Foreign investment review policy sees further changes

Under the Investment Canada Act (ICA), the government of Canada reviews acquisitions of control of Canadian businesses. Announcements by the prime minister of Canada on 7 December 2012, regarding changes to the ICA and related policies that would primarily affect acquisitions by foreign state-owned enterprises (SOEs), were discussed in this column in the March 2013 issue of this journal. The ICA was subsequently amended (in June 2013) to include specific provisions relating to SOE investments that were not anticipated.

‘Brightline’ tests

The ICA mandates a scheme for the review of acquisitions of control of large Canadian businesses by non-Canadian investors. In broad terms, control of a Canadian business may be acquired through: (i) the acquisition of all or substantially all of the assets used in carrying on the business; (ii) the acquisition of a majority of the voting securities or interests of the joint venture or partnership that owns the business; or (iii) the acquisition of a majority of the voting securities of a corporation that owns the business.

The acquisition of one-third or more but less than a majority of the corporation’s voting securities will also constitute an acquisition of control, unless it can be established that the investor will not control the Canadian business through the ownership of those securities. An acquisition by an existing minority non-Canadian owner may be reviewable if by the incremental acquisition that owner acquires control.

Donald E Greenfield, QC, is a partner and the head of oil and gas at Bennett Jones LLP, a law firm with offices in Calgary, Toronto, Edmonton, Ottawa, Dubai and Doha, and representative offices in Washington DC and Beijing.