On April 22, 2017, the 2017 budget implementation bill (Bill C-44) received royal assent, enacting amendments to Canada’s foreign investment regime, which raises the foreign investment review threshold for direct acquisitions of non-cultural Canadian businesses by a non-state-owned WTO investor to C$1 billion.
Under the Investment Canada Act (ICA), acquisitions of Canadian businesses by non-Canadian investors are subject to a pre-closing “net benefit” review if the value of the acquired Canadian business exceeds certain financial thresholds. Currently, for direct acquisitions of non-cultural Canadian businesses by a non-state-owned WTO investor, the relevant financial threshold that triggers a review is C$800 million in enterprise value. That threshold was not scheduled to change until April 2019, when it would have increased to C$1 billion.
Bill C-44 implements a proposal first introduced in the Canadian government’s 2016 Fall Economic Statement and immediately (as of June 22, 2017) raises this threshold to C$1 billion, which is then indexed annually to GDP growth beginning in January 2021.
In addition, Bill C-30, which implements the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union, contains provisions which further raise the review threshold to $1.5 billion for investments flowing from EU member states, the United States, Mexico, Chile, Peru, Columbia, Panama, Honduras and Korea. Bill C-30 has received royal assent this spring and the provisions raising the ICA review threshold are expected to come into force later this summer, as we previously reported in an earlier post.
Higher review thresholds under the ICA will reduce ICA compliance costs and the business risks associated with high-value foreign investments into Canada and generally make Canada more welcoming to foreign investments.