Significant investor visa – new requirements

The much anticipated revised framework for the Significant Investor stream (SIV) of the Business Innovation and Investment visa program came into effect on 1 July 2015. The Migration Amendment (Investor Visas) Regulation 2015 (Regulation) and the Migration (IMMI 15/100: Complying Investments) Instrument 2015 (Instrument) are now both in effect. Background In February 2015, the draft framework for the revised SIV program was released for discussion by the Australian Trade Commission (AusTrade).  In April 2015, the SIV program was suspended for all new applicants while the framework was being revised by the Department of Immigration and Border Proection and Austrade. The revised SIV program has now been finalised and applications for SIVs under the new framework opened on 1 July 2015.  The key changes to the SIV program primarily relate to the classes of complying investments, being investments which can be made under the SIV, with some minor changes being made to other aspects of the SIV program. The new requirements for the SIV program are likely to be less popular with prospective investors as the option for establishing and investing in proprietary limited companies which operate qualifying businesses has been removed. Importantly, the changes prevent an investor from establishing a ‘property development’ business as a proprietary limited company, which had been utilised under the previous regime as a means of purchasing residential real estate in Australia. New framework Investors will now be required to make a ‘complying significant investment’ of at least AUD$5 million, comprising:

• a total of at least AUD$500,000 invested, or to be invested, in one or more venture capital funds
• a total of at least AUD$1.5 million in emerging companies investments, and
• any remaining portion of the investment (up to AUD$3 million) may be invested in one or more balancing investments.

Venture capital investments Investors will have 12 months from the date they are granted a visa to:

• enter into an agreement with the general partner of each, of one or more venture capital funds committing the investor to make an investment in one or more venture capital funds of at least AUD$500,000 in total, and
• the amount of each investment in a venture capital fund must be held:
  • in escrow in favour of the general partner of the fund, or
  • as security for a guarantee issued by an Australian ADI in favour of the general partner of the fund.

During the term of the visa a substantial part of the AUD$500,000 held for investment by the venture capital fund or funds (not including any fees related to the investment) must be invested. If an investment in a venture capital fund is realised before the visa ceases to have effect, the amount realised from the investment must be reinvested in one or more of the following:

• one or more venture capital funds
• emerging companies investments, or
• balancing investments.

A venture capital fund is a venture capital limited partnership, early stage venture capital limited partnership or Australian venture capital fund or funds, which is conditionally or unconditionally registered under the Venture Capital Act 2002. Emerging companies investments For the emerging companies’ investment, the AUD$1.5 million investment must be invested through one or more managed investment funds.  Managed investment funds include managed investment schemes (whose interests are not, and not, represented to become, traded on a financial market) and listed investment companies.  The managed investment fund or funds must invest in permitted investments.  Permitted investments are:

• securities quoted on ASX Limited
• securities (Australian non?ASX quoted securities) quoted on an Australian securities exchange other than ASX Limited.  The total value of investments in Australian non?ASX quoted securities must comprise no more than 20% of the value of the managed investment fund’s net assets at any time
• securities (unquoted Australian securities) not quoted on an Australian securities exchange that are issued by a company incorporated in Australia, or a trustee, or responsible entity of a managed investment scheme that invests in Australian real property, or Australian infrastructure assets, where the central management and control of the company is in Australia.  An investment in unquoted Australian securities must result in no more than 20% of the value of the managed investment fund’s net assets being held in such securities immediately after the time of investment
• securities (foreign quoted securities) quoted on a securities exchange operated in a foreign country.  The total value of investments in foreign quoted securities must comprise no more than 10% of the value of the managed investment fund’s net assets at any time
• cash held by Australian ADIs, including certificates of deposit, bank bills and other cash?like instruments to a maximum amount of 20% of the fund’s net assets, and
• derivatives but only if the derivative (other than options over securities) is made for risk management purposes and is not a speculative investment.

For an investment in securities of a company or managed investment scheme at the time of the first investment in those securities, the company or the managed investment scheme must have a market capitalisation of less than AUD$500 million.  Further, at any time, the proportion of a managed investment fund’s net assets held in securities of companies and managed investment schemes whose market capitalisation has grown to AUD$500 million or more must not exceed 30%. The investment must be maintained in securities issued by 20 or more different issuers, from a time that is 3 months after the first investment is made by the managed investment fund. An investment in securities issued by a particular issuer must result in no more than 10% of the value of the managed investment fund’s net assets being held immediately after the time of investment in securities issued by that issuer. Balancing investments The remaining investment must be invested through one or more managed investment funds (including managed investment schemes (whose interests are not, and not represented to become, traded on a financial market) and listed investment companies), and the investments made only in one or more of the following:

• securities of any of the following bodies, if the body is quoted on an Australian securities exchange:
  • a company
  • a real estate investment trust, or
  • an infrastructure trust.
• bonds or notes issued by:
  • a company that is quoted on an Australian securities exchange
  • a wholly?owned subsidiary of a company quoted on an Australian securities exchange, if the subsidiary is incorporated in Australia, or
  • a company incorporated in Australia, or a registered foreign company, if the bonds or notes are rated as investment grade by a credit rating agency that holds an Australian financial services licence (AFSL).
• annuities issued by a company registered under section 21 of the Life Insurance Act 1995, if the annuity does not repay capital during the period the visa is in effect
• Australian real property, however the following restrictions apply in regard to residential real property, including any Australian land zoned for residential use:
  • no direct residential real property investment may be made through the fund, and
  • no other residential real property investment (including, but not limited to, a debt or equity instrument, or a derivative) may be made through the fund unless:
    • the value of all residential real property investments is no more than 10% of the value of the fund’s net assets
    • the investment is not made for the dominant purpose of deriving financial benefits, and
    • the investment is not made for the dominant purpose of assisting any of the following individuals to reside in or gain legal ownership in Australian residential real property (including any Australian land zoned for residential use):
      • the investor
      • the investor’s spouse or de facto partner, or
      • any other member of the family unit of the investor or the investor’s spouse or de facto partner.
• cash held by Australian ADIs, including certificates of deposit, bank bills and other cash?like instruments to a maximum amount of 20% of the fund’s net assets, and
• derivatives but only if the derivative (other than options over securities) is made for risk management purposes and is not a speculative investment.

Other requirements The issuer of the interests in the venture capital fund, managed investment scheme or listed investment company, and any person (investment manager) authorised by an issuer to manage or make the investment on the issuer’s behalf, must either:

• hold, or be covered by, an AFSL, or
• be exempt from the requirement to hold an AFSL.

Further, the central management and control of any issuer and investment manager must be in Australia. An SIV investor, their spouse or de facto partner, or an associate of the SIV investor, their spouse or de facto partner, must not be the issuer, investment manager or involved in the management, or control of, or in partnership with an issuer or investment manager. The following persons must also maintain a minimum of AUD$100 million in funds that are under management in Australia:

• for investments made through managed investment schemes – the trustee or responsible entity of the scheme
• for investments made through a listed investment company – the company or the investment manager of the company, and
• if the investment is made through a fund of funds or an investor directed portfolio service – the issuer of the fund of funds or the person responsible for operating the investor directed portfolio service.

Nominations Nominations can now be made by AusTrade, in addition to nominations made by State or Territory government agencies. Residency requirements The primary visa holder’s residency requirements remain the same - to be eligible for permanent residency, they must have been in Australia for at least 160 days during the four year visa period (calculated by multiplying 40 by the number of complete years the visa has been held). The residency requirements for the primary visa holder’s spouse or de facto partner have changed, and to be eligible for permanent residency, they must have been in Australia for at least 720 days during the four year visa period (calculated by multiplying 180 by the number of complete years the visa has been held). However, only one of the above residency requirements needs to be satisfied. Applicants nominated by a State or Territory government must have a genuine intention to reside in that State or Territory.  Conversely, applicants nominated by AusTrade do not have to reside in a particular State or Territory. Visa length The length of time the visa will be granted for has been increased slightly to four years and three months (previously four years) https://www.lexology.com/library/detail.aspx?g=70194b7b-a6f7-4adf-b059-17d7e1ffe044