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New Zealand’s Specialist
Project Lawyers

There is a marked difference

in the way Greenwood Roche operates. From the outset we have focused on clearly defined specialist areas, retaining highly respected legal experts in each field. We then take that further; ensuring clients have direct and regular access to the most senior partners and lawyers, in a cost efficient manner.

Close contact with experts and clear cost advantages

We advise on a range of significant public and private sector projects. To ensure our specialists are always where they’re needed, we operate as one office with hubs in Auckland, Wellington & Christchurch.

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Recent Projects

Projects

Sale of greenfield development land in Auckland

Our client, one of Auckland’s largest landholders, recently sold nine super...

Recent Projects


Sale of greenfield development land in Auckland

Our client, one of Auckland’s largest landholders, recently sold nine super lots of bare land to a respected developer under a long term staged disposal and development agreement. Over time, the land will become a significant new mixed-use centre.


Greenwood Roche assisted with negotiating the terms of the agreement for sale and purchase including masterplan provisions, development covenants, profit-share arrangements and further land options.

Our client retains significant landholdings in the area. It has a strong interest in a successful and quality development that it can use as a spring-board for its own development plans. To achieve this, it was willing to put together an attractive package and share in the risks and reward of the development.

The agreement was concluded in lockdown. Despite the worsening economic news, both parties remained committed to their long-term vision.


Specialist expertise

Key lawyers involved

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Highbury Shopping Mall, Birkenhead

Greenwood Roche acted for the purchaser in the acquisition of Highbury Shopping...

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Highbury Shopping Mall, Birkenhead

Greenwood Roche acted for the purchaser in the acquisition of Highbury Shopping Mall, Auckland. We are also assisting in the ongoing repositioning and redevelopment of the mall.


Our work included negotiating the terms of the agreement for sale and purchase, conducting an extensive due diligence investigation on all legal aspects of the property, instructing technical consultants and advising on various commercial property and business structuring matters.

We continue to assist with the new owner’s expansion and redevelopment plans at the mall, including construction, new leasing and strategic land acquisitions.


Specialist expertise

Key lawyers involved

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Iwi Commercial Property

Greenwood Roche assisted Raukawa Property LP (now Iwi Commercial Property LP) with...

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Iwi Commercial Property

Greenwood Roche assisted Raukawa Property LP (now Iwi Commercial Property LP) with the preparation and negotiation of an agreement for sale and purchase, property due diligence investigations and acquisition of a commercial building in Tauranga


The property acquired by Iwi Commercial Property LP had a number of existing tenants, and the due diligence included reviewing those leases, as well as various construction contracts and associated warranties. We also negotiated a last-minute settlement retention for a number of potential defects discovered shortly before settlement


Specialist expertise

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New Hamilton office for Accident Compensation Corporation

Tainui Group Holdings and the Accident Compensation Corporation have announced the...

New Hamilton office for Accident Compensation Corporation

Recent Projects

New Hamilton office for Accident Compensation Corporation

New Hamilton office for Accident Compensation Corporation

Tainui Group Holdings and the Accident Compensation Corporation have announced the development of a $50m-plus Hamilton office complex.


Greenwood Roche lawyers Bob Roche, Sam Green and Jane McDiarmid are assisting ACC with a significant office consolidation project, which has recently reached a milestone with the conclusion of a development agreement for a new office building in Hamilton.

At each of ACC's main hubs, Dunedin and Hamilton, we are advising ACC on the RFP process for new office accommodation, development agreements for the design and build of new office buildings and the deeds of lease. Each building will have office space of approximately 8,500 square metres and will be significant construction projects for these cities.

The new Hamilton building will be developed by Waikato-Tainui and will be located on the corner of Collingwood Street and Tristram Street. The building is designed as a state of the art, low-rise, three-pavilion building and will be a substantial boost for the Hamilton CBD.


Specialist expertise

Key lawyers involved

Similar projects
Ministry of Business, Innovation and Employment – New National Office Redevelopment

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Ministry of Business, Innovation and Employment – New National Office Redevelopment

Ministry of Business, Innovation and Employment – New National Office Redevelopment

At over 20,000m2 of space, the redevelopment of a landmark Wellington building has provided the New Zealand Government’s largest Ministry with a substantial new National Office.


Greenwood Roche has successfully assisted the Ministry for Business, Innovation and Employment in the redevelopment and lease of MBIE’s new National Office premises in Wellington.
 
Greenwood Roche has continued to provide advice to MBIE throughout the course of the redevelopment, including assisting with the sale of the building to an NZX-listed property investment company during the project.
 
MBIE’s new National Office is one of a number of substantial redevelopment projects within Wellington on which Greenwood Roche has acted.


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New National Head Office for Transpower

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New National Head Office for Transpower

Greenwood Roche represented Transpower New Zealand Limited in relation to the redevelopment and lease of Transpower’s future national head office at Boulcott Street, Wellington.


Transpower plans, builds, maintains and operates New Zealand’s high voltage electricity transmission network. The new premises will house around 500 staff and the 24/7 control room for the National Grid.  At approximately 8,400m2, the Boulcott Street transaction is one of the largest commercial office leasing deals in New Zealand this year.

The Greenwood Roche team included partner John Greenwood and principal Doran Wyatt, both based in the firm’s Wellington office.


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New National Head Office for Ministry of Education

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New National Head Office for Ministry of Education

New National Head Office for Ministry of Education

Greenwood Roche represented the Ministry of Education on the redevelopment and 15 year lease of the Ministry’s new national head office at 33 Bowen Street, Wellington.


At approximately 13,100m2, the Bowen Street transaction was a full building lease and one of the largest commercial office leasing deals in New Zealand for the year. Greenwood Roche assisted the Ministry on all aspects of the negotiation and documents for the transaction, which included substantial refurbishment works, a seismic upgrade for the building and an integrated fitout.

The Greenwood Roche team for the deal were partner Jeannie Warnock and principal Doran Wyatt, both based in Wellington.
 


Specialist expertise

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Similar projects
Ministry of Business, Innovation and Employment – New National Office Redevelopment New National Head Office for Transpower Redevelopment of 56 The Terrace, Wellington

Recent Projects


Redevelopment of 56 The Terrace, Wellington

Kiwi Income Property Trust, one of the country’s largest listed property investors, is undertaking a $67 million redevelopment of its property at 56 The Terrace, Wellington, for lease by the Ministry of Social Development.


We are advising Kiwi Income Property Trust on this project. Our work has included advising on the development agreement and the 18 year deed of lease with the Crown and preparing and advising on the construction contract for the development works.


Specialist expertise

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New Co-located Processing facility in Palmerston North

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New Co-located Processing facility in Palmerston North

New Zealand Post has recently commenced operations at its new Manawatu Co-located Processing Facility.


Comprising over 7,000 square metres including a mail processing warehouse, staging interchange areas, and associated office accommodation (and a combined investment of over $10 million), the facility houses NZ Post’s mail processing functions for the entire lower North Island.

The facility is situated in the heart of Palmerston North’s main industrial area, and is strategically convenient to all major transport systems in the city (including the airport, state highways and rail network).

Greenwood Roche assisted NZ Post on the development, construction and leasing aspects of the facility. The development agreement provided for delivery of tenant works as a variation to the landlord's main contract and early engagement of the Main Contractor on a fixed margin open book basis. Both features enabled the project to be completed seamlessly to a tight schedule while maintaining the appropriate distribution of risk and responsibility between the parties.
 


Specialist expertise

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Watercare’s new head office

Recent Projects

Watercare’s new head office

Watercare’s new head office

Watercare Services Limited is responsible for providing water and wastewater services to the greater Auckland region, and employs a large number of people across many different teams.


We acted for Watercare in relation to its new head office premises located in Newmarket, Auckland. This was a significant project, involving the negotiation of a comprehensive redevelopment agreement and subsequent deed of lease, and further extensive advice in relation to Watercare’s ability to terminate its existing tenancies at that time.


Specialist expertise

Key lawyers involved

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Redevelopment of 56 The Terrace, Wellington Sale, redevelopment and leaseback of New Zealand Post House

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Sale, redevelopment and leaseback of New Zealand Post House

As part of New Zealand Post’s strategy to release capital from its corporate properties, it sold the landmark New Zealand Post House in Wellington to listed commercial property company Argosy Property in 2013.


We acted for New Zealand Post on the sale and leaseback of New Zealand Post House and on the negotiation of a comprehensive development agreement committing the purchaser to undertake a $40 million extensive redevelopment of the building.
 
The sale, for $60 million, was one of the single largest commercial real estate deals completed in Wellington in 2013.


Specialist expertise

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Watercare’s new head office

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Hagley Oval - Section 71 Proposal

On 23rd December 2018 Hon Poto Williams, the Associate Minister for Greater Christchurch...

Hagley Oval - Section 71 Proposal

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Hagley Oval - Section 71 Proposal

Hagley Oval - Section 71 Proposal

On 23rd December 2018 Hon Poto Williams, the Associate Minister for Greater Christchurch Regeneration approved a proposal to amend the Christchurch District Plan provisions for Hagley Oval to enable it to host large international fixtures and meet modern day broadcasting requirements.


Greenwood Roche assisted Regenerate Christchurch in developing the proposal on behalf of the Canterbury Cricket Trust.

The proposal approved by the Minister amends the Christchurch District Plan through section 71 of the Greater Christchurch Regeneration Act 2016 (GCR Act). The approved proposal incorporates the current resource consent conditions into the Plan and amends certain aspects of those conditions, including:

  • Amending the current condition to increase the four, retractable light towers to allow six permanent light towers to meet international broadcast standards.

  • Allow more lenient pack in and out timeframes for temporary facilities associated with hosting cricket matches to improve health and safety and limit damage to the Oval grounds.

  • Increasing the number of fixtures allowed per season, including an allowance for hosting International Cricket Council events on years that they occur.

These changes will mean that Hagley Oval will be able to host day-night matches that are now required by top-tier teams, allowing Hagley Oval to be more competitive when bidding for games compared to its rival cricket grounds.  With the Women’s Cricket World Cup approaching in 2021, the changes will allow Christchurch City to bid for and host games in this tournament.

Through the public participation stage of the process, 1,253 written comments were received, of which 83 percent were in favour of the proposal.

The Minister’s decision can be viewed at the following link: https://dpmc.govt.nz/sites/default/files/2019-12/Hagley Oval - Section 71 Proposal - Signed Decision Paper_1.pdf


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St Johns Retirement Village

Francelle Lupis and Amelia Alden recently assisted Summerset Villages (St Johns)...

Recent Projects

St Johns Retirement Village

St Johns Retirement Village

Francelle Lupis and Amelia Alden recently assisted Summerset Villages (St Johns) Limited in obtaining resource consent for a large retirement village in St Johns, Auckland.


The application was heard in the Environment Court, where Judge Smith, Commissioner Gysberts and Commissioner Prime held the consent as proposed “is appropriate and properly balances the interests of intensification with the need for compatibility with the residential environment and the impact on visual amenity”.
 
The village will range between two and six storeys and contain 328 units made up of independent living units, serviced units and care / dementia rooms.


Key lawyers involved

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City Rail Link

Greenwood Roche is acting for the Link Alliance on New Zealand’s largest ever...

City Rail Link

Recent Projects

City Rail Link

City Rail Link

Greenwood Roche is acting for the Link Alliance on New Zealand’s largest ever transport infrastructure project to deliver the country’s first underground railway, connecting Auckland’s existing train networks and transforming the city’s public transport system.


The City Rail Link is a 3.45km twin tunnel underground rail link that will run up to 42 metres beneath downtown Auckland to connect Britomart Station with a redeveloped Mount Eden Station.  The project also creates two new underground stations – Aotea Station, at Wellesley and Victoria Streets, and Karangahape Station near Mercury Lane and Beresford Square.

The Link Alliance consortium, who will deliver the main stations and tunnels for this project, comprises:

- City Rail Link Limited
- Vinci Construction Grands Projects S.A.S
- Downer NZ Limited
- Soletanche Bachy International NZ Limited
- WSP New Zealand Limited
- AECOM New Zealand Limited
- Tonkin + Taylor Limited

Amy Rutherford is fronting the Greenwood Roche team on this project, which is expected to run through until 2024 and will include the procurement of approximately 600 different packages with both domestic and international subcontractors, suppliers and consultants.  Greenwood Roche is advising the Link Alliance on various aspects of the City Rail Link Project, including providing strategic project delivery advice, preparing the procurement suite of contracts and assisting with downstream negotiations and engagements.

 


Specialist expertise

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Ōtākaro Avon River Corridor Regeneration Plan Approved

On Friday 23 August, the Minister for Greater Christchurch Regeneration announced...

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Ōtākaro Avon River Corridor Regeneration Plan Approved

On Friday 23 August, the Minister for Greater Christchurch Regeneration announced her approval of the Ōtākaro Avon River Corridor Regeneration Plan.  The Plan was developed by Regenerate Christchurch under the Greater Christchurch Regeneration Act 2016.  It outlines the vision and objectives for the future of the 600ha Ōtākaro Avon River Corridor (the former residential red zone), and directs the inclusion of an accompanying planning framework to enable the realisation of that Vision. 


This area is significant in many ways for Christchurch/Otautahi.  It has been and continues to be an area comprising sites and geographical features of cultural importance to Te Rūnanga o Ngāi Tahu and Te Ngāi Tūāhuriri Rūnanga.  The area also comprises various other sites of historical significance to Christchurch/Ōtautahi and is traversed by the Ōtākaro Avon River which is itself a key feature of the city’s identity and urban framework. In developing this Plan Regenerate Christchurch has therefore sought to acknowledge the significance of this area to the wider Christchurch/Ōtautahi community, as well as working with the environmental constraints and opportunities that it provides.  
 
The process has taken time and has not been without its challenges – the size and geographical constraints of the area, the various interests and feedback from stakeholders, community groups and members of the public, and the uncertainties particularly around future implementation have all been matters to carefully consider and address.  The Plan’s vision and objectives and the accompanying framework for the Area are broad.  While they have strong focus areas (including ecology, recreation, economic opportunity and community connection), they also seek to recognise that the regeneration of this Area will take time, and that new ideas, new technology and new activities which are not currently contemplated should be allowed to take place.  The vision and objectives therefore operate as a touchstone against which future decisions can be made – ensuring a clear aspiration for the area while still allowing flexibility to adjust to a changing future. 
 
The approval of the Plan by the Minister (and the Ombudsman’s recent finding as to its legal and evidential rigour) is a significant endorsement of the work done by the Regenerate Christchurch team on this project.   Greenwood Roche lawyers, Lauren Semple and Rachel Murdoch have been privileged to advise Regenerate Christchurch on the development of this Plan, the exercise of its powers under the Act in respect of this and other projects, and its general regeneration mandate.  It is extremely satisfying to see the Plan become operative and attention now turn to its implementation.


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News & Insights

Insights

Overseas Investment (Urgent Measures) Amendment Bill

Amongst a menu of urgent changes designed to combat the effect of Covid-19, on 14 May...

News & Insights

Overseas Investment (Urgent Measures) Amendment Bill

Amongst a menu of urgent changes designed to combat the effect of Covid-19, on 14 May 2020 the Government introduced the Overseas Investment (Urgent Measures) Amendment Bill (Urgent Measures Bill) into Parliament. This Bill proposes further changes to the Overseas Investment Act 2005 (Act) with the introduction of a temporary notification regime, and fast tracks the national interest test.


 The Urgent Measures Bill introduces a number of changes which will reduce the regulatory burden on investors and will also bring in those changes previously detailed in the Overseas Investment Amendment Bill (No 2) that the Government considers are urgently required. These are intended to take effect once the Urgent Measures Bill is in force. The remaining provisions of the Overseas Investment Amendment Bill (No 2) that have not been fast tracked under the Urgent Measures Bill will move into a new bill, the Overseas Investment Amendment Bill (No 3), which will proceed through the usual legislative process, and is expected to pass through Parliament in the next 12 months.
 
The Covid-19 pandemic and the economic downturn have created new foreign investment risk, and the Urgent Measures Bill is intended to stop vulnerable New Zealand assets being subject to foreign takeover during the economic fallout from Covid-19. Speaking of the Urgent Measures Bill, Associate Finance Minister David Parker has said:

“Hypothetically, with international tourism at a standstill the value of a significant tourism company may have plummeted and could be low or near zero. That value would not reflect the importance of the business, so interim controls are needed to protect our national interest.”

The Urgent Measures Bill had its first reading on 14 May, and it is intended to be passed quickly with a shortened Select Committee process. It is anticipated the Urgent Measures Bill will come into force in the middle of June.
 
The key changes under the Urgent Measures Bill are:

  • The introduction of a temporary emergency notification requirement for key control transactions that would not ordinarily have been covered by the Act.

  • The introduction of the national interest test in respect of strategically important businesses.

  • Once the temporary emergency notification requirement is no longer required, the introduction of a right for the Government to exercise a call-in power in respect of both investments in businesses not ordinarily screened by the Act but which may pose significant national security and public order risks, and investments in businesses that hold or generate certain types of sensitive data. This right will also apply to the majority of investments captured by the national interest test.

  • Simplification of the overseas investment regime by reducing the number of applications that require screening, bringing forward certain measures set out in the Overseas Investment Amendment Bill (No 2).

These changes are discussed in detail below.
 
Temporary Notification Requirement
 
The temporary notification regime requires certain transactions to be notified to the Government, even if these transactions would not ordinarily require consent under the Act. Under the regime, overseas investors will be required to notify the Government before they proceed with an investment in a New Zealand business that involves:

  • the acquisition of a more than 25% interest in a business;

  • an increase an existing interest in that business to, or beyond, certain thresholds (being 50%, 75% or 100%), or the acquisition of more than 25% of the business’ assets (by value). This requirement will apply regardless of the dollar value of the investment; or

  • the acquisition of property (including goodwill and other intangible assets) in New Zealand used in carrying on business in New Zealand (whether by one transaction or a series of related or linked transactions) of any value that effectively amounts to a change in control of the business.

Once notified, the Minister will then consider whether the investment is contrary to the national interest. The Minister may impose conditions on, or prohibit, certain transactions. It is anticipated that the majority of transactions will proceed without any Government intervention or any conditions imposed.
 
The Urgent Measures Bill requires the notification to be provided prior to transaction closing, in writing. The exact details of the requirement are yet to be prescribed in regulations, but it is anticipated that the investor will be required to provide certain details on the transaction to the Overseas Investment Office, such as  the identity, ownership and control details of the investor, any links to foreign governments, broad transaction details including the nature of the business or property to be acquired and the commercial rationale for the purchase (including as to pricing and valuation). A notification form will apparently be available on the Overseas Investment Office’s website.
 
The Government intends that investors will be notified within 10 days whether a transaction could be contrary to New Zealand’s national interest and subject to a further detailed review, which is to be processed within 40 days and may be extended by up to 30 days. The exact details and timeframes will be set out in the regulations. There will be no fee for submitting a notification.
 
Failure to comply with the notification requirements also means that the Government could later unwind the transaction if it fails the national interest test.
 
Even if not notified formally, the Minister may exercise his or her own discretion and determine a transaction to be contrary to the national interest, with the same potential unwind consequences.
 
The temporary notification requirement will be reviewed every 90 days and will only remain in place while the Covid-19 pandemic and its associated economic impacts continue to have a “significant effect in New Zealand” – a matter open to interpretation at the margins but which potentially could be for quite a long time.
 
Acceleration of the National Interest Test
 
The national interest test will allow the Minister of Finance to deny consent to any investment ordinarily screened under the Act that is considered to be contrary to New Zealand’s national interest (including security, economic and other interests). This power has been modelled on the Australian regime, but with the addition of an express discretionary Ministerial extension of the concept. This power and discretion cannot be delegated to the OIO.
 
Transactions of national interest are broadly defined as transactions already requiring consent under the Act which result in:

  • an investment by a non-New Zealand government investor;

  • an investment in a strategically important business (for example, military or dual use technology, security and intelligence, electricity and water, telecommunications, financial market infrastructure, significant airports and ports, or any key supplier to these, all as detailed in regulations yet to be drafted); or

  • any other investment that the Minister considers could be contrary to New Zealand’s national interest, provided that the Minister has notified the applicant that the transaction is being considered as such.

 Please refer to our previous article here for further details of the national interest test.
 
“Call-In” Powers
 
Once the temporary emergency notification requirement is removed, the Government will have replacement “call-in” powers to review certain investments in strategically important businesses which would not ordinarily be captured by the Act. This power would allow the Government to call in certain transactions, place conditions on or prohibit certain transactions from proceeding where they are perceived to pose a risk of harm to New Zealand’s national security or public order. The call-in power would apply to those types of business captured under the national interest test (excluding large irrigation schemes), and will extend to investments in businesses that hold or generate certain types of sensitive data (for example health or financial data). 
 
Please refer to our previous article for further details of the “call-in powers” (see above link).
 
Changes to simplify the Overseas Investment Regime
 
Certain changes originally introduced under the Overseas Investment Amendment Bill (No 2) are being fast tracked under the Urgent Measures Bill with the purpose of reducing the regulatory burden of the Act. This is in part due to the Covid-19 pandemic, as well as the expected time period for the passage of the Overseas Investment Amendment Bill (No 3) through Parliament.
 
The Urgent Measures Bill proposes to make it simpler to make productive investments in New Zealand by:

  • introducing a statutory standing consent in respect of certain New Zealand listed issuers and managed investment schemes;

  • reducing the number of fundamentally New Zealand entities that must obtain consent under the Act;

  • narrowing the definition of overseas person for all other non-natural persons such that a more than 25% interest must be held by overseas persons before the entity can be deemed to be an overseas person;

  • introducing streamlined consent criteria for investments in less sensitive New Zealand land that is only screened because it adjoins land that is sensitive in its own right;

  • simplifying the investor test by undertaking more targeted assessments of an investor’s character; and

  • reducing the number of small transactions that do not change control of sensitive assets that must get consent.

 Details of these are covered in our earlier article (see above link).
 
If you would like more information on the Urgent Measures Bill or application of the Overseas Investment Act generally, please contact us. We will provide further details of interest on the Urgent Measures Bill and regulations as they become available. 


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Some Significant Changes to New Zealand’s Overseas Investment Regime

The Overseas Investment Amendment Bill (No. 2) (Bill) was introduced to Parliament on...

Some Significant Changes to New Zealand’s Overseas Investment Regime

News & Insights

Some Significant Changes to New Zealand’s Overseas Investment Regime

Some Significant Changes to New Zealand’s Overseas Investment Regime

The Overseas Investment Amendment Bill (No. 2) (Bill) was introduced to Parliament on 19 March 2020, with the intention to carry out further reforms to the overseas investment regime in New Zealand, and implement changes known as the Phase 2 reforms.


The Phase 1 reforms, which placed restrictions on the sale of residential land to overseas persons and streamlined the consent process for forestry investment, were implemented in the 2018 changes to the Overseas Investment Act 2005 (Act).
 
The Bill proposes to introduce a number of changes to the Act to enable a more streamlined approach to overseas investment.  It does this by ensuring that the risks posed by foreign investments can be managed effectively, while better supporting productive overseas investment through easing of the regulatory burden of the screening process.
 
We summarise below some of the key amendments:
 
1.       National Interest Test

The introduction of a national interest test will allow the Minister responsible for the Act, the Minister of Finance, to deny consent to any investment ordinarily screened under the Act that is considered to be contrary to New Zealand’s national interest (including security, economic and other interests). This is similar to the Australian regime but gives the Minister much broader discretion to consider what is in the national interest in each case. By leaving some significant detail to determination by regulations, there is scope here for this to be influenced by government policy of the day rather than be limited to traditional “national interest” (ie. security or intelligence) concerns.

Transactions of national interest are broadly defined as transactions already requiring consent under the Act which result in:
 

  • an investment by a non-New Zealand government investor;

  • an investment in a strategically important business; or 

  • any other investment that the Minister considers could be contrary to New Zealand’s national interest, provided that the Minister has notified the applicant that the transaction is being considered as such.


Categories of strategically important businesses that the national interest test will apply to are, subject to the detail of regulations yet to be developed:
 

  • businesses that develop, produce or maintain military or dual-use technology;

  • critical direct suppliers to intelligence or security agencies;

  • telecommunications infrastructure or service providers;

  • businesses that generate or distribute electricity;

  • businesses involved in designated ports and airports;

  • systematically important financial institutions or financial market infrastructure;

  • media business that have an impact on New Zealand’s media plurality; and

  • large irrigation schemes.


On 13 May 2020, Associate Finance Minister David Parker announced that the introduction of the national interest test will be accelerated, so as to have it in place quickly to help deal with fall-out from the Covid-19 pandemic.
 
In addition, the national interest test will temporarily apply to any foreign investment, regardless of its nature or value, that results in a 25% ownership of a New Zealand business. It will also apply to increases of an existing interest to or beyond 50%, 75% or 100% in a New Zealand business. The Associate  Minister has said that the aim here is to minimise the possibility that cornerstone businesses in our productive economy are sold in a way contrary to our national interest while the pandemic is causing the value of many businesses to fall.
 
In practice, this is to operate as a simple notification requirement and the process is to be quick to ensure investment is not unduly delayed.
 
These temporary powers will be reviewed every 90 days, and will remain in place only as it is necessary to protect essential New Zealand businesses from the effects of the Covid-19 pandemic. The national interest test will remain (with a minimum threshold of $100 million) once the temporary measures end.
 
The Government aims to have the temporary measures in place by mid-June.
 
2.       Call-in Power
 
The Government has proposed a “call-in” power which allows for review of certain investments which would not ordinarily be captured by the Act. This power would allow the Government to call in certain transactions, place conditions on or prohibit certain transactions from proceeding where they pose a risk of harm to New Zealand’s national security or public order. Notification to Land Information New Zealand of these transactions before they are given effect to may be either mandatory or voluntary, depending on the category of the business involved.
 
The call-in power would apply to those types of business captured under the national interest test (excluding large irrigation schemes), and will extend to investments in business that hold or generate certain types of sensitive data (for example health or financial data).  It is expected that this power would be used only in rare circumstances where necessary to protect New Zealand’s interests.
 
3.       Lower Risk Transactions
 
The Bill proposes that certain lower risk transactions will no longer require consent under the Act. These types of transactions include:
 

  • Investments in land that are only screened because the land adjoins land that is sensitive in its own right (sensitive adjoining land). The adjoining land criteria has been narrowed, with the aim of reducing the number of transactions requiring consent under the Act. This is a significant change, to be welcomed, as a number of land transactions have to date been covered only because of the nature of adjoining land; 

  • Commercial leases or other interests in land of less than 10 years (whether this threshold is reached through a single interest or cumulative interests), being an increase from 3 years in the current legislation – again another significant easing although still not long enough to exclude most major commercial or industrial leasing;

  • Investments involving fundamentally New Zealand entities (refer below); and 

  • Small transactions which do not grant an overseas investor any control of sensitive assets.

 
4.         Narrowing of the meaning of “overseas person”
 
One important proposed change is to the definition of an “overseas person” as applied to a corporate entity. This is expected to reduce the number of corporate entities requiring consent under the Act.
 
Currently, entities that are 25% or more overseas owned will be an “overseas person” under the Act. The changes proposed mean that a corporate entity will be an “overseas person” only if it is more than 25% overseas owned. This makes sense, 25% being one of several common lower control thresholds for a minority investment that do not give any real control usually, save sometimes on very important decisions. More than 25%, in contrast, denotes the power to block a special resolution.
 
Perhaps more significantly, a New Zealand listed company will only be considered an “overseas person” if more than 50% of its shares are owned by an overseas person or two or more overseas persons cumulatively (the ownership test), or where overseas persons who hold 10% or more shares control the composition of 50% or more of the company’s governing body, or exercise control of more than 25% of the voting power at meetings of the company (the control test).
 
5.       Farm Land Advertising
 
Farm land in New Zealand will be subject to more thorough advertising requirements to allow New Zealanders more of a chance to purchase the land on the open market before it is sold to overseas investors. This includes increasing the minimum timeframe in which advertising must take place, ensuring that the advertising takes place prior to the parties entering a sale and purchase agreement and allowing alternative forms of advertising where appropriate.
 
6.         Streamlined Application Process
 
The Bill proposes to simplify the application process itself, by:
 

  • Completing more targeted assessments of an investor’s character and capability in the good character investor test, by only considering serious proven matters, allegations of serious matters where proceedings have begun, and any enforceable undertakings entered into by the investor.  

  • Importantly, the Bill no longer requires investors to carry out a full screening process for subsequent investment applications if they have been screened and approved in a prior investment. The investor simply has to prove that there has been no change to the investor test factors, or that any changes do not make the investor unsuitable to own New Zealand land.

  • Simplifying the ”benefit to New Zealand” test in some very practically significant ways:
     

    • Changing the counterfactual assessment requirement so that a “before and after” the investment assessment is completed, rather than “with and without” (it seems this is effectively a quiet reversal of the hugely problematic Crafar Farms ruling, that resulted in a significant degree of crystal ball gazing about what other potential investors would have done to add benefits); 

    • Introducing a proportionate approach to the test, taking into account the sensitivity of the land and the nature of the overseas investment – a very commonsense amendment;

    • Removing the requirement for ”substantial and identifiable” benefit for non-urban land greater than 5 hectares; 

    • Introducing a test for determining whether there will be a negative impact on water quality or sustainability where the investment involves extraction of water for bottling or bulk consumption; and

    • If the acquisition involves more than 5 hectares of farm land, there is a higher threshold for demonstrating the benefit to New Zealand as a reflection of its significant economic and cultural importance.
       

  • Following criticism of the lack of formal time frames, the Bill introduces statutory time frames for decisions to be made by the regulator. These will be set out in Regulations. Applicants will not be entitled to any relief if the timeframes are not met, and the timeframes do not create any legally enforceable right against the relevant Minister or regulator. 


7.       Increased Cost of Non-Compliance
 
The penalties for non-compliance with the Act have been significantly increased, raising the cap from $300,000 to $500,000 for individuals and from $300,000 to $10 million for all other applicants. The Overseas Investment Office will also be able to enforce undertakings given by overseas investors in Court, and may seek injunctive relief from the High Court in relation to steps to be taken (or not taken) by such investors.
 
The Government had planned to pass the Phase 2 reforms of the Act prior to the general election in September 2020, but the timeline for the Bill and its passage to enactment are now unclear due to the Covid-19 situation.  We will await further announcements on this Bill.
 
These are fairly significant amendments to the regime and it is surprising how quietly they have been slipped into Parliament and how little commentary they have attracted. Overall, though, they are to be welcomed.

Alternative Monetary Threshold for Australian Investors
 
In addition to the proposed changes to the Act, on 15 April 2020 the alternative monetary thresholds in respect of overseas investments in significant business assets by Australian investors were announced for the period 1 January 2020 – 31 December 2020.  These thresholds are:
 

  • $536 million in respect of Australian non-government investors; and

  • $112 million in respect of Australian government investors.


These thresholds are adjusted each year in accordance with the formula set out in the Overseas Investment Regulations 2005, and are relevant in the application of section 13 of the Act.
 
Please contact us if you would like further information on the changes proposed in the Bill, the recent announcement regarding the alternative monetary thresholds in respect of Australian investors, or the temporary Covid-19 measures.


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Housing, Active Transport and Environmental Enhancement to benefit from Fast Track RMA Processes

The Government has announced that a central element of its response to COVID-19 will...

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Housing, Active Transport and Environmental Enhancement to benefit from Fast Track RMA Processes

The Government has announced that a central element of its response to COVID-19 will involve a fast-track pathway through RMA processes for eligible projects.


Although the Bill has not yet been released, the Minister for the Environment has indicated that the fast track process will apply to both resource consents and designations and will allow those projects that meet the criteria to be determined by an Expert Consenting Panel rather than progressing through the usual RMA processes. The Expert Consenting Panel will be chaired by a current or retired Environment Court Judge or senior lawyer and will also contain a person nominated by the relevant councils and a person nominated by the relevant iwi.
 
Decisions made by the Expert Consenting Panel will be issued within 25 working days after receiving comments on an application (with some large scale projects the timeframes will increase to 50 working days). Treaty of Waitangi settlements will be upheld, as will the sustainable management purpose of the RMA and existing RMA national direction. According to Minister Parker, “once a project is referred to the Panel there is a high level of certainty the resource consent will be granted”.  
 
Appeal rights will be limited to points of law and/or judicial review in the High Court, with one further right of appeal to the Court of Appeal.
 
Minister Parker has indicated that the types of projects that could benefit from quicker consenting include “roading, walking and cycling, rail, housing, sediment removal from silted rivers and estuaries, new wetland construction, flood management works, and projects to prevent landfill erosion”. 
 
The changes to RMA process would be temporary, lasting approximately 2 years, and the Government aims to pass legislation as early as June.
 
In terms of cross-party support for the fast-tracked process, we understand that the Green Party holds concerns about how iwi and environmental activists will be able to participate and have therefore indicated they will only support the Bill for its first reading before reassessing having reviewed public submissions. National have indicated they will likely consider the changes “favourably” once details are available, on the basis the proposal is a confirmation that the RMA is not “fit for purpose”. NZ First and ACT also appear supportive.
 
The Environmental Defence Society has likewise signalled hesitant support for the proposal given its focus on environmental enhancement, noting “Overall, it looks like the legislation will avoid sacrificing environmental standards and has focused mostly on speeding up decision-making. Given the exigencies of this C19 world, the outline of the proposed bill looks like an appropriate response”.
 
The fast-tracked RMA process has the potential to see many projects get underway earlier than could have been achieved under “business as usual” RMA processes. We consider that an important consideration of in the drafting of fast-track legislation should be the lessons learnt in the Christchurch and Kaikoura contexts, where fast-track processes have been utilised (and are still able to be utilised) with success. We have considered the Christchurch and Kaikoura experience here.
 
We look forward to updating you with further details when the Bill is introduced.


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Reintroduction of depreciation deductions on commercial and industrial buildings

On 17 March 2020, the Government released an economic response package with the aim of...

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Reintroduction of depreciation deductions on commercial and industrial buildings

On 17 March 2020, the Government released an economic response package with the aim of assisting businesses following the Covid-19 outbreak. It was initially costed at $12.1 billion, which is equivalent to around 4% of New Zealand’s annual GDP. The package has since been expanded to ensure it keeps up with the evolving impact the virus is having on the economy.


Of the numerous support measures, $2.1 billion is being allocated towards reinstating depreciation on commercial and industrial buildings, including hotels and motels, but excluding residential properties.

Before 2010, owners of residential, commercial and industrial property in New Zealand were able to claim a tax deduction for building depreciation. This was an important feature of property investment, as it enabled the investor to claim an annual expense reflecting the assumed deterioration of the building, thereby spreading the cost of buying and improving a building over its useful life.

Tax depreciation for buildings was removed in 2010 in conjunction with a number of other tax changes such as increasing the rate of GST and lowering the corporate tax rate. This was on the basis that (amongst other things) Treasury’s analysis of QV data over the preceding 15 year period indicated that, on average, residential buildings in New Zealand, and arguably also commercial buildings, did not depreciate.

In 2018, the Tax Working Group observed the limitations of Treasury’s 2010 analysis and concluded that:

  • buildings do in fact depreciate and the international evidence is especially strong for industrial and commercial buildings; 

  • New Zealand is a clear outlier in the OECD in not allowing any depreciation deductions for commercial or industrial buildings, resulting in an effective marginal tax rate for ownership of these assets which is higher than in every other OECD country; and 

  • tax depreciation for commercial, industrial and multi-unit residential buildings should be reinstated at a 2% straight-line or 3% diminishing value rate.

The Government has now adopted this recommendation in respect of commercial and industrial buildings and, from 1 April 2020, these buildings are once again able to be depreciated, although at lower rates of 1.5% straight-line or 2% diminishing value. The capital cost of seismic strengthening is now depreciable – a matter which has been the subject of much debate over the last decade. These depreciation measures are being announced as permanent changes.

The depreciation deductions will assist hotel and motel owners impacted by the pandemic and building owners affected by reduced rental income. The intention is to encourage investment in new and existing buildings and improve business confidence. While this might be difficult to achieve in the short term, those with a longer investment horizon should benefit from the return to depreciation allowances which make this asset class a more tax efficient investment than many others.

On 15 April 2020, the Government announced further tax changes which will apply to small to medium enterprises (SMEs) only. These include:

  • a loss carry-back scheme which allows SMEs which experience losses in either the 2020 or 2021 tax year to carry the loss back and offset against profits in the preceding tax year (estimated to cost $3.1 billion over the next two years); and

  • relaxing the tax loss continuity rules so that SMEs which experience a change in ownership of greater than 51% do not have to forgo their tax losses, as previously required, and can use these to offset profits in later years (estimated to save SMEs $60 million per year). 


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COVID19 – Commercial Leasing at Alert Level 3

On Tuesday 28 April 2020, New Zealand moved to COVID-19 Alert Level 3. What does this...

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COVID19 – Commercial Leasing at Alert Level 3

On Tuesday 28 April 2020, New Zealand moved to COVID-19 Alert Level 3. What does this mean for commercial leases?


The Government has issued the Health Act (Covid-19 Alert Level 3) Order 2020 (Government Order), which sets out the requirements for businesses operating under Alert Level 3. The restrictions in the Government Order are non-exhaustive and should be considered in conjunction with other Government directives and guidance for specific industries.

Operating from your premises

Depending on the nature of a business, the Government Order prescribes the circumstances in which the business may open from its premises:

Type of Business

Infection Control Measures Required

  • Government agencies providing essential services (eg. immigration, corrections and emergency services)

  • Essential healthcare services

  • Physical distancing

  • Early childhood centres and schools

  • Physical distancing

  • Keep children, students and teachers in groups that are appropriately sized (to the extent practicable)

  • For schools, only open for students up to year 10

  • Supermarkets and dairies

  • Petrol stations

  • Pharmacies

  • Accommodation services

  • Physical distancing, with an increased distance of 2 metres between employees and customers

  • Prevent food or drink being served from the premises for consumption on the premises (except for accommodation services)

  • Venue businesses

  • Physical distancing, with an increased distance of 2 metres between all people

  • Ensure the venue is only used for controlled gatherings (ie. a wedding, tangihanga or funeral, with no more than 10 people present, and no food or drink served)

  • Public transport (except small passenger service vehicles)

  • Physical distancing, with an increased distance of 2 metres between all people

  • All other business

  • Physical distancing

  • Support contact tracing for any person entering the premises

  • Ensure no clients or customers enter the premises (other than to collect goods but without entering a building)

  • Ensure no close personal contact with customers or clients


Physical distancing measures are set out in the Government Order by reference to the type of business. For most businesses, this means having systems and processes in place which:
 

  • ensure people remain 1 metre away from other people or, if closer, are there for less than 15 minutes, so far as is reasonably practicable taking into account the nature of the business; and

  • mitigate the risks that arise to the extent that the above distance requirements are not fully maintained.

Unless a business implements the required infection control measures, it must remain closed. The Government has also asked that everyone that can work from home should do so, although this is not included in the Government Order.

Abatement of rent

A number of clients are now enquiring as to how the Alert Level 3 restrictions impact on any rent abatement provisions in commercial leases. Where a lease contains the commonly-used ADLS “no access in emergency” provision (or similar), for the clause to apply the emergency must “prevent the tenant from accessing the premises to fully conduct the tenant’s business”.

As at Alert Level 4, each lease must be assessed on a case by case basis.

Under the Government Order, most premises may only open if the necessary infection control measures are implemented. It is worth noting that the position on the Government’s https://covid19.govt.nz/ website is more restrictive than the Government Order – for example, on the website people are encouraged to work from home if they can. From a legal perspective, the Government Order is the source of legal restrictions, not the website, but the wider directives and guidance issued by the Government will still be relevant in assessing the restrictions applicable to each particular premises.

A tenant should provide its landlord with details of the extent to which its ability to operate fully from the premises is prevented due to the Government restrictions as a whole. Under leases containing a rent abatement provision such as clause 27.5 in the ADLS Sixth Edition, a fair proportion of rent and outgoings should then be abated based on this information. Regarding the main categories of commercial tenants:
 

  • Many hospitality and retail tenants are now operating from their premises in a limited capacity, allowing for contactless pick up of online orders, for example. While this may allow part of the premises to be utilised for the tenant’s business – such as a restaurant or café’s kitchen, or a retail tenant’s storage space – this is not a full operation of the tenant’s business or the premises. While the proportion of rent and outgoings that cease to be payable will be less than that at Alert Level 4, some abatement will likely still apply.

  • Office tenants are now able to access their premises, but many cannot operate fully from the premises, for example they cannot admit customers or clients and must maintain physical distancing. Others will be able to fully operate, for example if they seldom admit customers or clients and have workstations already sufficiently separated. Depending on the level to which a tenant is able to operate from the premises, a fair proportion of rent and outgoings may still cease to be payable under a no access provision.

  • Many warehousing and industrial tenants are now operating, although this may be at a limited capacity. Again, each tenancy needs to be assessed on a case by case basis as to the extent that the tenant is able to operate from the premises.

The no access provisions are based on the ability for a tenant to access the premises to operate its business, not whether or not it chooses to implement the necessary infection control measures and begin to operate. Any abatement should therefore be based on the legal restrictions for each premises, together with Government directives and guidance, and not the discretionary actions of the tenant.

Given the rapidly changing situation and uncertainty around future alert levels, it is recommended that landlords and tenants continue to work together to agree on a position for Alert Level 3 that is satisfactory to both parties. This position will need to be reconsidered at Alert Level 2 once specific restrictions for that alert level are announced. It is anticipated that the majority of premises will be able to reopen at Alert Level 2, potentially with fewer associated restrictions, and therefore the no access provisions in leases will likely have a diminished impact and, in some cases, may cease to apply.

If you have any questions about how the Government Order affects your lease, please feel free to contact any of our commercial property lawyers.


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Fast Track Consenting - Reflections on what may be needed and how it has been done previously…

There are four key “levers” which can be used to expedite a consenting process...

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Fast Track Consenting - Reflections on what may be needed and how it has been done previously…

There are four key “levers” which can be used to expedite a consenting process as compared to a standard Resource Management Act 1991 pathway:


  1. Change the regulatory environment.  For example, directly amend, or enable the amendment of, Resouce Management Act 1991 (RMA) documents to provide a more favourable planning environment for the desired development(s).

  2. Change the decision-maker. Recognising the constraints on decision-making in the local government context, extract that authority for specific projects and grant it to an independent body or, more commonly, a Minister.

  3. Change the decision-making framework. The RMA was designed to promote the sustainable management of New Zealand’s natural and physical resources. Decisions made under it (including development of the various planning documents) must accord with that purpose; a purpose which has been the subject of nearly 30 years of examination by the courts, and which inevitably requires the assessment and, where possible, the reconciling, of a wide range of complex and often competing considerations. That assessment carries implications for time, cost and risk. In certain circumstances (significant rebuild as a result of natural disaster or pandemic for example!) that assessment requirement may not remain appropriate. In such instances it may be appropriate to reframe the assessment such that particular outcomes are elevated (e.g. the recovery and regeneration of cities and communities).

  4. Change the way people participate. Reconsider the opportunity for public participation – can it be streamlined and utilised where it is most effective, for example, in the early stages of vision or outcome development. Rather than prescribed legal requirements, consider placing strong obligations on development agencies to encourage participation effectively and creatively. Require that participation to be documented and reported on – how have the views of the public be considered and responded to in the finished product? Remove appeal rights.  Retain ability to challenge statutory decision-making processes through judicial review.

The following table illustrates how each of the above levers has been used in existing or now-repealed special-purpose statutes. It also includes comments on the relative effectiveness of these statutes, drawing on our experience utilising and advising on them.  Please click to view the Table.


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Dealing with COVID-19 Liquidity Issues: Insolvency Relief for Business Owners

In this note, we look at the Government’s proposals to help businesses remain viable...

Dealing with COVID-19 Liquidity Issues: Insolvency Relief for Business Owners

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Dealing with COVID-19 Liquidity Issues: Insolvency Relief for Business Owners

Dealing with COVID-19 Liquidity Issues: Insolvency Relief for Business Owners

In this note, we look at the Government’s proposals to help businesses remain viable, and encourage continued trading between businesses, notwithstanding the prospect of insolvency due to COVID-19.


In an endeavour to cushion the economic impact for New Zealand by supporting businesses and thus protecting jobs and incomes, it is proposed to make some temporary amendments to the Companies Act 1993. These will focus principally on the insolvent trading restrictions and create what the Government has labelled a “business debt hibernation scheme”.

According to the Government’s media release, the package of temporary changes includes:
 
  • giving directors of companies facing significant liquidity problems because of COVID-19 a ‘safe harbour’ from insolvency-related duties under the Companies Act;
  • enabling businesses affected by COVID-19 to place existing debts into hibernation until they are able to start trading normally again;
  • allowing the use of electronic signatures where necessary due to COVID-19 restrictions;
  • giving the Registrar of Companies the power to temporarily extend deadlines imposed on companies, incorporated societies, charitable trusts and other entities under legislation; and
  • giving temporary relief for entities that are unable to comply with requirements in their constitutions or rules because of COVID-19.
We focus here on the first two key measures, the last three being of more mechanical practical significance.

The insolvent trading “safe harbour” for company directors

If Parliament votes to enact the requisite amendments, directors of companies facing COVID-19 liquidity issues will have a safe harbour from legal liability for breach of sections 135 and 136 of the Companies Act 1993, for a finite period. Presumably the definition of such a company will track or be similar to that used for the purposes of the COVID-19 business wage subsidy.

Section 135 is the provision well-known for prohibiting directors from allowing reckless, or insolvent, trading. A director of a company must not:
 
  1. agree to the business of the company being carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors; or
  2. cause or allow the business of the company to be carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors.
Section 136 backs this up by prohibiting a director from incurring an obligation unless he or she believes at that time on reasonable grounds that the company will be able to perform the obligation when it is required to do so.
In other words, the normal rules are that directors must not allow the company to trade in a way that sees creditors facing a high degree of financial risk and must not allow the company to incur obligations it is not reasonably going to be able to meet. Together, these mean keeping a very close eye on revenue and expenditure forecasts and cashflows, obligations and liabilities being incurred and the wider business and economic environment around them.

Directors are personally liable for any breach of these, and other, directors’ duties. That breach is actionable by shareholders, including through representative or derivative actions, and in due course by any liquidator.

The Government’s proposal (to be backdated to the 3 April announcement date) is that directors’ decisions to keep on trading, as well as decisions to take on new obligations, over the next 6 months, will not result in a breach of these duties if:
 
  1. in the good faith opinion of the directors, the company is facing or is likely to face significant liquidity problems in the next 6 months as a result of the impact of COVID-19 on them or their creditors;
  2. the company was able to pay its debts as they fell due on 31 December 2019; and
  3. the directors consider in good faith that it is more likely than not that the company will be able to pay its debts as they fall due within 18 months (for example, because trading conditions are likely to improve or they are likely to able to reach an accommodation with their creditors).
Whilst the first limb above might be easy enough to satisfy (provided there is good communication with creditors), and the second is basically factual, satisfying the third could be a tall order involving a degree of crystal ball gazing. However, all directors have to do is form a good faith view, which means look around, inform themselves in industry terms and across the supply chain and talk to creditors. And it only has to be “more likely than not”.

It seems that the temporary safe harbour proposal will only apply to directors of companies, and not those running businesses through some other form of legal entity or as sole traders which may involve direct personal liability to unsatisfied creditors.

COVID-19 business debt hibernation regime

The Companies Act amendments will also add a special, temporary, COVID-19 “business debt hibernation” regime to the Companies Act 1993.  It will in fact apply more widely than solely to companies, covering also other forms of legal entity such as trusts and partnerships (but excluding sole traders).

The detail is yet to be seen, though it appears to envisage some sort of majority creditor-sanctioned moratorium on debts, binding on all creditors of the business other than employees.   It will encourage early discussion with creditors, allow directors to keep trading and provide new creditors certainty that any payments made to them will not be subject to clawback under the voidable transaction rules – very necessary otherwise the business could be starved of necessary inputs.

The key features of the proposal are that:
 
  • directors will have to meet a threshold before being able to access the business debt hibernation regime and putting a proposal to their creditors - presumably this is referring to a total debts or reduced revenues threshold rather than some turnover threshold, but could also include a requirement that there be a reasonable prospect of the resumption of normal trading;
  • creditors will have a month from the date of notification of the proposal to vote on it, with the proposal going ahead if 50% (by number and value) agree and subject to any conditions of their agreement – it seems this does not rule out an earlier approval, which could well need to be engineered given the immediacy of some of the likely COVID-19 liquidity issues; and
  • there will be a one month moratorium on the enforcement of debts from the date the proposal is notified and a further 6 month moratorium if the proposal is passed.
The core structure of the proposal seems to encourage agreement amongst creditors for the mutual benefit of all. Although conditions can be imposed, by definition they will need to be reasonable in the circumstances and not risk quashing the whole proposal, potentially forcing the business over the edge.

If creditors reject the proposal, the directors would still have the range of existing options available including trading on, entering voluntary administration and appointing a liquidator.

We will need to see what safeguards are included in order to avoid the business debt hibernation regime simply being used as a means of buying time in a way much less dramatic than a voluntary administration – admittedly only a month but in some cases that could just be enough to stave off more permanent insolvency action. The 50% creditor approval threshold, and likely consequences of non-approval, may suffice to deal with the scope for misuse.

The business debt hibernation process is meant to be so simple that legal advice is not required before directors invoke it… quite how likely this is will depend on the complexity of the overall situation, the nature of banks’ and creditors’ contractual rights and the array of alternatives.

In order to encourage businesses to continue to transact with a company that has entered business debt hibernation, it is proposed that any further payments or dispositions of property, made by the company to third party creditors (but not related parties), would be exempt from the voidable transactions regime. That regime puts at risk certain “non-ordinary course” payments received by a creditor of a company that becomes insolvent at any time in the ensuing two years.

But this is no free pass: the transaction with the business in debt hibernation will need to have been entered into in good faith by both parties, on arm’s length terms and without the intent to deprive the existing creditors of the company.

Those trading with the company will therefore not have to worry about a liquidator seeking to unwind transactions if the company is later placed into liquidation.

As a separate matter, the voidable transactions regime will be amended as well regardless of a business being in debt hibernation, by reducing the two year clawback window for voidable transactions to a mere 6 months, which is a much more workable period.

The proposed six month time period for these temporary amendments may well be too short but it can be expected there will be provision for that timeframe to be extended by the Minister or by Order in Council.

Other core director duties remain

Whatever a company does with the benefit of these two sets of protection, the directors still have the core duty at the end of the day to act in the best interests of the company, which means the best interests of all shareholders and indirectly other stakeholders. As always, or perhaps more than ever, this remains a difficult juggling act.

For more advice, please contact any Greenwood Roche partner or your usual Greenwood Roche lawyer.


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COVID-19: Impact on Construction Contracts

Since 26 March 2020, New Zealand has been on COVID-19 Alert Level 4. This means all non-essential...

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COVID-19: Impact on Construction Contracts

Since 26 March 2020, New Zealand has been on COVID-19 Alert Level 4. This means all non-essential work must cease for at least 4 weeks. Any construction works that can be carried out at home can continue e.g. non-site works including design, programming, QA, costing, estimating and administration.


"Essential Work" is defined here. In summary, any work required to protect people, property or the environment from imminent risks or to support essential services is deemed “Essential”.  

The escalation to Alert Level 4 on 26 March, and the associated shutdown, required immediate action to secure construction sites across New Zealand and ensure people returned home safety.  Every party in the construction industry is now considering their rights and obligations under their contracts as well as how best to mitigate the cost and time risk.   

In the attached Contractual Summary table, we have identified the likely clauses in the NZS 391X, CCCS and Master Builder forms of contract relevant to the current situation. We can also advise on the effect of the current situation on construction work contracted under any other form of contract.

Some practical tips:

Notification

Notification is usually a pre-requisite for any claim for time and money. Even if there are no time bars, prompt notification of delay and cost escalation will generally be required. The Alert Level 4 shutdown may have time and cost consequences which are largely unknown—and it is fine to state that. 

Evidence of cost and delays 

For claimants, it will be important to keep good records of costs to make it easier to compile a claim later. Most delay claims are assessed against a programme’s critical path: it could be useful to think ahead about how to reschedule and resequence works over the next 4 weeks (or more). 

Mitigation

Contracts often require mitigation—with a failure to do so reducing a party’s entitlement to relief (e.g. extra time and/or payment).  What steps could the parties take to mitigate costs or delays?
 
In particular, where variations are accepted, we expect that any stated working day rate will be the subject of much scrutiny in the coming weeks, as principals and engineers look to understand how such rates are made up and then move to manage cost and identify any duplicated items within contractor claims. 

We also expect that principals and engineers will require far greater transparency and close ongoing involvement in the mitigation and management of any variation claims than would usually be expected. The nature of the lockdown (and the lack of progress on-site) allows the parties time to stop and consider such matters, and to collaborate more effectively than would usually be the case.

Health and safety

COVID-19 presents risks to projects: both for the provision of essential services during Alert Level 4 and potentially beyond. Parties should ensure that their work health and safety policies and procedures are up to date and appropriate.

Seek a fair deal

Regardless of what the contract says, parties are free at all times to negotiate a solution that best fits the situation. In the present case, there may be some goodwill given the unprecedented magnitude of COVID-19. 

There is nothing to stop parties talking to each other about a solution that best fits their project and about how both parties can work together to minimise the impacts of COVID-19 to mutual benefit.

Clear the emails, reset relationships and consider the next project

Whilst the lockdown is having severe effects on the Construction industry, it also affords all parties a unique opportunity to reset project relationships and use the time meaningfully to advance or resolve existing issues on a project. The time can also be used to optimise design, programming and pricing; and prepare to recommence and complete the project as efficiently as possible. For example, we expect most contractors will be entitled to an extension of time resulting from COVID-19: parties could be looking to either ask or propose acceleration plans to mitigate delays.   

At the front end, for principals with a secure programme of future work, this is a great time to consider the next project: most contractors are at home and many are considering what comes next.  It is an opportunity to begin engaging on the next project wherever possible to make use of any capacity in the system.

We have put together a “quick reference” guide to the relevant clauses in NZ standard construction contracts (covering the NZS3910 and NZS3916, ACENZ Consultancy Agreement the Master Builder Subcontract Agreement). Please click on the link below to access this summary.


covid-19-impact-on-construction-contracts.pdf


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Lauren Semple – Partner

Lauren Semple leads our resource management team and has 25 years’ experience in the...

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Jeannie practises in all areas of commercial property with a focus on development and lease...

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Doran specialises in commercial property matters, including leasing, COVID-19 lease issues...

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Kelly is an experienced lawyer specialising in commercial property with particular experience...

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Amy Rutherford – Principal

Amy is a specialist construction lawyer who has experience across a range of energy, construction...

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Monique Thomas – Principal

Monique specialises in resource management law, advising on a broad range of issues within...

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Michael joined Greenwood Roche in 2019 after gaining a range of experience in full service...

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