Both the Competition Act and the
Investment Canada Act thresholds
for review of acquisitions of Canadian businesses are expected to
increase in 2014, to C$82 million and C$354 million respectively,
although these increases have yet to be officially confirmed by the
Minister, and in the case of the Competition Act merger
notification "size of target" threshold, is subject to
The Competition Bureau must generally be given advance notice of
proposed transactions under the merger notification provisions of
the Competition Act, when the "size of the
target" exceeds the specified threshold, and when the combined
Canadian assets or revenues "in, from or into" Canada of
the parties together with their respective affiliates (the
"size of parties" test) exceeds C$400 million.
Transactions involving Canadian subsidiaries, as well as the direct
acquisition of Canadian businesses or assets, and acquisitions of
interests as little as 20% (for public companies) or 35% (for
private companies and interests in non-corporate business
combinations) can trigger merger notifications in Canada.
The "size of target" threshold for merger notification
is based on either the book value of assets in
Canada of the target (or in the case of assets, of the assets in
Canada being acquired), or the gross revenues from
sales "in or from" Canada generated by those assets,
calculated in accordance with the Notifiable Transactions
Regulations under the Competition Act.
The Act provides an amending formula to keep the target size
indexed for inflation, but the Minister has the discretion not to
index the threshold in any given year, and has exercised that right
in the past. If implemented, however, application of that formula
would see the threshold increased to C$82 million for transactions
closing in the remainder of 2014.
Investment Canada Act:
The threshold for advance review and Ministerial approval of
certain direct foreign acquisitions of control of Canadian
businesses under the Investment Canada Act is subject to
indexing for inflation. Subject to approval by the Minister,
according to the amending formula, it is expected that the amount
will increase from C$344 million to C$354 million dollars for 2014
for direct investments by WTO investors in non-cultural
Direct acquisitions of control of Canadian businesses with
cultural activities, and direct acquisitions of control of
non-cultural Canadian businesses where neither the sellers nor
purchasers are from WTO-member states, are still subject to a
review threshold of C$5 million. Indirect acquisitions of control
of non-cultural Canadian businesses (pursuant to the acquisition of
control of their non-Canadian parents) are not subject to review
for WTO investors (or non-Canadian WTO-sellers), regardless of the
size of the assets of the Canadian business.
Legislation has been passed that would see the basis of
calculation of the Investment Canada Act review threshold changed
from book value to "enterprise value" and increased to
$600 million. This change would not apply, however, to investments
by state-owned enterprises. Implementation of the change is
awaiting finalization of implementing regulations. Unless and until
the "enterprise value" threshold is implemented, the
threshold for review of all acquisitions of control of a Canadian
business (one with assets and employees or agents in Canada)
remains based on the book value of the Canadian business.
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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The Canadian Competition Bureau issued a template document for use as a form of Consent Agreement, to be filed with the Competition Tribunal to resolve concerns the Bureau may have with proposed mergers.
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