The 2014 increases to the merger notification threshold under
Canada's Competition Act and the investment review
threshold under the Investment Canada Act have been
The Competition Act requires advance notification of
certain merger transactions involving operating businesses in
Canada where "size-of-parties" and
"size-of-target" financial tests both are exceeded:
The "size-of-parties" test requires that the parties
to a transaction, together with their affiliates, have assets in
Canada, or annual gross revenues from sales in, from or into
Canada, exceeding C$400 million. (The
"size-of-parties" threshold remains unchanged for
The "size-of-target" test generally requires that the
value of assets in Canada to be acquired, or owned by the
corporation the shares of which are being acquired, or the annual
gross revenue from sales in or from Canada generated by those
Canadian assets or the corporation, exceeds a specified threshold.
The Competition Bureau announced on January 20,
2014 that the "size-of-target" threshold would
be increased to C$82 million for 2014. (The new
threshold will take effect immediately following publication in the
Canada Gazette, which is expected to occur on January 25, 2014.
This represents a $2 million increase from the C$80 million
threshold for 2013.
Investment Canada Act
The Investment Canada Act requires that any
Non-Canadian that acquires control of a Canadian business (whether
or not that business is controlled by Canadians prior to the
acquisition) must file either a notification or an application for
review. For the purposes of the Act, a Non-Canadian includes any
entity that is not controlled or beneficially owned by
Generally, "WTO Investors" are required to file a
pre-closing application for review and approval when directly
acquiring a Canadian business which:
has assets with a book value in excess of a threshold
to be adjusted annually, which for 2014 is expected to be
C$354 million (the official amount will be
published in the Canada Gazette in early 2014); or
is cultural in nature and has assets with a book value in
excess of C$5 million.
In general, a WTO investor is an entity that is owned or
controlled by citizens from countries which are members of the
World Trade Organization. Special rules apply to Non-WTO Investors
as well as to acquisitions by State-Owned Enterprises (see the
bulletin on the
guidelines for State-Owned Enterprises for further details) and
in certain other situations in the cultural sector.
In 2013, the government amended the Investment Canada Act to
establish thresholds based on "enterprise value" for WTO
Investors (except State-Owned Enterprises) which will start at
C$600 million and rise to C$1 billion over four years (see our
bulletin on the
Investment Canada Act amendments). These changes are still
pending and may come into force later this year.
The foregoing provides only an overview. Readers are
cautioned against making any decisions based on this material
alone. Rather, a qualified lawyer should be consulted.
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