On March 25, 2015, three substantive amendments (the “Amendments”) to the Investment Canada Act (the “Act”) and its regulations were published in the Canada Gazette:

  1. Subject to certain exceptions, the “net benefit to Canada” review threshold will be increased to $600 million and will be determined based on the “enterprise value” of the Canadian business being acquired.
  2. The statutory review period for a national security review will be lengthened.
  3. Additional information is required when an investor files a notification or an application for review under the Act.

The first and third amendments will come into force on April 24, 2015. The second amendment is now in force.

Change in Review Threshold for WTO Private-Sector Investors

Currently, the monetary threshold requiring the pre-merger approval of direct acquisitions of a Canadian business (other than businesses engaged in cultural activities) by WTO investors under the Act is $369 million and is determined using the book value of the assets of the Canadian business.  As of April 24, 2015 the review threshold will calculated using “enterprise value” and increase to $600 million (increasing to $800 million after two years and eventually to $1 billion after another two years). In general terms, the enterprise value of a Canadian business will be:

  • for a publicly traded Canadian business, calculated as its market capitalization, plus its total liabilities excluding its operating liabilities, minus its cash and cash equivalents;
  • for a private Canadian business, calculated as its total acquisition value, plus its total liabilities, excluding its operating  liabilities, minus its cash and cash equivalents; and
  • for a Canadian business acquired through an asset acquisition, calculated as its total acquisition value (i.e. total consideration payable for the acquisition), plus the liabilities that are assumed by the investor, minus the cash and cash equivalents that are transferred to the investor, all as determined in accordance with the transaction documents that are used to implement the investment.

The increased review threshold and enterprise value calculation method do not apply to SOE investors or to investments in cultural businesses. In such circumstances, the investor is still subject to the lower review threshold based on book value of the assets of the Canadian business.

Lengthening of National Security Review

The national security review process applies to investments that could be injurious to national security. The Amendments principally prescribe lengthier review periods if a national security review (“NSR”) is triggered.  With the Amendments, the NSR review process can take up to 200 days or longer with the consent of the foreign investor.

Additionally Required Information

The Amendments require that more information be provided when an investor files a notification or an application for review under the Act. Information such as legal name, address, phone number, fax number, e-mail address and date of birth will now be required from the members of the board of directors of the investor, the investor’s five highest paid officers and the investor’s shareholders who own 10% or more in equity or voting rights.  The investor will also be required to provide information with respect to (i) whether it is owned, controlled or influenced, directly or indirectly, by a foreign government; (ii) the sources of funding for the investment; and (iii) the 2007 North American Industry Classifications System Codes for products and services that are or will be manufactured, sold or exported by the Canadian business.