LaurentLore Business and Investor Edition
January 2020
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In This Issue
Follow the Money
Growth Investments and Philanthropy
Employees of Relocating Businesses
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"Don't bother looking anywhere else"

Thoroughly recommended. Extremely professional and experienced firm from initial assessment to final delivery. Simon and his team took on what should have been a straightforward application for residency investment visa. INZ went back 13 years into business history wanting details and explanations. Records were not available as they are disposed off after 7 years in our country. Simon was able to work with the scraps of information available from emails to make an excellent summary and understanding of the business history at that time and help educate INZ on a very specialized area of business transactions. We began to feel that we really were not wanted in NZ by INZ at many times and felt like giving up. Simon continued to battle our corner with great determination, accuracy and points of law. At no point were we asked for more funds as we would have expected from any other lawyer in the world. Simon honored his fixed price deal. Don"t bother looking anywhere else."

- North American Investor  

LaurentLaw Barristers & Solicitors
7A Maidstone St, Grey Lynn, Auckland, 1021, New Zealand
Ph.  +64-9-630-0411;  Fax  +64-9-630-0412

This specialty newsletter provides immigration insights for potential business applicants under either the Investor or Entrepreneur programmes. However, as noted in our previous newsletter, we do not encourage applications under the Entrepreneur category owing to the great difficulty of the policy, and the poor outcomes that it has been producing.

We also produce a separate Corporate newsletter focusing on employers, and a General newsletter offering advice to prospective and recent migrants to NZ. If you would like to receive either of the other newsletters, visit here to learn more and to see past publications. 

You can subscribe to our law firm blog to see up-to-date commentary on trends in the immigration field, including the fall-out from the election of a Labour-led government in September 2017.

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Yours sincerely
Simon Laurent
LaurentLaw Barristers & Solicitors
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Your comments would be appreciated - including questions which you would like answered directly or in a future instalment.
Follow the Money - Lawfully Earned Funds

One of the biggest challenges for Investor applicants can be to prove how they made the money that allows them to nominate funds or assets for investment in New Zealand.

Most Investors have been in business for some years.  They may generate their wealth through structures which they keep at a distance from themselves, both for tax and for asset protection purposes.  However, to qualify for NZ Investor Residence they must show that they were personally involved in producing that wealth.  Even more troublesome is the requirement that they must personally own the wealth that they want to send to NZ.  Previous cases have shown that indirect or nere equitable ownership, through a Trust or through a company where they are not shareholders, is unacceptable.

We have tried to argue in the past that the visa policy settings do not reflect the reality of how high net worth people conduct their business interests.  The policy can therefore disqualify the very people that this category is meant to attract.  However, for the present we are stuck with the status quo.  It has forced some clients to reacquire assets into their own name, and to undo complex and valuable structures, which might then expose them to significant tax liability.

Another difficulty, which we have seen in more than one recent case, is that while a business owner can prove that they have owned and managed a profitable enterprise that has generated the funds for NZ investment, they are also asked to prove how they made the money to start that business in the first place.  This tracing exercise can take people back 20 years or more into their past.  In many jurisdictions, financial and other records only need to be kept for a certain time, perhaps 7 or 10 years, so that proving this history can be a real challenge.  Again, arguments that call for the application of common-sense will fall on deaf ears.

For this reason, we will ask potential clients, right at the outset, about how they came to make their money or create their businesses.  Such an enquiry can sometimes seem like going down a never-ending rabbit hole.  It can, however, alert people early on to the pitfalls that they may face, or that they may be able to fix at the start.

If you are considering applying for an Investor 1 or Investor 2 visa, we should have that conversation about where the money came from, how it all started, and what needs to be done to remove hurdles to the approval of an application.
Growth Investments and Philanthropy
The Investor Residence category has been in its current form for 9 years.  We saw a trend that, once they got approval to transfer funds to NZ, most investors would put their money into low-risk products such as Government bonds or fairly conservative managed funds.  This is understandable for 2 reasons:
  • The funds have to stay there for 3 years (Investor 1) or 4 years (Investor 2).  People want to be sure that their money will still be there at the end of that time; and
  • If the value of an investment drops too far below the threshold (for instance, the NZ$10 million required for Investor 1), this could make it difficult to keep the Resident Visa or to have the conditions on that visa removed.  While there could be some leeway provided for a situation beyond the applicant's control, such as an event leading to a catastrophic loss of value, there is no guarantee of this.
The policy now encourages applicants to put some of their money into "growth investments" - basically, anything other than bonds and philanthropic investments (see below).  For example, if you apply under Investor 2 and agree to put NZ$1.5 million toward growth investments:
  • the total sum to be transferred to NZ reduces from $3 million to $2.5 million, although you still have to show that you have the $3 million available; and
  • you only need to spend 438 days in NZ over the whole 4-year investment period, instead of being tied to 146 days per year for the last 3 years of that period.
A "time in NZ" benefit also applies to the Investor 1 category, although there is no discount on the $10 million required under that policy.

Philanthropic investments include putting one's money with a well-established NZ-registered charity, or an approved not-for-profit organisation.  They simply open another option for people to put their funds to use.  It is not clear whether many people have invested in this way since the policy was extended in June 2017.

Our Acceptable Investments Guide lists the other types of assets or products which applicants can invest in.
Employees of Relocating Businesses
The "ERB" category allows key personnel of an overseas company, which is in the process of setting up in NZ, to gain Residence.  The company must get the support of NZ Trade & Enterprise and show that it will benefit New Zealand.

This is a remarkably underused category of Residence.  Visas approved under ERB policy have been in single digits for the last few years.  One reason for this may be that it is only available if the applicant does not qualify for Residence in any other way.  Senior managers, or high-level technical experts, often have qualifications and experience that enable them to get Skilled Migrant Residence.

However, it may be useful to get over the English language barrier.  Skilled Migrant applicants must score IELTS 6.5 or equivalent, while the English level under ERB is only IELTS 4.0.  We have also been successful in getting the English language requirement waived altogether by Ministerial Special Direction, for managers of a high-profile corporate client delivering significant economic value to NZ.

Another hurdle is the need for the business to show that it benefits NZ by setting up here.  This is defined as:
  • introducing or enhancing new technology or skills, or new/improved products or services;
  • creating or expanding exports;
  • creating employment.

Fortunately, an applicant does not need to show that "substantial" benefit will be generated, as with the troubled Entrepreneur visa Instructions.  However, he or she is still at the mercy of the discretion of a visa officer deciding whether a benefit exists.  This means that forecasts for the company's future in NZ need to be thoroughly and carefully documented.

it is also clear from a fairly recent appeal decision that the business must be in the process of establishing itself here, rather than having been up and running successfully for a number of years already.

If this pathway to Residence suits your situation, then contact us to discuss further.

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