Changes to Australia’s foreign investment policy framework

2 April 2020

Earlier this week the Federal Government announced a series of important changes to Australia’s foreign investment policy framework as a result of market conditions flowing from the impact of COVID-19.

The primary changes, which are temporary in nature for the duration of the COVID-19 crisis, are:

1. Effective from 10.30pm AEDT on Sunday 29 March 2020, all proposed foreign investments into Australia subject to the Foreign Acquisitions and Takeovers Act 1975 (the Act) will require approval, regardless of value or the nature of the foreign investor, and

2. To ensure sufficient time for screening applications, the Foreign Investment Review Board (FIRB) will work with existing and new applicants to extend timeframes for reviewing applications from 30 days to up to six months.

More information about the Treasurer’s announcement and FIRB’s approach to administration of the expanded regime can be found on the FIRB website.

For some years now many private capital investment firms within our membership have been subject to FIRB approval processes due to application of the ‘foreign government investor’ rules. The changes announced earlier this week have the effect of significantly expanding the range of investment firms and transactions brought within scope of the regime by reducing all monetary thresholds to $0 for relevant ‘foreign persons’ subject to the Act.

Since the announcement the Council has been working extensively on this issue, and have taken feedback from member firms across the industry about the implications of this decision on current and future activities. We know that many investment firms in the industry are dealing with emergency funding situations within portfolio companies impacted by COVID-19, and this immediate change to investment rules will present new challenges in many cases. That’s the reason we have moved quickly and decisively to advocate on behalf of the industry on a range of initiatives. Some of the steps we have already taken in relation to this issue include:

  • Engaging with numerous investment firms and key legal advisors within the industry to define the scope of the issues arising from this policy change.
  • Holding initial discussions with the FIRB Secretariat within the Department of Treasury to better understand further details around the announced changes, and to share our views on key areas of concern.
  • Writing to the Federal Treasurer to provide our support for the extent of the Government’s COVID-19 work in seeking to protect the Australian economy to the greatest extent possible, while pointing to the key concerns we have with the implications of the expanded foreign investment policy framework – especially in the context of providing vitally important and urgent financial support to portfolio companies within our industry.

The Council will continue to engage with FIRB and the Federal Government on this very important issue in days and weeks to come. We will be keeping its members updated with further information that is relevant to our industry once it is available, which we hope will assist with decision making during this period of heightened volatility and uncertainty for all businesses.