Canada: Canada Adopts Significant Changes To Foreign Investment Review Framework

On March 25, 2015, the Canadian government adopted regulations that significantly affect the foreign investment review framework.  The new regulations, which take effect on April 24, 2015, implement the long anticipated changes to the existing thresholds that trigger a net benefit review under the Investment Canada Act (ICA).  For investments by World Trade Organization (WTO) private-sector investors, the basis of the net benefit review threshold will change from the "book value" of the target Canadian business's assets to its "enterprise value".  Initially, the new threshold amount will be $600 million.  This is expected to result in the review of fewer foreign investment proposals to determine whether they are likely to be of net benefit to Canada.

However, foreign investments by state-owned enterprises (SOE) will continue to be subject to the existing standard for the net benefit review threshold, specifically, the "book value" of the target Canadian business's  assets.  This is in line with the Canadian government's policy on SOEs and will allow greater scrutiny of investments made by foreign SOEs in sectors of the Canadian economy.  Investors from non-WTO member countries and foreign investments in Canadian "cultural businesses" will also continue to be subject to the existing net benefit review threshold.

The new regulations also increase significantly the information required from foreign investors, even where there is no net benefit review, in order to provide Canadian security and intelligence agencies with more information about investors and their investments.  This change aligns with the Canadian government's authority to conduct a national security review of a foreign investment, where it determines whether an investment could be injurious to national security.  Increasingly, such national security reviews are being undertaken.  The new regulations have increased the timeline for completing such reviews from 130 days to 200 days, effective immediately on the date of publication, March 25, 2015.

This bulletin provides an overview of the foreign investment landscape in Canada, and the key aspects of the new regulations. All amounts are stated in Canadian dollars.

Overview of Foreign Investment in Canada

The acquisition of control of a Canadian business or the establishment of a new business by a foreign investor in Canada requires compliance with the ICA and its regulations.  In some instances, the ICA deems the acquisition of a minority interest in a Canadian business by a non-Canadian investor to be an acquisition of control.  Foreign investment proposals require an analysis to determine whether the foreign investor requires a pre-closing approval from the Canadian government.

Monetary thresholds prescribed under the ICA are used to determine whether an investment proposal by a non-Canadian will be reviewed by the Canadian government to assess whether it is likely to be of "net benefit to Canada".  All other acquisitions of control of a Canadian business and the establishment of new businesses in Canada by a foreign investor require that a notification be given to the Canadian government within thirty days of closing or, in the case of a new business, its establishment.

In addition to the net benefit review process, the ICA contains national security provisions, which permit the Canadian government to review investments that could be injurious to national security.  The federal cabinet may impose any measures that it considers advisable to protect national security.  The ICA does not define "national security", which injects significant discretion and corresponding uncertainty into this aspect of the investment review process.  Foreign investments constituting the acquisition of a minority holding in a Canadian business or resulting in the establishment of a new Canadian business, or even a foreign entity carrying on all or part of its operations in Canada are all subject to the national security provisions.  There are no monetary thresholds for national security reviews, which may be initiated after a transaction has been completed or an investment has been implemented.

New Net Benefit Review Threshold

Monetary thresholds prescribed under the ICA are used to determine whether investment proposals by foreign investors will be reviewed by the Canadian government to assess whether they are likely to be of net benefit to Canada.   Under the existing law, a direct acquisition of control of a Canadian business (either a share acquisition or an asset acquisition) by a non-Canadian WTO investor is generally subject to a net benefit review if the "book value" of the assets of the Canadian business exceeds $369 million.

As of April 24, 2015, the threshold determination will be based on the "enterprise value" of the Canadian business.  A net benefit review will generally be required if the "enterprise value" of the target Canadian business's  assets is $600 million.  The threshold will be increased to $800 million in two years, to $1 billion two years later and thereafter, indexed annually to reflect changes in Canada's gross domestic product (GDP).

The regulations set out a detailed formula to determine "enterprise value". Generally, the calculation will be as follows:

  • For publicly traded companies, the enterprise value of the assets of the Canadian business is equal to the market capitalization of the entity plus its liabilities (other than operating liabilities) minus its cash and cash equivalents.
  • For private companies, the enterprise value of the assets of the Canadian business is equal to the total acquisition value, plus its liabilities (other than its operating liabilities) minus its cash and cash equivalents.
  • For an asset acquisition, the enterprise value of the assets of the Canadian business is equal to the total acquisition value, plus its liabilities (other than its operating liabilities) minus its cash and cash equivalents.

The enterprise value is determined based on the date of filing.  The formula for calculating the enterprise value and in turn, determining whether a pre-closing approval from the Minister of Industry is required, is complex and should be reviewed to properly assess the foreign investor's obligations under the ICA.

State-Owned Enterprises

The Canadian government will continue to review investments by SOEs under the existing rules.  Under the ICA, an SOE is broadly defined and includes not only entities that are owned by a foreign state, but also entities that are directly or indirectly owned, controlled or influenced by a foreign government.  Foreign SOE investment proposals are assessed using more extensive factors to determine whether they are likely to be of net benefit to Canada, including whether the target Canadian business would be operated on a commercial basis.

The current $369 million threshold, based on the book value of the Canadian business's  assets, will continue to apply to investments by SOEs.  The asset value threshold will continue to be indexed annually to reflect changes in Canada's nominal GDP.

Other Investments Excluded from New "Enterprise Value" Rules

The existing book value threshold will continue to apply:

(i) in the case of non-WTO investors, unless the Canadian business is controlled by a WTO investor immediately prior to the implementation of the investment; or

(ii) where the foreign investment is in a "cultural business", a term that is broadly defined in the ICA.  In these cases, the thresholds for review remain at $5 million and $50 million in book value for direct and indirect investments, respectively.

New Disclosure Requirements for Foreign Investors

Where the thresholds are not exceeded and an investment proposal is not subject to a net benefit review, the non-Canadian investor must nevertheless notify the Canadian government of the investment and file a notification in the prescribed form.  Such notification must be given within thirty days of closing.  Effective April 24, 2015, foreign investors will be required to provide significantly more information when completing the notification form, even where there is no net benefit review.

Among the new informational requirements, foreign investors will have to identify:

  1. the names of board members;
  1. the investor's five highest paid officers;
  1. any person or entity that owns 10% of the investor's equity or voting interests;
  1. whether the investor is owned, controlled or influenced, directly or indirectly, by a foreign government; and
  1. sources of funding for the investment.

Additionally,  investors will have to furnish a copy of the purchase and sale agreement or if not available, a description of the principal terms and conditions, including the estimated total purchase price for the Canadian business.  The government will use this information to determine whether the foreign investment should be reviewed under the national security provisions of the ICA.

Significantly more informational requirements have also been added to the application for review form, which applies when the foreign investment proposal is subject to the net benefit review assessment.   This information will be used to determine whether the government will also initiate a national security review of the proposed foreign investment.

Establishment of New Canadian Businesses

It should be noted that where a foreign investor establishes a new Canadian business, there is a requirement to file a notification form with the Canadian government. The regulations will require significantly more disclosure of information about investors and their investments  effective April 24, 2015.  Such foreign investments are also subject to the national security provisions.

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

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
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).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.