Quiddity M&A: Australia Foreign Investment Reforms

On the 5 June 2020, the Treasury of the Australian Government released a 34-page document titled Foreign investment reforms, outlining the "most comprehensive" reform to Australian foreign investment review framework since the Foreign Acquisition and Takeovers Act (FATA) was introduced in 1975.

The new powers afforded the government - a draft legislation for consultation will be released next month - will primarily address:

• A new national security test that will require foreign investors (government or private), to inform the Foreign Investment Review Board (FIRB) if they are preparing to acquire a direct interest in a “sensitive national security business.”

• Streamlining the approval processes for certain privately controlled institutional investment funds that hold purely passive foreign government funds, alongside private capital in non-sensitive sectors.

• Stronger penalties and enforcement powers to ensure greater compliance.

This new draft legislation makes an important distinction between national security sensitive investments and others, and also makes a clear delineation between foreign government investment (FGI) which is passive and which is active.

It also may alleviate the burden on private equity firms as a result, but this proposed reform is clearly a framework for greater scrutiny on FGI and its strategic implications.

Further comments below the fold ...