Please see our blog on proposed amendments to Canada’s national security regulations for foreign investment

The key financial thresholds relevant to pre-merger notification of proposed transactions under the Competition Act remain unchanged in 2022, while the thresholds for pre-closing “net benefit” to Canada review under the Investment Canada Act have been revised upward.

Competition Act

In 2021, the Competition Bureau (Bureau) announced that its key “size of transaction” threshold would decrease to CA$93 million (from CA$96 million the previous year). A year later, on February 7, 2022, the Minister of Innovation, Science and Industry (ISI Minister) announced that this threshold will be maintained for 2022.[1]

According to the ISI Minister, this decision provides the Bureau with a “greater field of vision” to detect and review “potentially harmful transactions”. The Competition Act contains a GDP-indexing formula for annual adjustments to the pre-merger notification “size of transaction” threshold. However, it also permits the ISI Minister to refrain from altering the threshold, in which case the threshold for the previous year applies.

Pre-merger notification thresholds

Under the Competition Act, parties to transactions over certain financial thresholds must notify the Bureau in advance of closing and pay a filing fee. The fee in 2021 was set at CA$74,905.57, and the 2022 value of this fee has not yet been announced at the time of this update’s writing. While Bureau notification thresholds may vary by type of transaction, transactions generally require notification when the two following thresholds are exceeded:

• Size of transaction threshold: either (i) the value of the acquisition target’s Canadian assets or (ii) the target’s gross revenues from sales in or from Canada generated by its assets in Canada exceed CA$93 million; and
• Size of parties threshold: either (i) the value of the Canadian assets of the parties and their affiliates or (ii) the gross revenues from sales in, from or into Canada of the parties and their affiliates exceed CA$400 million.

If both thresholds above are exceeded, a notification must be filed with the Bureau and closing may not occur until clearance has been received.[2]

Investment Canada Act

The ISI Minister announced that the Investment Canada Act (ICA) thresholds for non-cultural business acquisitions will be raised in 2022. If a transaction meets or exceeds the applicable review threshold, the responsible minister must make a determination of whether the investment results in a “net benefit to Canada” before the transaction is implemented.

Reviews under the ICA are generally led by the ISI Minister, except when the target is a “cultural business”, in which case the review is conducted by the Minister of Canadian Heritage.

Private sector trade agreement investments in non-cultural businesses

For direct acquisitions of Canadian businesses by private sector investors from countries that have a free trade agreement containing certain provisions with Canada – currently, European Union member countries, the United Kingdom, the United States, Mexico, Australia, Japan, Brunei, Malaysia, New Zealand, Singapore, South Korea, Chile, Peru, Colombia, Panama, Honduras and Vietnam – the 2022 threshold is CA$1.711 billion, measured by the enterprise value of the target Canadian business.[3] Indirect acquisitions by these investors (provided they are also World Trade Organization (WTO) members) are not subject to review.[4] 

Private sector WTO investments in non-cultural businesses

For direct acquisitions by private sector WTO investors that are not party to certain free trade agreements with Canada, the 2022 threshold is CA$1.141 billion in enterprise value[5]. Indirect acquisitions by these investors are not subject to review.

State owned enterprise (SOE) WTO investments

The government has increased the review threshold for direct acquisitions of a non-cultural Canadian business by an SOE of a WTO member country to CA$454 million in the book value of the target’s assets.

Non-WTO investments and investments in cultural businesses

For direct acquisitions of cultural businesses (such as those involving the production, publication, distribution, sale or exhibition of books, magazines, film and music recordings) by any investor, and direct acquisitions of non-cultural businesses by investors from the few countries that are not WTO members, the threshold remains unchanged at CA$5 million in book value of the target’s assets. Indirect acquisitions of cultural businesses and indirect acquisitions of non-cultural businesses by non-WTO investors are subject to a CA$50 million threshold[6], based on the book value of the target’s assets.[7]

For more information, please contact a member of Dentons Canada’s Competition and Foreign Investment Review group.

*The authors would like to thank Camila Maldi for her assistance with this article.

[1] See https://www.newswire.ca/news-releases/minister-champagne-maintains-the-competition-act-s-merger-notification-threshold-to-support-a-dynamic-fair-and-resilient-economy-861470809.html

[2] The parties may legally close with the expiry of a 30-day waiting period (which can be extended) or upon receipt of an advance ruling certificate or a “no-action” letter with a waiver of the notification requirement (if a notification filing has not been made).

[3] The trade agreement investor threshold also applies where the seller is a trade agreement investor, other than a Canadian. Enterprise value is equal to the market capitalization for a public company transaction, or the purchase price for a private company transaction, plus liabilities (excluding operating liabilities), less cash and cash equivalents.

[4] "Indirect" investments are acquisitions of Canadian businesses by virtue of the acquisition of a non-Canadian corporate parent of a Canadian entity that carries on the Canadian business. See s 14.11(2) of the ICA for rules applicable to indirect acquisitions by trade agreement investors that are not WTO members. 

[5] The WTO investor review threshold also applies where the seller is a WTO investor, other than a Canadian.

[6] The CA$50 million threshold is reduced to CA$5 million where the value of the Canadian business represents more than 50% of the value of all of the assets acquired in the transaction.

[7] The CA$5 million direct threshold and CA$50 million indirect threshold for non-cultural business acquisitions do not apply if the seller of the Canadian business is a WTO or trade agreement investor (not including a Canadian). Instead, such transactions are subject to the thresholds applicable to WTO and trade agreement investments, as noted above.