CANADA: Changes to Investment Canada Regulations approved

Friday March 27 2015

Industry Canada has published amendments to the Investment Canada Regulations, which will enter into effect on 24th April 2015.

The revised regulations make a number of changes, detailed below.

A new threshold for Investment Canada Act review

Under the Investment Canada Act, all acquisitions of control of Canadian businesses by non-Canadian investors are subject to either a review (on exceeding a prescribed threshold) or notification. Under the revised regulations, acquisitions will be subject to review where the enterprise value (currently, asset value) of the acquired Canadian business exceeds C$600 million, where the acquirer is a WTO investor. This threshold will remain at C$600 million for two years, then increase to C$800 million for a further two years, and then finally to C$1 billion (indexed annually to inflation) thereafter. The calculation of “enterprise value” will depend on the structure of the acquisition (public v private, asset acquisition) and will be subject to some exemptions similar to those currently in place, including that there will continue to be separate rules for acquisitions of Canadian cultural businesses and for state-owned enterprises. Lower thresholds for review on the basis of asset valuation will continue to apply for non-WTO investors.

Amended notification requirements

For investments that are not subject to review (i.e. those that fall below the review thresholds), there is a notification requirement with a notification form (setting out basic information about the investor and the acquired business), that can be submitted any time up to 30 days after the investment is completed.

The new regulations will increase the disclosure requirements of the notification form. In particular, the new notification form will require:

• Further information on shareholders and management board – the legal names of the members of the investor’s board of directors, its five highest-paid officers and any person that owns 10% or more of its equity or voting interests. For each such person, a local mailing address must be provide along with telephone number, fax number, e-mail address, nationality (i.e., WTO or NAFTA), date of birth, and whether they own any interest in the acquired Canadian business.
• Information on whether a foreign state owns a controlling or minority interest in the investor, and whether it has any special veto power or power to appoint directors or officers or direct strategic decision-making.
• A copy of the purchase and sale agreement, together with the sources of funding for the investment.

The Investment Canada Act authorises the government to review investments on national security grounds. The changes extend the timelines from the current 130 days to 200 days.

Click on the above link for the revised regulations.