Go to our Contact page for our office details.
The Department of Home Affairs has issued its draft guidance “Modern Slavery Act 2018: Draft Guidance for Reporting Entities” (Draft Guidance) for the new Modern Slavery Act 2018 (Cth) (the Act).
On 9 May 2017, the Australian Treasurer announced that the Government would be introducing a new exemption certificate for certain ‘low risk’ business acquisitions.
Under the current law in Australia, virtually all acquisitions by ‘foreign government investors’ must be notified to the Foreign Investment Review Board, and may not proceed until the applicant has received a statement of no objection from the Australian Treasurer (FIRB approval). A foreign government investor includes:
The definition of foreign government investor captures not only state-owned enterprises and sovereign wealth funds, but also things like public sector pension funds, the investment funds into which state-owned enterprises, sovereign wealth funds and public sector pension funds invest and, due to tracing rules, portfolio companies for such investment funds.
These rules have had a significant effect on private equity funds, many of which are considered to be foreign government investors as a result of passive investment by public sector pension funds or sovereign wealth funds. A private equity fund that is deemed to be a foreign government investor will generally be required to obtain FIRB approval in respect of its Australian investments (regardless of value), and its Australian portfolio companies will be deemed to be foreign government investors and will also be required to seek FIRB approval for their smaller bolt-on acquisitions.
Aside from the delays associated with seeking FIRB approval, the application fees (usually A$25,300 per transaction, eligible for fee reductions for very small transactions) for all of these applications are a significant burden.
The Government has announced the introduction of a new exemption certificate for low risk acquisitions of securities. This certificate will allow foreign investors, including private equity funds that are deemed to be foreign government investors, acquiring securities to obtain pre-approval for multiple investments in one application, rather than having to apply separately for each investment. This is in line with the proposals we have advocated since the law changed in December 2015 and should provide relief for private equity funds and their portfolio entities that currently have to lodge a multiplicity of FIRB applications (and pay the associated fees) for low dollar value transactions. While it can take some time to negotiate exemption certificates for land acquisitions in our experience, we will continue to work with relevant industry bodies to ensure this new exemption certificate operates in a practical and effective manner. The application fee for the exemption certificate will be A$35,000. Further guidance on the types of transactions that will be eligible for the exemption certificate will be released prior to 1 July 2017.
Most of the other announced changes relate to land acquisitions, some of which come into effect immediately. Of most relevance to private equity:
Other changes relate to residential land, as noted below: