted as a result of the coronavirus crisis, could become unfair prey to foreign interests.
Accordingly, ALL investment contracts made on or after 10:30 pm (AEDT) Sunday, 29 March 2020 will be assessed by the Foreign Investment Review Board (FIRB) against the Foreign Investment Framework and the broader National Interest test.
This will see an increase in the number of personal decisions made by the Treasurer, who has very different views to the FIRB on the National Interest test. Frydenberg will make decisions through a political lens. In the current environment, Foreign Investment decisions will be highly political and may well be subject to immense media scrutiny.
There is also a very real probability that this revised threshold will make the Government and FIRB far more aware of the types of sales occurring. This may well lead to amendments to the Foreign Investment Framework on a permanent basis. Therefore, it is important to double check whether your transaction requires FIRB approval.
Contracts signed prior to the stipulated time / date but not yet finalised are unaffected by these changes.
While these are temporary measures applicable during the COVID-19 pandemic, we expect that it will have significant impact on FIRB’s workload and processing times. If you propose to lodge a FIRB application, we consider that it would be prudent to include:
- submissions as to how the transaction supports Australian jobs and business (eg, capital injections);
- if the transaction was long planned / negotiated before COVID-19 – references to this (essentially demonstrating that you are not attempting to take advantage of the impacts of the COVID-19 pandemic); and
- if the application must be processed within 6 months – additional submissions as to the urgency of your application.
The team at TG Endeavour is extremely well placed to assist. Brendan Tegg, until recently worked as Head of Policy for Prime Minister Scott Morrison. When Mr Morrison served as Treasurer, Brendan assisted him in the development of the current Foreign Investment Framework.
Brendan and the team at TG Endeavour can assist in the drafting of Foreign Investment purchase applications, ensure company arguments align with prevailing political views and make decision makers fully aware of the benefits of transactions.
Brendan has already had significant interactions with the Treasurer’s office since the announcement that have ensured guidance from FIRB has covered issues important to industry.
If you have legal queries please contact a member of Thomson Geer’s M&A team.