Industry Canada has announced that the Investment Canada
Act (Act) threshold for 2012 that applies to most direct
acquisitions of Canadian businesses by non-Canadian investors from
World Trade Organization (WTO) member countries is
$330 million (an increase from last year's $312 million
threshold). The threshold applies to the gross book value of the
target's assets. Note that under the Act, a non-Canadian
includes a Canadian-incorporated entity that is ultimately
controlled outside of Canada.
The lower threshold of $5 million continues to apply to direct
investments that relate to cultural businesses or where none of the
non-Canadian parties comes from a WTO member country.
On a date still to be fixed, new regulations under the Act
will come into force dramatically increasing the $330 million
threshold to $600 million, $800 million and
$1 billion over the next six years, with further increases
based on a prescribed formula. When the new regulations come into
force, the threshold calculation will be based on 'enterprise
value', a term still to be defined.
In addition, under recent amendments to the Act, the government
is now permitted to review any investment by non-Canadians on the
basis of national security concerns. No financial threshold applies
and the government has up to 50 days, following either notification
or the filing of an application for review, to issue notice of a
potential national security review. Therefore, if a proposed
transaction that is not otherwise subject to review potentially
raises national security concerns, parties should consider filing a
notification as early as possible in order to obtain pre-merger
clearance (or at least trigger the review period).
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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