The Minister of Industry recently issued new guidelines that
apply to reviewable transactions for the acquisition of control
of a Canadian business where the proposed acquirer is a foreign
The Investment Canada Act requires that where a
non-Canadian proposes to acquire control of a significant
Canadian business, the Minister of Industry (or the Minister of
Canadian Heritage in respect of cultural businesses) must
review and approve the acquisition. The Minister must be
satisfied that the proposed acquisition is likely to be of
"net benefit" to Canada before issuing the approval.
The application process usually takes 45 to 75 days.
The new guidelines reflect the potential for concern that
the Minister may have with the "governance and commercial
orientation" of some state-owned enterprises (i.e.,
enterprises that are controlled directly or indirectly by
Further, the guidelines specify that the Minister will
examine the corporate governance and reporting structure of the
state-owned entity and that this examination will include
whether the non-Canadian adheres to Canadian standards of
corporate governance — including, for example,
commitments to transparency and disclosure, independent members
of the boards of directors, independent audit committees and
equitable treatment of shareholders, and to Canadian laws and
As many state-owned enterprises are probably not public
companies, it is not clear how the guidelines in respect of
some of these commitments that typically apply to public
companies (such as independent directors, audit committees and
treatment of shareholders) would apply.
In making the net benefit determination, the guidelines
state that the Minister will assess whether the Canadian
business to be acquired by the state-owned enterprise will
continue to have the ability to operate on a commercial basis
regarding a number of important indicia, including where
exports go, where processing takes place, the participation of
Canadians in the operations and the level of capital
expenditures to maintain the Canadian business. A foreign
government-controlled entity can therefore anticipate that to
secure approval by the Minister, it may be required to provide
undertakings beyond those normally expected of a privately
McCarthy Tétrault Notes:
While the new guidelines do not amend the Investment
Canada Act — indeed the Minister states that the
factors of assessment enumerated in the Act will be continue to
be applied — the guideline sends a clear signal that
acquisitions by entities controlled by a foreign government
will be subject to additional scrutiny. The guidelines go so
far as to suggest that state-owned enterprises should submit
specific undertakings at the time of the application.
Undertakings are usually submitted at a much later stage of the
The increased scrutiny to which entities owned by foreign
governments will be subject will not apply to transactions that
are not otherwise subject to review under the Investment
Canada Act as described in the 2008 update below.
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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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.
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