FIRB provides further guidance on new regime for refunds and credits of application fees in competitive bid processes

FIRB has released guidance on the regime for refunds and credits of application fees in competitive bid processes. The competitive bid refund and competitive bid credit regime allows unsuccessful bidders to request a refund of up to 75% of its application fee, or a full credit of the application fee to be applied to another FIRB application made in the following 24 months.

Overview 

A bidder who is "genuinely unsuccessful" in a competitive bid process can request either:

1. a competitive bid refund: being a refund of part (up to 75%) of the paid application fee; or 
2. a competitive bid credit: being a full credit of the application fee to be applied to a FIRB application made in the following 24 months.

FIRB has specified that decisions to grant a competitive bid refund or a competitive bid credit will be made at its discretion on a case by case basis.

Eligibility

The following eligibility criteria apply to unsuccessful bidders requesting a competitive bid refund or competitive bid credit:

1. the bidder must have given FIRB notice of its acquisition of an interest through a competitive bid process. This can be done in the FIRB application or at a later stage but prior to the issue of a no objection notification;¹  
2. the bidder must have participated in a "competitive bid process" (i.e. a process involving at least two participants who place bids for a particular asset where the outcome is not known) and not withdrawn its bid prior to knowing it is unsuccessful; and
3. the bidder must have been "genuinely unsuccessful" in the competitive bid process (that is, the bidder must have been acting on arms' length terms with the seller and must have been ultimately informed by that person that its bid is unsuccessful).

This regime does not apply to actions involving residential property or actions which are covered by an exemption certificate.

Competitive bid refund

A competitive bid refund is a refund of up to 75% of the application fee² paid by the bidder for FIRB's approval of its proposed acquisition. 

An unsuccessful bidder must request a competitive bid refund within 6 months following the date on which the bidder is informed its bid has been unsuccessful.

FIRB's guidance states that if a bidder receives a competitive bid refund it should not take the action permitted by the no objection notice the subject of the competitive bid refund. From a policy perspective, this makes sense even though it is not apparent that FIRB intends to revoke the no objection notice. Unsuccessful bidders will need to weigh up the pros and cons of obtaining a competitive bid refund and losing the flexibility to proceed with an acquisition if circumstances change. Actions can be taken within 12 months of the date of a no objection notice. Given that it appears that the no objection notice will remain on issue, if circumstances do change it may be possible to repay the refund (thereby curing the policy concern) rather than apply for a new FIRB approval. 

Competitive bid credit

Alternatively, an unsuccessful bidder may apply for the full amount of the application fee paid by the applicant to be credited to a different application submitted by the bidder in the 24 months following the date on which the bidder is informed its bid has been unsuccessful. Competitive bid credits offer a more flexible mechanism for saving application costs relative to a competitive bid refund in that it may be received to another entity which sits within the bidder group (for e.g. another subsidiary of the same parent company as the parent company of the bidder). Where a subsequent application is made by another entity within the bidder group, the request for the application of the credit must be accompanied by the written consent of an authorised officer of the original applicant.

A competitive bid credit can only be applied once, even where the full amount of the credit is not required for the subsequent application. 

Implications for bidders in competitive bid processes

Whilst this new refund and credit regime appears to balance the desire for early engagement by bidders with FIRB and acknowledges the sunk costs for unsuccessful bidders in competitive bid processes, the practical impact of the new regime remains untested and will largely depend on the level of uptake by unsuccessful bidders. 

We also expect that sellers who are running a competitive bid process will increasingly require that FIRB applications are lodged and application fees are paid by bidders as part of their binding bids (and in advance of signing the definitive transaction documents), depending on the level of competitive tension and the size of the transaction (with its implications for the quantum of the FIRB application fee). 

Further details of the process for seeking a competitive bid refund or competitive bid credit are set out in Guidance Note 10.

Authors: Anita Choi, Partner; Kylie Lane, Partner; Will Mason, Senior Associate and Jin Yoo, Lawyer.