Canada modifies policy on foreign investment review

On 7 December 2012, the Canadian minister of industry announced decisions under the Investment Canada Act (ICA) to allow two foreign state-owned enterprises (SOEs) to acquire control of Canadian businesses. China National Offshore Oil Corporation (CNOOC) acquired Nexen Inc and Malaysia’s Petroliam Nasional Berhad (Petronas) acquired Progress Energy Resources Corp.

Reviewable transactions

The ICA provides that an acquisition is reviewable if a non-Canadian investor proposes to acquire control of an existing Canadian business, where the book value of the assets of the target business exceeds C$344 million (US$342 million). (For a cultural business, the threshold is C$5 million.) This is in addition to a national security review process under the ICA that is applicable to any investment by a non-Canadian.

In broad terms, control of a Canadian business may be acquired through the acquisition of all or substantially all of the assets used in carrying on the business, the acquisition of a majority of the voting securities or interests of the joint venture or partnership that owns the business, or the acquisition of a majority of the voting securities of a corporation that owns the business.

Donald E Greenfield, QC, is a partner and co-leader of the energy practice group at Bennett Jones, a law firm with offices in Calgary, Toronto, Edmonton, Ottawa, Dubai, Abu Dhabi, Doha, Washington and a representative office in Beijing.