Canadian M&A Perspectives Private and Public Mergers & Acquisitions | Private Equity

New Investment Canada Act Review Threshold – C$1 Billion

Posted in Contractual Matters, Private Equity, Private Transactions, Public M&A, Shareholders, Strategy
Oliver J. BorgersMichele F. Siu

On June 22, 2017, the pre-closing review threshold that applies to most direct acquisitions of Canadian businesses by non-Canadian1, non-state owned investors from WTO member states increased to C$1 billion from $C800 million2.  In an effort to encourage foreign investment that is beneficial to Canada, the Canadian Government increased this threshold to C$1 billion two years ahead of schedule3.

The C$379 million (2017) pre-closing review threshold for direct acquisitions of Canadian businesses by non-Canadian, state-owned investors continues to apply4. Also continuing to apply is the C$5 million pre-closing threshold for direct transactions that relate to cultural businesses or where the buyer is from a non-WTO member state and the seller is either from a non-WTO member state or from Canada.

It is worthwhile to remember that the Canadian government can review any investment (including minority investments) by non-Canadians on the basis of “national security” concerns.  No financial threshold applies. The government has 45 days after the certified date of a notification or application for review to provide notice of a potential national security review.  Therefore, if a proposed transaction that is not otherwise subject to approval raises national security concerns, parties should consider filing a notification as early as possible in order to obtain pre-merger clearance (or at least trigger the review period prior to closing) in respect of any acquisition of control of a Canadian business by a non-Canadian (that is not otherwise subject to review and approval).

1 A non-Canadian includes a Canadian-incorporated entity that is ultimately controlled outside of Canada.

2 In April 2017 the threshold increased from C$600 million to C$800 million.

3 See the Government of Canada’s 2017 budget here.

4 This threshold applies to the asset book value of the target.