Foreign Investment Review Board (FIRB) approval for in business and private investments in Australia

The Foreign Investment Review Board (FIRB) is an Australian government department that assesses applications from foreign persons who would like to invest or buy into a business in Australia.

It is important to consider whether as a foreign person if you need FIRB approval to purchase a business or private investment in Australia.

What is Foreign Person?

The Foreign Acquisitions and Takeovers Act 1975 (FATA) describes a foreign person as:

• any individual who does not ordinarily reside in Australia; or
• a corporation or trustee of a trust in which:
  • an individual not ordinarily resident in Australia, a foreign corporation, or a foreign government, holds a substantial interest (at least 20%); or
  • two or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation, or a foreign government, that hold an aggregate interest of at least 40%; or
  •  a foreign government.

Different rules apply to investments by foreign government investors compared with private investors. These additional requirements apply regardless of the foreign government. 

This article will not be considering foreign government investment but rather private investor.

Do I need FIRB approval?

If you are proposing to:

• Acquire a direct interest in an Australian entity or Australian business
• Acquire an interest in an agribusiness
• Acquire an interest in a media business where I will hold more than 5% interest
• Acquire an interest in Australian land, including an interest in an Australian land corporation
• Acquire an interest in a mining or production tenement

And you reach the relevant monetary thresholds which due to COVID 19 is currently Nil, you will generally require FIRB approval before acquiring interests in securities or assets, or taking other actions in relation to corporations, unit trusts or businesses that have a connection to Australia as outlined.

Foreign persons generally require foreign investment approval before acquiring a substantial interest (generally at least 20 per cent) in an Australian entity that is valued above the relevant monetary threshold. Certain acquisitions of securities or assets may require approval at a lower percentage threshold and monetary threshold (e.g., investments in national security businesses).

Transactions will come under two categories:

• significant actions
• notifiable actions.

Significant action

A significant action is:

• an acquisition of interests in securities, assets or Australian land, or otherwise an action in relation to entities and business (e.g., entering into agreements);
• that meets the relevant monetary thresholds;
• has a connection to Australia; and
• other than in relation to the acquisition of interest in Australian land, results in a change of control involving a foreign person.

If the investment is a significant action, you are not obliged to obtain FIRB approval prior to completing the transaction. However, if the proposed transaction has not been notified, the Treasurer still has powers to make a range of orders if the proposed transaction is contrary to the national interest. If you chose to notify the Treasurer of a significant action, it becomes a notifiable action.

Notifiable action

The following acquisitions that meet the monetary thresholds are notifiable actions:

• acquisition of a direct interest in an Australian entity or business that is an agribusiness;
• acquisition of a substantial interest (at least 20%) in an Australian entity; and
• acquisition of an interest in Australian land.

It is important to note there does not need to be a change of control. A ‘direct interest’ generally means at least a 10% interest or an interest that will result in the foreign investor having the ability to influence, participate or control the Australian entity or business.

If the investment is a notifiable action, you must obtain FIRB approval prior to completing the transaction.

The Treasurer may:

• provide a no objection letter with or without conditions; or
• make an order prohibiting the transaction if the investment is contrary to the national interest.

What are the monetary thresholds?

The Treasurer because of COVID-19 has reduced the thresholds currently to Nil.

However normally they are reviewed each January, except for the general threshold for agricultural land (including those specific to Singapore and Thailand investors) which is not indexed. The thresholds also vary depending on whether Australia has entered into trade agreements with the country that the investor is from, in which case higher thresholds may apply to investors from that country (but not subsidiaries incorporated in Australia).

Australia has thirteen Free Trade Agreements currently in force with:

• New Zealand (1983)
• Singapore (July 2003)
• Thailand (1 January 2005)
• The United States (1 January 2005)
• Chile (6 March 2009)
• ASEAN – Australia’s first multi-country FTA between the 10 ASEAN countries (Brunei, Myanmar, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam) and New Zealand (1 January 2010)
• Malaysia (1 January 2013)
• Republic of Korea (12 December 2014)
• China (20 December 2015)
• Japan (15 January 2015)
• Canada (8 March 2018)
• Mexico (8 March 2018)
• Vietnam (8 March 2018)

Normally the thresholds can be found on the FIRB site here.

FIRB has a comprehensive checklist on their website to assist with applications.

Want to know more on FIRB?

FIRB approvals and exemptions for private business investors can be a complex area of the law. Our team has assisted many overseas business and private investors with their FIRB requirements.

Contact our team to discuss your needs.