Overseas Investment Office spells out stance on 'overseas persons'

The Overseas Investment Office says its new definition of an “overseas investor” is consistent with other regulators.

But the OIO will provide greater clarity on its rules and it will not penalise custodian companies in the meantime.

Law firm Russell McVeagh says the new interpretation captures large numbers of share investors.

The Overseas Investment Office will now view trusts or custodian company based overseas as an “overseas person” when they are involved in holding shares in a company where more than 25% of the shareholding is owned by overseas entities.

The OIO has made an official response to NBR.

“The Overseas Investment Act says that, if an overseas person or persons have 25% more of any class of a company’s securities, then the company will become an ‘overseas person’ itself.

“This will trigger the need for consent under the act. According to statutory interpretation principles, the OIO has always interpreted ‘have’ as meaning legal and beneficial ownership.

“Overseas-owned custodian companies are usually ‘overseas persons under the act.

“The OIO has previously exempted some companies that provide custodian services in cases where the beneficial ownership and control of the securities held by the custodian company remain with the underlying investors.

“These exemptions remove the custodian company’s need for consent but not that of any underlying overseas investors.

“This is consistent with the approach of other regulators who have granted exemptions to bare trustees who do not have any beneficial ownership or control over the securities they hold.

“The OIO is now looking at how it can provide greater clarity and certainty on this issue for companies, nominee companies and investors.

“Affected custodian companies can apply to the OIO for individual exemptions under regulation 37 of the Overseas Investment Regulations.

“The OIO doesn’t have the power to issue a regulation 37 class exemption.

“In the meantime, the OIO will not be taking any action against custodian companies that haven’t applied for an exemption, or target companies that may have been affected.”

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