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Canadian Going Private Transactions: Regulatory Approvals – Investment Canada Act

See Chinese version below [中文版参阅下文].

Transactions involving the acquisition of control of a business with Canadian operations can engage several Canadian regulatory regimes. In some cases, approval from the designated government authority is required before the transaction can close.  In the first of two blog posts, we explore the potential application of the Investment Canada Act (the “Act”) to such transactions.  In Part I, we discuss which transactions may require pre-closing approval under the Act.  In Part II, we will focus on the national security provisions of the Act, which have increased in importance as a result of the Covid-19 pandemic.

A transaction may require pre-closing approval under the Act if, among other things, a non-Canadian entity acquires control (which is usually presumed for this purpose at 33⅓% or more) of a Canadian business and the applicable financial threshold is exceeded. Generally speaking, one of two thresholds will apply to most direct acquisitions of control of Canadian businesses by non-Canadian, non-state-owned enterprise (“SOE”) investors from World Trade Organization member states: (a) C$1.613 billion (2020) in enterprise value of the target where the acquirer or the target is a non-SOE “trade agreement investor” (investors controlled in the U.S., EU Member States, Mexico, Japan, Singapore, South Korea, Vietnam, Australia, New Zealand, Chile, Peru, Colombia, Honduras, and Panama) or (b) C$1.075 billion (2020) in enterprise value of the target where the non-SOE acquirer or target are controlled in other WTO member states (such as investors controlled in China). For direct acquisitions involving SOEs, the current review threshold is C$428 million (2020) based on the asset book value of the target. The threshold will be much lower if the acquirer and the target are not controlled in a country that is a member of the WTO or if the target engages in cultural activities; C$50 million in asset book value for indirect acquisitions or C$5 million in asset book value for direct acquisitions. Approval from the applicable federal minister (which may be the Minister of Innovation, Science and Economic Development or the Minister of Canadian Heritage for cultural transactions, or both) must be obtained in advance of closing of the transaction. The applicable Minister(s) must be satisfied that the transaction is of “net benefit” to Canada. The initial review period for applications is 45 days but that period can be (and usually is) extended unilaterally by the Minister for a further 30 days (and even longer if all parties consent). Approval will often be conditional on the acquirer giving written undertakings to the Minister relating to such matters as Canadian employment levels, capital expenditures and research and development to be made or conducted in Canada.

监管机构的批准 -《加拿大投资法》

对涉及收购加拿大企业控制权的交易可能会受到加拿大的若干规范监管。在某些情况下,在交易完成前需要获得指定政府部门的批准。我们在接下来的两篇博客将探讨《加拿大投资法》(以下简称“投资法”)在此类交易中的潜在申请过程。 在第一篇,我们讨论投资法可能要求交易完成前的批准。 在第二篇,我们将会重点讨论投资法的国家安全条款,由于新型冠状病毒疫情COVID-19,国家安全条款的重要性日益提高。

根据投资法,如果一个非加拿大实体获得加拿大企业的掌控权(一般设定为拥有33⅓%以上股权),并且加拿大目标公司的综合资产在帐面上超过特定的门槛,则需要在交易完成之前获得批准。一般而言,大多数非加拿大企业,非国有企业的世贸组织成员国的收购方直接收购加拿大企业控制权的情况下,适用以下两个审核门槛之一:(a)如果收购方或目标公司是非国有企业“贸易协定投资者”(投资者的控制权在美国、欧盟成员国、墨西哥、韩国、智利、秘鲁、哥伦比亚、洪都拉斯和巴拿马), 目标公司的企业价值为16.13亿加元(2020年门槛); 或者 (b)如果收购方或目标公司的控制权在其他世贸组织成员国(如控制权在中国),目标企业价值为10.75亿加元(2020年门槛)。对于涉及国有企业的直接收购,根据,目前的审查限额为目标公司的资产账面价值$4.28亿加元(2020年门槛)。如果收购方或目标方的控制权不在世贸组织成员国内,或者目标企业活动范围涉及文化产业,审核门槛将低得多;间接收购的资产账面价值 $5,000万加元或直接收购的资产账面价值$500万加元。必须在交易完成之前获得适用的联邦部长(加拿大创新、科学与经济发展部部长,或加拿大遗产部长(文化交易项目),或两者兼而有之)的批准。相应工业部长必须确信该交易对加拿大具有“净惠利益”。申请的初始审查期为45天,但该期限可以(通常)由部长单方面延长30天(如果所有各方同意,则会更长)。批准通常取决于收购方向加拿大部长提供关于加拿大就业水平,资本支出和研究与开发等事项的书面承诺。



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