Canada is a top destination for foreign companies and investors attracted to our wealth of natural resources, stable and sound political and financial systems, and world-class infrastructure. While Canada is an open economy and welcoming of foreign investment, there are issues that corporations and investors should keep in mind when doing business in Canada. Norton Rose Fulbright’s guide, Doing Business in Canada, provides a general overview of the principal corporate, tax and other legal considerations that would be of interest to foreign businesses wishing to establish or acquire a business in Canada.
Of particular interest in the M&A context, the chapter on competition and Foreign Investment Laws addresses sections of the federal Competition Act relevant to an acquirer of an existing Canadian business. The Competition Act sets out a framework to promote and maintain fair competition and applies to Canadians and non-Canadians alike.The Competition Act prohibits certain anti-competitive business practices and also provides the Commissioner of Competition, who heads the Competition Bureau, with the ability to review merger activity in Canada. Where the Commissioner believes a transaction is likely to prevent or lessen competition substantially, he may challenge the transaction before the Competition Tribunal, an independent quasi-judicial body.
There are two parts of the Competition Act that apply to the acquisition of an existing Canadian business which any investor must consider:
- the pre-merger notification provisions in Part IX of the Competition Act; and
- the substantive merger provisions in Part VIII.
Of note is that the above provisions apply independently. Thus even if a transaction is not subject to mandatory pre-merger notification provisions in Part IX, a transaction may nonetheless be subject to the substantive merger provisions in Part VIII of the Competition Act. The chapter on competition and Foreign Investment Laws speaks to both of these provisions in detail, and also considers related practical considerations, as well as issues in respect of confidentiality and the regulation of anti-competitive practices. The chapter also considers the applicability of the Investment Canada Act in M&A transactions and, more specifically, what constitutes a reviewable or notifiable transaction thereunder.
It is vital to consider competition and foreign investment laws and best practices early on in any deal making process. In addition to offering a convenient primer on the principal competition and foreign investment laws relevant to doing a deal in Canada, Norton Rose Fulbright’s guide, Doing Business in Canada, also sets out the corporate, tax and other legal considerations relevant to ensuring that a Canadian deal is executed in a successful timely and efficient manner.