New Zealand is the latest in a small group of nations to be granted excepted foreign state investor status by the United States, in a move which is likely to benefit New Zealand investors looking to invest in certain businesses in the United States.
The designation relates to the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), a United States law which seeks to strengthen the ability of the Committee on Foreign Investment in the United States (CFIUS) to address national security concerns arising from investments into the United States.
FIRRMA expanded the jurisdiction of CFIUS beyond transactions that could result in foreign control of a United States business to evaluate certain types of non-controlling investments in sensitive “TID U.S. Businesses” and investments involving real estate located in close proximity to sensitive real estate (such as near an airport or military installation).
An investment may be a “non-controlling investment” where it affords the investor:
- access to material non-public technical information;
- membership or observer rights on the board, including the right to nominate an individual to the board; or
- involvement (other than through voting of shares) in substantive decision making of the United States business regarding critical technologies, critical infrastructure, and the safekeeping of personal data of United States citizens.
“TID U.S. Business” is any United States business that:
- produces, designs, tests, manufactures, fabricates or develops one or more critical technologies;
- owns, operates, manufactures, supplies, or services critical infrastructure; or
- maintains or collects sensitive personal data of United States citizens.
FIRRMA also imposes mandatory CFIUS filing requirements for certain types of investments.
In being granted excepted foreign state investor status by the United States, New Zealand joins its ‘five eyes’ partners, Australia, the United Kingdom and Canada in that ‘qualifying investors’ in each country are exempt from the expanded jurisdiction and mandatory filing requirements imposed by FIRRMA.
Our view is that this designation is a positive step in making it easier for New Zealand investors to do business in the United States and will likely benefit those New Zealand businesses that are looking to make those types of investment in the United States.
The Government press release is available here.
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