On 28 October 2020 (and following consultation on exposure draft legislation (see our Insight here)), the Australian Government introduced the Foreign Investment Reform (Protecting Australia's National Security) Bill 2020 (Cth) and Foreign Acquisitions and Takeovers Fees Imposition Amendment Bill 2020 (Cth) into the House of Representatives. The Bills have now been referred to the Senate Economics Legislation Committee for further inquiry and report by 26 November 2020.
If passed, the Bills (together with associated regulations) will effect the major reforms to the foreign investment review regime announced on 5 June 2020 and will include, among other things:
- retaining the $0 monetary thresholds for all foreign persons for investments of 10% or more (and in some cases less than 10%) in national security businesses. The definition of national security business is still under consideration. In particular, one limb of that definition cross refers to the concept of critical infrastructure under the Security of Critical Infrastructure Act 2018 (Cth), which itself is undergoing consultation and is currently proposed to be significantly expanded to cover 11 sectors deemed ‘critical’ (see Reform of Australia’s critical infrastructure reforms Inisght below for further details of the proposed expansion). The combined effect of these pieces of legislation, if passed in their current form, would be that the current $0 thresholds would be retained for many types of acquisitions;
- a new national security review, including a ‘call in’ power to compel an investor to submit an application and a ‘last resort’ ability for the Treasurer to issue a divestment order where there is no other remedy for a national security risk;
- a new register of foreign owned assets to record all foreign interests acquired in Australian land, water entitlements and contractual water rights, and business acquisitions that require foreign investment approval;
- strengthening the Treasurer and the Commissioner of Taxation's enforcement powers and information sharing arrangements; and
- an exemption from the definition of ‘foreign government investor’ for certain investors that have foreign-government ownership but are privately controlled provided the investors meet a strict passivity test (based on initial draft guidance, many private equity funds may not qualify given investors’ information rights and their ability to vote on things like key person changes).