More guidance on the "Open and Transparent" Sale Test
In the March edition of Fundamental, we highlighted the new Foreign Investment Review Board (FIRB) rules requiring foreign investors to demonstrate their acquisition of agricultural land met the new "open and transparent sale process" test.
In response to feedback from stakeholders, FIRB has recently released revised guidance on the open and transparent sale process test. As partner Mark Lyons explains, the amendments generally allow greater flexibility in dealing with the requirement.
Primary production business or residential development
The requirement now only applies to sales of agricultural land intended to be used for a "primary production business" or "residential development". For example, if a foreign investor intended to acquire a large parcel of agricultural land to construct a wind farm, then the foreign investor would not be subject to the requirement.
The requirement will no longer apply to leasehold interests or licences except where they have "freehold characteristics". This means the requirement is unlikely to apply to a foreign investor seeking to take out a standard lease over agricultural land to operate a primary production business.
Alternative forms of sale
Alternative forms of sale processes (other than a 30 day public marketing campaign) will be considered so long as they provide equal or greater participation by Australian bidders.
The guideline provides examples of processes likely to be considered favourably, including where the property in question had been advertised through multiple channels for a period of at least 30 days prior to the sale. The marketing for the property included online advertising through rural real estate brokers and via advertisements in local and national media.
The requirement will no longer apply to foreign investors acquiring agricultural land allowing significant Australian participation in the primary production business. The Australian participation can obviously be by way of significant part ownership of the land, but potentially includes situations where there is significant ongoing participation by Australian entities in operating the primary production business on the land.
It should be noted the amendments to the guidelines do not impact on whether FIRB approval is required. The amendments are only relevant in determining whether, as part of assessing a FIRB application, the open and transparent sale process requirement needs to be met. If the requirement is not strictly complied with, then it is the FIRB applicant's responsibility to establish the requirement does not apply.