In brief
On 25 September 2018, the Foreign Investment Review Board released revised guidance on the application of the requirement for an open and transparent sale process for foreign persons acquiring agricultural land. Partner Wendy Rae, Senior Associate Julian Barendse and Lawyer Bianca Sacco examine these changes.
Requirement for an open and transparent sale process (old policy)
Since 1 February 2018, as part of the national interest test regarding acquisitions of agricultural land, FIRB has considered whether there was an open and transparent sale process which would allow Australian participation. Under the previous version of the guidance note (see New restrictions on foreign persons acquiring Australian land and agribusinesses), the requirement for an open and transparent sale process applied to all investments in agricultural land by foreign persons, unless it fell into one of eight exceptions or there were otherwise extenuating circumstances.
Approval would generally not be granted for any acquisition of agricultural land unless:
- the property was offered for sale publicly and 'marketed widely' (ie, advertised on widely used listing websites or in regional/national media) for a minimum of 30 days; and
- there was equal opportunity for bids or offers to be made for the property while available for sale.
Key changes under the revised policy
Taking into account stakeholder views on the application of the open and transparent sale process requirement, FIRB updated its policy on agricultural land investments on 25 September 2018 with revised Guidance Note 17.
The key changes include:
- the revised process applies to a narrower range of agricultural land acquisitions – the requirement for an open and transparent sale process will now only apply to acquisitions of freehold interests (and leasehold interests with freehold characteristics) in agricultural land that is intended to be used for a primary production business or residential development;
- greater flexibility on what is required for an open and transparent process – FIRB will take into account the particular circumstances of a sale process (although a process which would have satisfied the test under the old policy will satisfy the requirement under the revised policy);
- limited exceptions – where a transaction would otherwise be within the scope of the revised policy, there are now three exceptions being broadly that:
- the proposal is a foreign to foreign transaction with no change of control (eg, internal reorganisations, acquisitions of increased interests in entities where the applicant already holds a 50% interest and introductions of new minority interests where the target is already foreign controlled);
- the acquisition allows Australian investors to participate in a significant way (eg, where the applicant is majority Australian controlled or where there is significant ongoing participation by Australian entities in the operation of the primary production business (such as a sale and long term lease back to an Australian investor)); or
- there are extenuating circumstances or compassionate grounds which apply (and there is now further detail given regarding this discretion); and
- details of sale process are relevant whether or not proposal is exempt – the circumstances of the sale process will be relevant as part of examining whether a proposal is contrary to national interest, and applicants are required to include details about the sale process in their application, whether or not the proposal is exempt from the open and transparent sale process requirement.
The revised guidance note is particularly helpful for the development of renewables. Our expectation is that acquiring an interest in agricultural land with the intention of constructing a solar or wind farm would not generally be subject to the revised requirement for an open and transparent sale process. This will be particularly helpful where it is necessary for a developer to acquire freehold title to agricultural land as part of a development (this was previously within the scope of the open and transparent sale process requirement and a relevant exception did not apply).
Overall, in our view the revised guidance note is more in line with our understanding of the policy intention, being to ensure Australians are afforded an opportunity to participate in the sale of land which will be used for farming (such as the situation which arose with respect to the sale of S. Kidman & Co which was not approved by the previous Treasurer), as opposed to hindering other purposes such as renewables development.