Strategies for the New Zealand Entrepreneur Residency Category
By Wilson Du, Migration and Investment Specialist, Immigration Chambers Limited.
Recently we have been hearing from clients that they have heard the rumour that it has become impossible to get residence in New Zealand from the Entrepreneur Category. Previously, many people have tried and failed to achieve the ultimate goal of residence under this scheme, and the rumours suggest that the rate of decline is too high.
This article aims to set out the facts, and to ask the question, whether there is still a pathway to residence in New Zealand by operating a business.
Background
The Entrepreneur Work Visa is one of the pathways to Residency in New Zealand under the business category. The objective of this category is to contribute to economic growth by enabling experienced business people to grow or establish high growth and innovative businesses with export potential in New Zealand.
The current policy launched in March 2014, replacing the Long-term Business Visa. The visa pathway allows applicants to operate a business in New Zealand, and if the policy requirements are met, they can then apply for residence based on the business operation. The following charts are statistics from the New Zealand Government showing application numbers and approval rates in the last 7 years covering all the three stages of the Entrepreneur category (updated to March 2020).
Entrepreneur Work Visa (Interim) Decided
Entrepreneur Work Visa (Balance of 3 years) Decided
Entrepreneur Residence Decided
We can see from the charts that the first stage-Entrepreneur Work Visa (Interim) has the lowest approval rate at 36% on average, while the average approval percentages of Entrepreneur Work Visa (Balance of 3 years) and Entrepreneur Residence are 76% and 74% respectively.
This means that INZ has always strictly controlled the first stage in order to enable only eligible business people to establish a business in New Zealand, while deterring people who do not meet the requirements of INZ instructions. More than 70% of applicants who obtained an Entrepreneur Work Visa (Interim) have been granted Entrepreneur Work Visa (Balance of 3 years) and residency.
From 2017 to 2019, the approval rate of the first and third stage has dramatically dropped, and notably the decline rate of the interim visa was 90% in 2017.
Reasons for the high decline rate
There are many reasons why an application could be declined. Based on our research and experience, the main reasons for the high decline rate are as follows:
- Most of the businesses focused on exporting existing products, which was considered as having only a minor benefit to the New Zealand economy.
- A number of applicants were not devoted to their business, some of them even were not familiar with their industry. Poor management is another point challenged by Immigration NZ.
- Inadequate business experience. INZ encourages people who have relevant business or management experience to establish or develop a business which generates sustainable benefit to NZ. Some applicants were declined because their business experience was irrelevant to the proposed business.
- Similar business plans which include inadequate research, and made unfounded or unrealistic assumptions.
- Human resource management. Some applicants hired additional employees to meet the threshold for additional points in their application, whereas the business actually had no demand for the extra labour. Also, a large number of companies have not been able to provide staff work records, PAYE and so on, which arouses concerns about compliance with employment law.
The other reasons for decline included providing false or misleading information to INZ, and failing to transfer their nominated funds to New Zealand.
Future Prospects for the Entrepreneur Category
There have been rumours that INZ has planned to close the entrepreneur category. However, the rumours have turned out to be just that; rumours. In a recent meeting organized by the New Zealand Association for Migration and Investment (NZAMI), a Senior Manager of INZ Josh Kennedy stated that INZ currently has no intention to close or adjust the policy.
Josh explained that all applicants should have a comprehensive understanding of the objectives of this category. INZ welcomes any business people who could contribute to the New Zealand economy, and they have always followed this rule to determine applications. Any entrepreneur work visa should fulfil at least one of the objectives, namely, high growth, innovative business or export potential.
As to the three objectives, we would suggest that potential applicants consider the following:
- High growth: there is currently no standard or definition for what constitutes a high growth business. However, applicants can demonstrate their own understanding and reasons why they feel their business belongs to the high growth category, in a way that may persuade an INZ officer. Generally speaking, applicants should take into account factors including the industry situation, trend, business type along with the New Zealand market to state whether their business has the potential to achieve a substantial increase.
- Innovative business: an innovation is when an organisation introduces new processes, services, or products to affect positive change in their business. Compared with businesses in the same industry, innovative business can include improving existing methods or practices, or starting from scratch and introducing new methods. Ultimately the goal is to reinvigorate a business or sector, creating new value and boosting growth and productivity.
- Export potential: For the purpose of export potential INZ usually only recognize goods or services originally made in New Zealand or those that have been re-processed in some way, instead of simply re-exporting products that do not originate here. Also, INZ is reluctant to accept the exporting of existing branded products, for example by just finding a new offshore market for something that is already being exported.
This means that applicants who have a genuine intention to establish a business, and also have relevant work experience with an attractive business plan, have a high potential to succeed in the entrepreneur category.
Strategies in Entrepreneur Category Applications
Who is an Ideal Applicant?
As legal professionals, we must be cautious and prudent in reviewing and accepting potential clients because of the high threshold and rate of decline for the Entrepreneur Category. When assessing potential applicants’ circumstances, we need to take into account these factors:
- Whether the applicant has solid business or management experience, especially in those industries matching the requirements of New Zealand?
- Whether the applicant has a genuine intention to establish or develop a business in New Zealand?
- Whether the applicant would like to focus on the proposed business in New Zealand, or whether they simply intend to invest and have it managed by someone else?
- Whether the applicant understands and can elaborate on their own short-term and long-term planning in terms of the business and family?
Market research
Market research is a critical component when starting a business. It will provide all the information to make a better business decision. As a foreigner who intends to set up a business in New Zealand it is essential to visit New Zealand and meet professionals several times, discussing proposals, analysing the local market, selecting products or services, preparing a foundation for a business plan, and so on. We always advise clients to do proper market research, even they can authorize local institutes to conduct market research, which will provide more detailed analysis and professional advice.
Business type
In determining the type of business to operate, focus should be on the three key points of INZ requirements. Applicants should enter into a sustainable and long-term business which will generate substantial benefit to New Zealand and have the potential to succeed.
For example, some restaurant businesses were recently approved by INZ due to their location, scale and even operational approaches, whereas many other restaurants had their business plans rejected. A good adviser should also be able to recommend some profitable and realistic projects from existing business partners.
Business plan
A good business plan is a foundation for success. INZ determine an Entrepreneur work visa (interim) mainly relying on the business plan. There are several key points for an acceptable business plan:
- Comprehensive understanding of the proposed business
- Combine applicant’s knowledge, skills and work experience with the business, focusing on why the applicant’s background helps achieve the stated goals.
- Detailed information and professional analysis
- Reasonable, realistic and achievable financial forecasts with concrete evidence
If necessary, a professional adviser should be able to help write a plan or find a professional business consulting company to help write the business plan.
SUMMARY
Whilst it may be the case that many have failed, the fact remains that many have also succeeded. When reviewing the cases that have failed, one notices a common thread, and that is that the applicants did not have sound legal advice and a clear vision of their business from the beginning. Without such guidance, their applications for residence have been doomed to fail from the outset.
On the other hand, those applications that have been successful were well thought out and involved a genuine intention on the part of the applicant to operate a successful business in New Zealand.
With proper guidance, a qualified legal professional, licensed immigration adviser or lawyer, can help you to navigate the difficulties, and give you the best chance for a successful outcome. In other words, the applications that should be approved, will be approved.
Wilson Du, LLB
Migration and Investment Specialist
Immigration Chambers.
Email: wilson@iclegal.co.nz
Web: www.iclegal.co.nz
Phone: +64 9 218 9991