Changes to the Long Term Business Visa

On 20 March 2013, changes were made under the Long Term Business Visa (“LTBV”) instructions.

The recent changes have been the most significant in the last decade. We understand that the main driver for change is the high volume of marginal applications coming through. The business migration branch is currently processing about 1000 of these cases. It is understood that 20% of the applications are or such dubious quality that they will be very quickly declined.

There was seen to be a need to protect migrants and maintain the integrity of Immigration New Zealand. By raising the bar, migrants who are in a vulnerable position, will have the best chance in meeting the Residence Visa requirements under the Entrepreneur Category as the LTBV is essentially a work to residence visa policy.

This was the desired position as migrants would essentially be required to invest a substantial amount of their funds and resources when applying under the LTBV. It would be a shame if the migrants were unable to meet the residence visa requirement after so much sacrifice and sweat equity.

We will now look at the relevant changes.

“Specific” The business plan is now required to propose a specific business.

Previously, a proposed business plan could say ­ “I intend to open a pizza takeaway in Auckland” and this would have been sufficient. The current change now requires that the applicant states the exact address of where the business will open.

The intent is that the applicant would be able to utilise the interim visa for 9 months more effectively which would avoid a situation where the applicant has to request an extension when applying for the 27 month balance. Under LTBV an applicant ultimately gets 3 years or 36 months and must run their business successfully for a minimum of 24 months in order to convert to residency under the ENTREPRENEUR CATEGORY.

“Working Capital” This change is more specific to applicants applying under the Entrepreneur Plus Category. The definition has been put in place to clarify what would constitute working capital. This would avoid applicants from declaring investment funds in the business that are not really being utilised for business purposes. For example, the proposed business is to purchase a dairy and the applicant intends to invest NZD $500,000.00. The purchase price of the dairy is $300,000.00.

The applicant also declares that $200,000.00 will remain as working capital and puts this in an interest bearing account. Prior to the change, it was not clear whether the working capital could be considered part of the investment capital. The current definition clearly states that the $200,000 is not considered as working capital as it is not actively invested in the business.

“Existing Business”

Purchasing an existing business now has additional requirements. These are to ensure that the acquisition is genuine. For example, if the applicant is purchasing 25% shares in an existing business, then The Immigration Officer will require a valuation to ensure that the purchase price is at market rate.

“New” and “Existing” Clarity has also been provided with the terms “New” and “Existing”. This is intended to resolve the issue of determining what constitutes "New” or “Existing”. Without this definition, it was unclear as to whether a new technology, product or service has to be “New” or “Existing” in the whole of New Zealand or a particular region. The current definition now provides that it means New or Existing to New Zealand or the region of New Zealand in which the business would be located.

“Employment” Before the amendment of the instructions, it was acceptable to meet the benefit test by way of creating employment through employing at least 1 part­time staff member. However, the instructions now require that it must be “full­time” employment

“Significant Benefit”.

This term has not been defined which raises a number of issues: 1) What is the threshold for significant? It would be counter productive to establish an arbitrary threshold solely at the discretion of a case officer.

2) Will this lead to a number of inconsistencies with decision making and therefore create more uncertainty?

It seems that this term has been put in place to ensure that the case officer's discretion could be used in situations where they are of the view that the application is marginal.

For example, an applicant proposed to purchase 25% shares in a business that is valued at $100,000.00. Prior to the incorporation of the term “Significant Benefit”, this would meet the instruction as substantial is defined as owning 25% shares in a business. However, with this new term, it may now be possible to decline an application on the basis that 25% shares in a business that is valued at $100,000 is not considered to create a significant benefit.

Our view is that this term is a double edge sword. On one side, it gives the case officer a fall back position should they view the application to be marginal even if it otherwise meets the instructions. However, this also creates uncertainty. A case officer may consider an application to fall within the definition of significant benefit this year but the exact same proposal may not satisfy this definition in two years time. Accordingly, it would be ideal to perhaps define this term or limit the case officer’s discretion in this respect.