Senate

Revised Explanatory Memorandum

Circulated by the authority of the Treasurer, the Hon Wayne Swan MP

General outline and financial impact

Improving the integrity of Australia's foreign investment screening regime

The Foreign Acquisitions and Takeovers Amendment Bill 2009 improves the integrity of Australia's foreign investment screening regime by ensuring that the Government has the capacity to examine substantial investment proposals that could potentially raise national interest concerns.

The use of innovative and increasingly complex financing arrangements has been a growing feature of investment activity over recent years. While these types of investment arrangements may have a solid commercial basis, they can have the effect of delivering influence or control over Australian companies through a variety of new ways that were not envisaged when the Foreign Acquisitions and Takeovers Act 1975 was being drafted more than 30 years ago.

The Bill clarifies the operation of the Act by explicitly requiring foreign investors to notify the Government where there is a possibility that the type of arrangement being used will deliver influence or control over an Australian company, either currently or at some time in the future. The amendments specifically include transactions, agreements or arrangements that include debt instruments having quasi-equity characteristics.

Date of effect: The amendments apply from 12 February 2009.

Proposal announced: These amendments were announced in the Treasurer's press release No. 17 of 12 February 2009.

Financial impact: Nil.

Compliance cost impact: Low. The number of foreign investment proposals that are likely to be affected by these amendments is very small and any additional compliance costs will be largely insignificant.