The Investment Canada Act (ICA) threshold for review of direct acquisitions of Canadian businesses by World Trade Organization (WTO) investors (or from WTO investors) has increased from CA$600 million to CA$800 million in enterprise value as of April 24, 2017.

While this increase in threshold was already contemplated in the ICA, the Canadian Government has also moved forward in its budget bill (Bill C-44) on the promise it made in its Fall Economic Statement to raise the review threshold for direct acquisitions to CA$1 billion in target enterprise value—two years ahead of schedule—through an amendment to the ICA. This step continues the liberalization of foreign investment review that we have seen with the current Government. For example, see our article discussing the Government’s recent approval of a foreign investment that had been rejected on national security grounds by the previous Government.

The ICA review threshold determines which foreign acquisitions of control of Canadian businesses are subject to (generally) pre-closing approval by the Minister of Innovation, Science and Economic Development or (for cultural businesses) the Minister of Canadian Heritage under the ICA’s "net benefit to Canada" test.

Note that the threshold for review of direct foreign investments is lower (CA$5 million in assets of the target business) where there is an acquisition of a Canadian cultural business, or where neither the purchaser nor the vendor is from a WTO member country (there are very few countries that are not WTO members). In addition, state-owned enterprise (SOE) investors are subject to their own review threshold (CA$379 million in assets of the Canadian business) and transactions of any size may be subject to national security review.

The liberalization trend will be more pronounced for some foreign investors as a result of the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) which will raise the the review threshold to CA$1.5 billion for investors from the European Union—and from other countries, such as the US, Mexico and Korea, through most-favoured-national (MFN) requirements in trade agreements.