The Morrison Government has introduced major changes to the foreign investment review regime which will remain in place for the duration of the COVID-19 pandemic.

Effective from 29 March 2020, the measures impact a range of transactions by imposing:

• A blanket requirement for Foreign Investment Review Board (FIRB) approval on all proposed foreign investment transactions.
• An extension to the FIRB review timeframes from 30 days to six months.

Here, partner Mark Lyons explains the changes, the likely impact, and what's next.

Background

A growing concern for the vulnerability of distressed Australian assets, combined with a falling Australian dollar, prompted the Treasurer to announce immediate changes to the rules governing foreign investment in Australia. In the face of the COVID-19 pandemic and intense pressure on the Australian economy and businesses, the measures are far-reaching and give rise to an unprecedented level of FIRB scrutiny on capital inflows into Australia.

Blanket screening measures

Screening applies to all proposed investments, regardless of the nature of the foreign person, the value of the proposed investment, or the type of asset. This is achieved by reducing the various monetary thresholds which trigger approval to $0. Non-monetary exemptions available under the existing regime appear unaffected by the measures and should continue in place subject to further guidance.

You need to consider whether these new rules apply to any existing transactions that are in process and conditional.

Approvals will take time

Anticipating a sharp increase in applications, FIRB will request an extension to the statutory deadline from 30 days to six months on all applications. This will commence from the date the application fee is paid and shift the onus on to the applicant to establish the approval should be considered on an urgent basis. Priority review will only be granted to applications directly protecting and supporting Australian businesses and jobs.

Extensions of this magnitude are likely to push the unconditional and completion timeframes of transactions beyond the due dates intended by parties and need to be carefully managed.

What's next?

The Treasurer confirmed the measures will be in place for the duration of the COVID-19 crisis and further administrative clarification is coming. We will provide an update once the final details of the new framework are released by FIRB. In the meantime, our lawyers can advise on the appropriate strategy for approaching these transactions and assist with all aspects of this rapidly changing landscape.