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On 25 September, Australia’s Foreign Investment Review Board issued two guidance notes, designed to clarify Australia’s foreign investment policy in two key areas - acquisition of agricultural land and exemption certificates.
This new guidance note provides information for foreign investors proposing to invest in agricultural land, including when an acquisition of agricultural land is a notifiable action, approval processes and compliance.
As part of the national interest test, where a foreign person proposes to acquire an interest in agricultural land, FIRB will consider whether there was an opportunity for Australian investors to acquire the land or agricultural land entity, and have regard to the openness and transparency of the sale process.
Generally, approval will not be granted for the acquisition of agricultural land that was not offered for sale through an open and transparent sale process.
Some factors that will be considered in determining whether a sale process was open and transparent include:
To provide certainty for applicants and vendors, a sale process with the following characteristics would be unlikely to pose national interest concerns (i.e. this is what FIRB is looking for):
Other sale processes may be sufficient if the applicant can demonstrate the land has been open to an equivalent level of participation by Australian parties as the sale process outlined above.
The applicant is responsible for demonstrating how they became aware that the land was advertised for sale and whether the acquisition was subject to an open and transparent sale process. Applications should include all relevant details about the sale process, whether or not an applicant considers the case to meet the Australian opportunity requirement or fit within one of the exceptions. The applicant may need to arrange for the vendor to provide details or, alternatively, submit them directly to FIRB on a confidential basis.
Even where a transaction may be exempt from the open and transparent sale process requirement, the circumstances of the sale are relevant. For example, private approaches by a vendor to parties, including Australian parties, are preferable to deals negotiated with one party only. However, FIRB may still take the overall circumstances of the sale into account as part of examining whether a proposal is contrary to the national interest.
Under the foreign investment framework, each proposed acquisition of an interest in land by a foreign person must be separately notified, unless otherwise exempt. However, a longstanding feature of the framework is that foreign persons making multiple acquisitions can apply for an up-front approval for a program of land acquisitions without the need to seek separate approvals.
Section 58 of the Foreign Acquisitions and Takeovers Act 1975 allows a foreign person to apply for a certificate in relation to acquisitions of one or more kinds of interests in Australian land, and the Treasurer to grant such a certificate, if satisfied that the acquisitions of the kinds of interests by the foreign person is not contrary to the national interest.
The new guidance note sets out the factors that will typically be considered for each kind of land when assessing an application for an exemption certificate and the types of conditions that an exemption certificate will generally specify.
The thresholds for agricultural land do not apply to certain acquisitions of agricultural land by owners or operators of wind or solar power stations. A wind or solar power station is defined in Section 5 of the Foreign Acquisitions and Takeovers Regulation 2015 to mean a wind power station or solar electricity generation system that is an accredited power station as defined in the Renewable Energy (Electricity) Act 2000.
The certificate is a mechanism available to minimise the regulatory burden of foreign investment screening that would otherwise apply to each acquisition covered by a certificate. It is intended for foreign persons with a high volume of acquisitions of interests in land (this generally would not include individuals). A certificate will not usually be granted where the number of likely acquisitions is small and it would be reasonable for the foreign person to notify the acquisitions separately.
A certificate will generally specify the maximum value of interests that can be acquired and also the period during which acquisitions can be made. While certificates have previously been for a default 12 months, certificates may now be issued for shorter or longer periods depending on the circumstances.
Applications will be considered on a case-by-case basis to ensure they are not contrary to the national interest. This will take into account factors such as:
If an applicant, or any related person or entity, has held an exemption certificate previously and has not complied with its conditions, or has not met conditions attached to individual acquisitions, this compliance history will be taken into account when assessing the applicant’s suitability to hold an exemption certificate. For exemption certificates relating to interests in agricultural land, compliance with the Agricultural Land Register administered by the Australian Taxation Office (ATO) may be taken into account. Non-compliance with conditions of a certificate may also lead to revocation of a certificate by the Treasurer.
A foreign person who has had an application for a certificate declined, may still apply for individual acquisitions.
An exemption certificate will typically be given subject to conditions. Standard development conditions will apply to all agricultural land exemption certificates that are for residential development. That is, the exemption certificate would be conditional on development commencing within a five year period.
Foreign persons granted an exemption certificate must report periodically (for example, quarterly), on the acquisitions made during the period under their certificate, as required by their specific reporting condition. The frequency of reporting will depend on factors such as the period the certificate is in force and the nature of the acquisitions covered by the certificate. As part of this reporting, a certificate holder will also need to confirm that all foreign persons covered by the certificate are meeting all ongoing conditions attached to the certificate and earlier individual approvals and certificates.
If a foreign person seeks to use an exemption certificate to acquire freehold interests (or leasehold interests with freehold characteristics) in agricultural or vacant commercial land proposed to be used for a primary production business or residential development, that land must have been offered for sale under an open and transparent sale process.
Conditions will be imposed on exemption certificates to ensure this requirement is met. So, unless an applicant is acquiring land that has been subject to an open and transparent sale process, an exemption certificate cannot be used for that particular acquisition. The applicant will be required to report on the sale process for each of its acquisitions under the exemption certificate.
Foreign persons (including foreign government investors) are able to apply for an exemption certificate to cover a program of acquisitions of interests in mining tenements.
Exemption certificates for mining or production tenements would generally be granted subject to conditions that:
Foreign persons are able to apply for an exemption certificate to cover a program of acquisitions of interests in commercial land.
Conditions contained in exemption certificates for interests in commercial land will apply in the same way as if the land was being acquired individually. For example, if vacant commercial land is covered in the exemption certificate, the certificate would be conditional on development commencing within the standard five years.
Exemption certificates for commercial land will generally not cover low threshold commercial land.
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