Understanding the local investment regulations and rules are crucial. Engage a qualified professional to assist.
Mergers & Acquisitions in Australia
Takeovers are subject to the Corporations Act 2001 (Cth) Chapter 6. It limits the circumstances that an acquisition of more than 20% of the voting power can be made in a:
- listed company
- unlisted company with more than 50 members
- listed managed investment scheme
Acquisitions resulting in more than 20% of voting power are permitted in specific circumstances.
Depending on the size of the transaction, the following regulatory bodies may be involved in a takeover process:
- The Australian Securities & Investments Commission (ASIC). ASIC has primary responsibility for the administration of the Corporations Act, market supervision and compliance. ASIC can grant exemptions and modifications in appropriate circumstances and also issues Regulatory Guides.
- The Takeover Panel is a peer review body that regulates corporate control transactions and takeover disputes in widely-held Australian entities.
- The Australian Securities Exchange (ASX)
- The Foreign Investment Review Board (FIRB) /The Treasury
- The Australian Competition & Consumer Commission (ACCC)
- Courts. The Federal and State Courts have primary responsibility under Chapter 6 of the Corporations Act for approving schemes of arrangement.
It is highly recommended that professional advice is sought in relation to takeovers. The information below is general in nature and is not intended to constitute legal advice.
Australia's Foreign Investment Regulation
Any foreign company, entity or individual seeking to invest in Australia should be aware and must comply with Australia's regulation of foreign investment.
In December 2015, the Australian Government introduced a new foreign investment regime with clearer rules and strengthened monitoring, enforcement and penalties. Strict penalties (including civil and criminal penalties and disposal orders) may apply for breaches of Australia’s foreign investment framework. Information provided on this site is intended as general reference. Foreign Investors should determine whether their proposed acquisition or investment requires a formal submission of a proposal and if in doubt, seek professional legal advice.
Foreign Investment Framework Administration
Australia’s foreign investment regime is administered by the Australian Treasury and the Australian Taxation Office. The Australian Treasurer makes decisions on policy and proposals advised by the Foreign Investment Review Board (FIRB). The Treasurer can prohibit foreign investment proposals found to be contrary to the national interest, or can impose conditions on an investment to address national interest concerns. Historically, the rejection of foreign investment proposals rarely occurs. However, a number of forced disposals of established residential property have occurred as a result on non-compliance and criminal prosecution may also apply.
Applications for investment should be submitted to FIRB for review and will make recommendations for decisions by the Treasurer. www.firb.gov.au
Foreign persons are required to notify and receive a no objections notification where their proposed acquisition exceeds the relevant monetary screening threshold, unless they are exempt.
For business investment, investors/foreign persons require prior approval to acquire a substantial interest (20% or more) in an Australian corporation or control of an Australian business valued above specific monetary thresholds. (The Corporations Act takeover provisions also applies for acquisitions of 20% to listed companies, unlisted companies with more than 50 members and listed managed investment schemes).
All foreign government (state-owned) investors also require approval to acquire a direct interest in an Australian entity or an Australian business or to start a new Australian business, regardless of the value of the investment (i.e. $0 threshold).
Specific rules/thresholds apply for proposed acquisitions in sensitive businesses. These include media; telecommunications; transport; defence and military related industries and activities; encryption and securities technologies and communications systems; and the extraction of uranium or plutonium; or the operation of nuclear facilities.
Business Investment applications are submitted to the Foreign Investment Review Board (FIRB).
Specific rules and compliance applies to residential real estate, agribusiness/agricultural land, commercial real estate/land & developments, mining tenements etc.
Investment Application Process
Applications are submitted online through the FIRB online system or the Australian Taxation Office in the case of certain dwellings & residential land. Applications should be lodged in advance of any transaction (or made conditional on foreign investment approval). A transaction should not proceed until the outcome has been advised. Applications should be lodged electronically on the FIRB Applications website
Applications are reviewed on a case-by-case basis to ensure that they are not contrary to the national interest. National interest considerations can include: national security, competition,other Australian Government policies (including tax), impact on the economy and the community, and the investor’s character.
All applications are treated in-confidence. Applicants pay a fee (per application) and supporting documentation is required before the foreign investment application is processed.
Applications are usually considered in 30 days but may be extended by the investor or by the Treasurer (up to 90 days).
Applicants will be informed of the decision within 10 days of it being made. That decision will either raise no objections, allowing the proposal to go ahead; impose conditions, which will need to be met; or block the proposal.
The Australian Government expects all entities operating in Australia (both Australian or foreign owned) to understand and comply with Australia’s laws & regulations and maintain the highest standards of conduct and corporate behavior at all times. FIRB provides information and fact sheets on these obligations. investors and persons operating entities are expected to keep themselves up to date with any changes to their obligations. FIRB Investor Obligations