Recently, the Government of Canada issued a flurry of
announcements relating to the Investment Canada Act. Here are some
highlights that we thought would be of interest to our M&A Blog
The government is proposing a legislative change that would
require the Minister of Industry to give reasons for any rejection
under the Investment Canada Act, whether initial or final.
Presently, the Minister is only obliged to give written reasons in
the event of a final rejection. As we saw in 2010, the Minister
issued an initial rejection of BHP Billiton Ltd.'s bid for
Potash Corp. and BHP then withdrew its bid. The Minister was not
required in that case to issue a final rejection and therefore no
reasons were ever given.
The government is proposing a further legislative change that
would allow the Minister to accept security for the payment of
penalties in order to secure an investor's obligations under
written undertakings. Written undertakings are typically required
to get a transaction approved.
In the wake of the government's lengthy enforcement action
against U.S. Steel for breach of undertakings – which was
ultimately settled out of court – the government
announced that in the future it would be willing to enter into
mediation to resolve issues that arise when an investor is unable
to fulfill undertakings.
Finally, at long last the government is moving forward with
implementing regulations to increase the financial threshold that
triggers Investment Canada Act review and approval. The current
threshold is triggered if the gross book value of the Canadian
target's assets on its balance sheet exceeds C$330 million.
This threshold will be changed to a threshold based on
"enterprise value," a concept yet to be defined. Further,
the threshold will be pegged at $600 million, rising to $800
million two years later, and $1 billion two years after that.
The government should be issuing draft regulations that define
"enterprise value" shortly, although it will probably be
a number of months before a final version comes into force. We
expect that enterprise value will key off of market capitalization
for public companies and a formula to determine market value for
private companies. And although the financial threshold will rise,
because enterprise value seeks to determine the market value of a
business, there may not be a significant resultant decrease in the
number of filings as we might otherwise expect.
Overall, these changes reflect the importance that is being
placed on monitoring, yet attracting, foreign investment into
Canada. It will be interesting to see how these changes and
proposed amendments pan out.
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).