Under the Investment Canada Act (the “ICA”), the direct acquisition of control of a Canadian business by a non-Canadian may be subject to a pre-closing review and approval process (a “Net Benefit Review”) if a specified monetary threshold is exceeded. When officially published in the February Canada Gazette, the following thresholds for Net Benefit Reviews will be effective from January 1, 2022:

Trade Agreement Investors: For a direct acquisition of control of a Canadian (non-cultural) business involving either a purchaser or a controlling vendor that qualifies as a trade agreement investor, the threshold is C$1.711 billion in enterprise value, provided that the purchaser is not a foreign state-owned enterprise. A trade agreement investor includes an entity or an individual whose country of ultimate control is a party to one of the following trade agreements:

  • The Canada-United Kingdom Trade Continuity Agreement
  • Comprehensive and Progressive Agreement for Trans-Pacific Partnership
  • Canada-European Union Comprehensive Economic and Trade Agreement Implementation Act
  • Canada-United States-Mexico Agreement
  • Canada-Chile Free Trade Agreement Implementation Act
  • Canada-Peru Free Trade Agreement Implementation Act
  • Canada-Colombia Free Trade Agreement Implementation Act
  • Canada-Panama Economic Growth and Prosperity Act
  • Canada-Honduras Economic Growth and Prosperity Act
  • Canada-Korea Economic Growth and Prosperity Act.

WTO Investors: For a direct acquisition of control of a Canadian (non-cultural) business involving either a purchaser or a controlling vendor that qualifies as a World Trade Organization (“WTO”) member investor (“WTO Investor”), the threshold is $1.141 billion in enterprise value, provided that the purchaser is not a foreign state-owned enterprise.

State-Owned WTO Investors: For a direct acquisition of control of a Canadian (non-cultural) business involving a purchaser that is a WTO investor that is a state-owned enterprise or a purchaser that is a non-WTO investor that is a state-owned enterprise where the Canadian business that is the subject of the investment is, immediately prior to the implementation of the investment, controlled by a WTO Investor, the threshold is $454 million in asset book value.

Non-WTO Investors and Investments in Cultural Businesses: The thresholds that apply to an investment by a non-Canadian investor who is not a WTO Investor which involves the acquisition of control of a Canadian business which is not controlled by a WTO Investor immediately prior to the implementation of the investment remain at C$5 million in asset book value for a direct investment and C$50 million in asset book value for indirect transactions. The foregoing thresholds also apply to investments made by all non-Canadian investors to acquire control of a Canadian business that is considered to be a cultural business under the Act.

If the applicable threshold for a pre-merger review under the ICA is not met or exceeded, the acquisition of control of any Canadian business by a non-Canadian entity is subject to a relatively straightforward notification process. In most cases, indirect acquisitions of non-cultural businesses involving WTO Investors, including state-owned enterprises, are not reviewable but are subject to a notification process. Notifications may be filed before or within 30 days of closing.

Notwithstanding the above, an investment which is only notifiable, including the establishment of a new Canadian business, and which is considered related to Canada’s cultural heritage or national identity may be subjected to a review if an Order-in-Council directing a review is made and a notice is sent to the non-Canadian investor within 21 days following the receipt of a certified complete notification.

All transactions by non-Canadians involving acquisitions, in whole or in part, of Canadian businesses or the establishment of new businesses in Canada have the potential to be reviewed under the national security review provisions of the ICA.