Significant changes to the Competition Act's merger
review process and the Investment Canada Act
(ICA) came into effect on March 12, 2009, when the
Budget Implementation Act 2009 (Bill C-10) received Royal
Changes to the Merger Provisions under the
Increased thresholds for pre-notification
― The existing $400-million "size of the
parties" threshold has been maintained, but the "size of
the transaction" threshold increased from $50 million to $70
million (with further increases annually).
Different statutory waiting periods and production
powers ― Previously, the statutory waiting
period for mergers subject to notification was 14 days, with
complex transactions subject to a maximum 42-day waiting period.
Now, the period for most uncomplicated transactions has increased
to 30 days. In complicated transactions, the Competition Bureau can
extend the waiting period by an additional 30 days beyond the time
required for the parties to respond to a request for information
and documents from the Bureau.
The Bureau is authorized to issue a request for information to
the parties to a proposed transaction "relevant to the
Commissioner of Competition's assessment of the proposed
transaction" within 30 days after submission of
pre-notification filings. Once the parties' response is
complete, and only then, a second30-day waiting period begins to
run. Previously, the Commissioner was required to seek orders
subject to the supervision of the courts, and the statutory waiting
period continued to run while the parties gathered information
responsive to the order.
Reduced post-closing challenge window
― The Commissioner's previous three-yearpost-closing
window to launch an application challenging a transaction has been
reduced to one year.
Bill C-10 also made a number of changes to the criminal and
reviewable conduct provisions of the Competition Act.
Investment Canada Act Changes
A. New National Security Review
The ICA permits the government to review acquisitions
of control of Canadian businesses by non-Canadians that are above
certain prescribed thresholds, to ensure they are "of net
benefit to Canada." The scope of review powers has been
increased to encompass concerns of national security in respect of
acquisitions of control and minority investments in Canadian
businesses by non-Canadians.
Vague criteria and potentially broad review
― The government can now review proposed investments
where it has "reasonable grounds to believe that an investment
by a non-Canadian could be injurious to national security." No
financial threshold applies. There is no definition of
"national security" in the bill, and review can occur
before or after closing. The responsible Minister may deny the
investment, ask for undertakings, provide terms or conditions for
the investment, or require divestment.
Information produced can be shared with other
investigating agencies ― The Minister can compel
a party to provide information that the Minister "considers
necessary," and may communicate information produced with
respect to a national security review to prescribed investigative
bodies, which may also disclose the information for the purposes of
that agency's investigation.
B. Changes to Review Thresholds
Increase of WTO thresholds ― The
current $312-million prescribed threshold for pre-closing review of
direct investments by World Trade Organization (WTO) member country
investors (except in cultural, transportation, financial services
and uranium businesses), will, on a date still to be fixed,
increase dramatically — to $600 million, $800 million and
$1 billion over the next six years. After that, the threshold will
be determined on an annual basis using a prescribed formula.
When the increased thresholds for review are proclaimed in
force, the calculation will be based on "enterprise
value," a term not yet defined, instead of the current
valuation based on the aggregate value of all assets being acquired
as shown in the financial statements for the Canadian business.
Removal of most sector-specific thresholds
― Previously, the threshold for review for controlled
sectors (cultural, transportation, financial services and uranium
businesses) and investments by non-WTO investors was $5 million.
This threshold has been removed for investments in all sectors
except for cultural businesses and for certain direct investments
by non-WTO investors.
McCarthy Tétrault Notes:
Overall, Canada's merger review process is now much closer
to that of the United States. There, a similar "second
request" procedure for complicated transactions is used, and
responding to second requests can take months and cost millions of
For foreign investors in Canada, it will also be interesting to
see how widely the government invokes its new national security
review powers under the ICA.
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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