Australia’s new laws require Foreign Investment Review Board approval for all foreign acquisitions of Australian businesses
In response to the COVID-19 pandemic, the Australian Government has implemented a temporary change to its foreign investment review framework.
From 10:30 pm on Sunday 29 March, all proposed foreign investments into Australia that are subject to the Foreign Acquisitions and Takeovers Act 1975 (the Act) will require approval from the Foreign Investment Review Board (FIRB).
Previous foreign investment laws
Previously, reviews were required at different threshold amounts, depending on the asset class. For example, there was a $1.192 million threshold for an investment that was:
- Non-government; and
- In a non-sensitive business; and
- From a country with a free trade agreement
For sensitive businesses, the threshold was $275 million.
New foreign investment laws
Now, regardless of the value or nature of the foreign investment, it will be subject to a review, as the threshold for all foreign investments covered by the Act has been lowered to $0.
Additionally, the Foreign Investment Review Board will extend the time in which it reviews new and existing applications from 30 days to 6 months. However, urgent applications that support Australian business and jobs will be given priority.
Why the change to foreign investment laws?
The Federal Government says these changes are not an investment freeze but a move to safeguard the national interest at a time when COVID-19 has caused significant uncertainty in the economy.
The consequences of this decision will be widespread, particularly by overseas acquirers and domestic sellers of Australian businesses who may have agreed on contracts (but completion yet to occur). In these circumstances, completion will either:
- Be delayed; or
- Fail for lack of FIRB approval
Or both of the above.
If you’re concerned about how the changes to foreign investment laws will affect your business, contact us for urgent advice.
DISCLAIMER: We accept no responsibility for any action taken after reading this article. It is intended as a guide only and is not a substitute for the expert legal advice you can get from marshalls+dent+wilmoth and other relevant experts.