New 2015 Investment Canada Act WTO Review Threshold
Industry Canada has announced that the 2015 Investment Canada Act (“Act”) threshold that applies to most direct acquisitions of Canadian businesses by non-Canadians will be C$369 million. This is an increase from last year’s $354 million threshold. The threshold applies to the gross book value of the target’s assets. Note that under the Act, a non-Canadian includes a Canadian-incorporated entity that is ultimately controlled outside of Canada.
The existing lower threshold of C$5 million will continue to apply to transactions that relate to cultural businesses or where none of the parties are from a country that is a WTO member.
It is worthwhile to remember that the Canadian government is also permitted to review any investment by non-Canadians on the basis of “national security” concerns. No financial threshold applies and the Canadian government has up to 50 days, following either notification or the filing of an application for review/approval, to issue 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).
We also note that draft regulations may bring in new and higher thresholds later this year that apply to investors (other than state owned enterprises). As well, a higher Competition Act (Canada) transaction threshold will also be announced shortly (which we expect will rise from the current $82 million level by approximately $3 to $5 million). Please keep reading Canadian M&A Perspectives to learn more about these changes as they are announced.