Tessa Baker and Guy Bidwill (Chapman Tripp) authored this publication

Introduction

• The regime is set out in the Overseas Investment Act 2005 ("OIA") and is regulated by the Overseas Investment Office ("OIO"). The tenet of the regime is that it is a privilege for overseas persons to own or control sensitive New Zealand assets, although the OIA now explicitly acknowledges the role of overseas investment in increasing economic opportunity in New Zealand.
• For certain less sensitive investments, the starting assumption will be that the investment may proceed unless there is an identified risk to New Zealand's interests.

Summary of major recent changes

In February 2025, the government announced reform to the OIA to reverse the presumption against foreign direct investment ("FDI"), allowing overseas investment to proceed unless there is an identified risk to New Zealand's national interests.

The Overseas Investment (National Interest Test and Other Matters) Amendment Act 2025 came into force on 6 March 2026. In conjunction with the legislative changes, a new Ministerial directive letter was issued on the same date (the "MDL").

The changes better reflect the benefits international investment can bring to New Zealand's economy, while maintaining appropriate regulatory tools to manage risks to New Zealand's national interest. The scope of what is screened by the OIO has not changed, but how certain fewer sensitive assets are screened has. We summarize the key changes as follows:

• There are three new consent pathways as follows:
  • The primary consent pathway for significant business assets and classic sensitive land (i.e. not farmland or residential land);
  • The production forestry pathway for sensitive land used for production forestry; and
  • The $5million plus house pathway for qualifying investor visa holders.
• The rules regarding farmland, residential land and fishing quota have not changed.
• The national interest, benefit to New Zealand, and investor tests have been consolidated into a single test for the three new consent pathways. The new test has three stages as follows:
  • Stage 1 is an initial risk assessment. If the OIO has reasonable grounds to consider that the transaction may include a risk to New Zealand's national interest, then the transaction is referred to Stage 2, otherwise consent will be granted.
  • Stage 2 is the national interest assessment. If the OIO has reasonable grounds to consider that the transaction may be contrary to New Zealand's national interest, then the transaction is referred to Stage 3.
  • Stage 3 requires the responsible Minister to decide whether or not to decline a transaction on the grounds that it is contrary to New Zealand's national interest.
• The OIO expects that the majority of new pathway applications to be decided at Stage 1, but has noted that applicants must positively identify and address potential risk factors.
• Investors holding an Active Investor Plus, Investor 1 or Investor 2 residency visa may apply for consent to buy or build one home worth more than NZD$5 million under the new $5million plus house pathway.

Who files?

An overseas person making an acquisition that requires consent must apply to the OIO for that consent or clearance, as applicable, before completion of the acquisition. Any agreement for an acquisition must be subject to receiving such consent or clearance.

The applicant is required to provide details of its structure, decision-making processes, how the investment will be funded and controlling individuals. For certain land applications, the applicant must also provide details of the benefits to New Zealand that would result from the investment.

An individual or entity will be considered an overseas person if they are not a New Zealand citizen, not ordinarily a resident of New Zealand or, in the case of an entity, incorporated overseas or more than 25 percent owned or controlled by overseas persons. A New Zealand citizen or entity will also be considered an overseas person if they are investing on behalf of an overseas person.

A consent application includes a filing fee that varies according to the type and complexity of the transaction and whether a national interest assessment is required.

Types of deals reviewed

Consent under the OIA is required for a range of acquisitions by overseas persons, including the acquisition of more than a 25 percent ownership or control interest in a target entity, or an increase in an existing interest to or through 50 percent, 75 percent or 100 percent.

Consent is required where the value of the applicable New Zealand assets, or consideration attributable to those assets, exceeds NZD $100 million (or an alternative monetary threshold for investors from certain jurisdictions), or where the target owns or controls, directly or indirectly, an interest in sensitive land. The definition of sensitive land is detailed and requires analysis from qualified advisers.

An overseas person establishing a business in New Zealand must obtain consent if, before commencing business, the expected expenditure incurred in establishing the business exceeds NZD $100 million (US$57.8 million), or the relevant alternative monetary threshold.

Direct acquisition of interests in sensitive land also requires consent, including the acquisition of a leasehold interest of three years or more for residential land and 10 years or more for other sensitive land, together with the acquisition of forestry rights and fishing quotas.

Consent requirements can be triggered for transactions occurring upstream of the New Zealand assets, as well as for direct acquisitions in New Zealand.

Investments in strategically important businesses, where a consent requirement is not already triggered, can, and in some cases must, be notified to the OIO for ministerial clearance. Mandatory notification is required for investments in critical direct suppliers to New Zealand's intelligence or security agencies and businesses involved in military or dual-use technology but is otherwise optional. Non-notified transactions may be reviewed by the minister before or after completion of the investment.

Scope of the review

For the three new consent pathways, overseas investors must satisfy the new national interest test. The OIO will undertake the three-stage process described above to determine whether a transaction poses a risk to New Zealand's national interest.

However, for transactions which involve farmland, residential land or fishing quota, overseas investors and controlling individuals are required to meet a bright-line investor test comprising a closed list of character and capability factors.

Parties must wait until the assessment is complete and consent is granted before completing the transaction.

Examples of investor test factors include whether the overseas investor has convictions resulting in imprisonment; corporate fines; prohibitions on being a director, promoter or manager of a company; penalties for tax avoidance or evasion; and unpaid tax of NZD 5 million or more in New Zealand or an equivalent amount in another jurisdiction.

Where the overseas investment involves certain categories of sensitive land, the overseas investor must also satisfy the benefit to New Zealand test. The requirements under the test differ depending on the nature of the land. For example, stricter provisions apply where the land is farmland.

The OIO assesses the benefits delivered by the transaction and considers factors including economic benefits, environmental outcomes, public access, protection of historic heritage and advancement of government policy. The OIO must determine whether the benefit is proportionate to the sensitivity of the land and the nature of the transaction.

A specific test must also be satisfied for investments in residential land, including increased housing, non-residential use or incidental residential use.

A mandatory national interest assessment applies to transactions involving strategically important businesses or those undertaken by foreign government investors. Supported by a cross-government committee, the minister has broad discretion to determine whether to block a transaction on the basis that it is contrary to New Zealand's national interests. The minister may address national security or public order risks by imposing conditions, prohibiting incomplete transactions or requiring disposal if completion has already occurred.

Consent to a transaction is granted with standard conditions prescribed by the OIA and, in many cases, special conditions specific to the transaction. Investors are required to report to the OIO on progress in relation to those conditions. If an overseas investor fails to comply with the conditions, the OIO can require the investment to be sold and, in cases of serious or deliberate breaches, criminal or civil penalties may be sought.

Review process timeline

Timeframes under the regulations differ depending on the nature of the application.

The statutory timeframe for a farmland application is 100 working days. By contrast, the initial risk assessment under Stage 1 of the new national interest test is be completed within 15 working days, while stages 2 and 3 have 55 working day timeframes.

These timeframes can be paused or extended by the OIO. They do not create a legal obligation enforceable in a court of law, and there is no recourse for applicants if the specified timeframe is not met.

The 2026 MDL has set out an expectation that the OIO will complete 80 percent of Stage 1 assessments in five working days, and 80 percent of all other consent applications within half the relevant statutory timeframes.

How foreign investors can protect themselves

In most circumstances, it is difficult to obtain consent under the OIA in advance of agreeing to a transaction because the consent regime screens specific transactions rather than simply identifying the investor.

It is possible for an investor to apply on a standalone basis to be screened against the investor test. However, this does not remove the need to seek consent for a specific transaction, although it may make that process easier and faster.

Where consent under the OIA is required, or where the investor is required or chooses to make a notification, the transaction should be conditional on receiving the relevant consent or clearance and must not proceed to completion until that consent or clearance is obtained.

Investors should assess early in a transaction process whether consent or notification under the OIA will be required and which tests will apply. In some circumstances, although not most, discussions with the OIO before filing can be helpful to gauge the OIO's reaction to aspects of the transaction.

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_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

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