FIRB exemption certificates: removing barriers to tenement acquisitions
Investment in the Resources sector continues to be an area of high activity. In this article, we consider the need for “foreign person” acquirers (which includes some Australian-incorporated entities) to obtain approval of the Foreign Investment Review Board for acquisitions in the Resources sector and how an exemption certificate may assist acquisition programs.
Under the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA), a “foreign person” (Foreign Person) includes any corporation in which:
For a publicly listed entity, holdings of less than 5% are disregarded from the above assessment, but it is nevertheless a broad definition which means that many ASX-listed companies and other Australian incorporated entities are considered to be Foreign Persons for the purposes of the FATA.
Broadly speaking, a Foreign Person cannot acquire certain interests in Australian assets without first lodging appropriate notification with the Foreign Investment Review Board (FIRB) under the FATA. The Treasurer, on the advice of FIRB, has the power to prevent an acquisition where they determine that it is contrary to the national interest.
Under the FATA, Foreign Persons may require approval to acquire an interest in a tenement or the underlying land used to carry on a mining operation. Acquisitions of interests in an exploration tenement by Foreign Persons are generally not notifiable actions, although this can vary between Australian States and Territories depending on rights attaching to the exploration tenement. Acquisitions of interests in mining or production tenements, including acquisition of shares in an entity that holds such tenements, are notifiable actions. A $0 threshold will apply to most mining or production tenement acquisitions unless:
The $0 notification threshold means that every such acquisition requires FIRB approval. For an ongoing series of acquisitions, this can present a significant time and cost burden and impede a smooth transaction. To help lessen the regulatory burden, FIRB permits a Foreign Person to apply for an exemption certificate to cover a proposed program of acquisitions . An exemption certificate will cover a program of acquisitions within a specified period and specified area, up to a specified aggregate consideration.
Exemption certificates are intended for high volume land acquisitions by a Foreign Person and will not usually be granted for small acquisition programs where it would be reasonable for the Foreign Person to notify FIRB of the acquisitions separately. An exemption certificate can be a useful tool, in particular for those ASX-listed entities which are captured under the technical definition of “foreign person” as noted above.
FIRB’s guidelines for the provision of exemption certificates note that applications for exemption certificates are considered on a case-by-case basis and will take into account factors, including:
The assessment will ultimately consider whether the acquisition is contrary to the national interest.
Exemption certificates will also be subject to certain conditions. In the case of a program of acquisitions for mining and production tenements, exemption certificates would generally be granted subject to conditions that specify:
For companies considering a program to expand their asset portfolio, an exemption certificate may provide relief from FIRB requirements which would otherwise compel acquirers to give individual notice (and seek separate approval) of each and every proposed acquisition.
If you would like more information, please contact HopgoodGanim Lawyers’ Corporate Advisory and Governance team.