What foreign investors should know about notifications, government review and national security screening
Canada continues to seek foreign investment and remains an attractive destination for international investors.
Foreign investors should assess the potential application of the Investment Canada Act early in the transaction-planning process, particularly where the Canadian business operates in a sensitive sector or possesses valuable technology, infrastructure or data.
A non-Canadian investor may be required to file a notification under the Investment Canada Act when establishing a new Canadian business or acquiring control of an existing Canadian business. Certain high-value transactions require approval before closing, while any foreign investment may be reviewed on national security grounds. Where a notification is required, it may generally be filed before implementation or within 30 days afterward.
What is the Investment Canada Act?
The Investment Canada Act, or “ICA”, is Canada’s primary foreign investment review regime. The legislation has two purposes:
- to determine whether certain significant foreign investments are likely to be of net benefit to Canada; and
- to permit the government to review foreign investments that could raise national security concerns.
The ICA requires foreign investors to notify the government when they establish or acquire control of a Canadian business, and also permits voluntary filings (for example, for investments that do not result in control). For certain transactions, government pre-approval may be required.
When Does the ICA Apply?
The ICA applies to investments in Canadian businesses by any “non-Canadian”. A “non-Canadian” includes an individual who is neither a Canadian citizen nor a qualifying permanent resident, as well as an entity that is not Canadian-controlled.
Obligations under the Act can arise in situations that do not necessarily look like traditional M&A transactions, and even where the investment has only a limited connection to Canada. For example, a filing may be required or advisable where a foreign investor:
- acquires all or a majority of the voting shares of a Canadian corporation;
- acquires at least one-third of the voting shares of a Canadian corporation (which may give rise to a presumption of control);
- acquires the assets of a Canadian business;
- establishes a Canadian subsidiary and begins carrying on business in Canada;
- acquires a minority interest in a Canadian business; or
- acquires the shares of a corporation incorporated outside of Canada which owns one or more Canadian subsidiaries (known as an indirect acquisition).
When Is a Notification Required?
A notification under the ICA must generally be filed whenever a non-Canadian:
- establishes a new Canadian business; or
- acquires “control” of an existing Canadian business.
Control of a corporation may be acquired through the acquisition of its voting shares or through an acquisition of all or substantially all of the assets used in carrying on its business. An acquisition of a majority of the corporation’s voting shares generally constitutes an acquisition of control.
An acquisition of at least one-third of the voting shares is presumed to constitute an acquisition of control unless it can be established that the investor does not control the corporation in fact.
Where a notification is required, it must be filed with the government either prior to, or no later than 30 days after, the implementation of the investment.
When Does an Investment Require Approval Before Closing?
High-value acquisitions of control may require a pre-closing application for “net benefit” review. For such an investment to proceed, the government must be satisfied that it is likely to be of “net benefit” to Canada.
The threshold for when a “net benefit” review is required depends on a number of factors, including the identity and country of ultimate control of the investor, whether the investor is state-owned, the enterprise value of the Canadian business, and whether the target carries on a “cultural business”.
For 2026, the enterprise value threshold is $2.179 billion for qualifying private-sector investors from Canada’s trade agreement partners, and $1.452 billion for other qualifying private-sector investors from World Trade Organization member states.
However, if the target is a “cultural business” (which includes businesses engaged in the production or distribution of books, film or video recordings, or music), the thresholds are substantially lower.
The applicable threshold should be confirmed for each investment. If a net benefit review is required, the parties will need to plan well in advance and allow significant time for governmental review.
Can an Investment Be Reviewed on National Security Grounds?
Unlike net benefit reviews, the government may conduct a national security review on any foreign investment, regardless of its value, regardless of whether the investor is acquiring “control”, and regardless of whether a notification is even required under the ICA.
There is no definition of “national security” in the ICA, and the government has issued guidelines outlining a variety of factors that it may take into account, including:
- defence capabilities, sensitive technology and critical infrastructure;
- the supply of critical goods, services and minerals;
- Canada’s economic security and international interests;
- access to sensitive personal data;
- foreign surveillance, espionage or interference; and
- intelligence and law-enforcement activities.
Investments involving sensitive sectors, including critical-minerals activities, or investors with ties to certain states, may attract heightened scrutiny under the national security regime.
Canada’s foreign investment policy continues to evolve in response to changing economic and geopolitical priorities. Although recent government initiatives emphasize attracting and diversifying foreign investment, national security screening remains an important and fact-specific consideration, particularly for sensitive sectors and investors with state connections.
What Happens After Filing a Notification?
Once it is satisfied with the notification, the government will issue a standard letter confirming that the notification has been certified as complete.
Once the filing has been certified as complete, an initial 45-day national security review period begins. If the government does not issue a notice or order within the applicable period, the initial national security screening period will generally expire. A certification letter itself is not a substantive approval of the investment.
If concerns arise, the government can require the disclosure of additional information, impose conditions on the investment, or require that the investment be unwound.
Should an Investor File Before Closing?
To help mitigate regulatory risk, an investor may submit a required notification before closing, rather than relying on the 30-day post-closing filing period. Doing so initiates the applicable national security screening period before the investment is implemented.
An investor considering a minority or other non-controlling investment may similarly submit a voluntary notification to initiate the national security screening period and obtain greater regulatory certainty.
If a voluntary notification is not filed, the government has up to five years after the implementation of a non-notifiable investment to make an order for a national security review.
Legislative amendments also contemplate mandatory pre-implementation filings for certain investments in prescribed business sectors, although the relevant filing requirements are not yet in force. Investors should confirm the applicable requirements at an early stage in the transaction process to allow for appropriate lead time and planning.
What Information Becomes Public?
The content of an ICA notification is treated as privileged and confidential information by the government.
Basic details of certified transactions, including the names and jurisdictions of the parties, the month of certification, and a basic description of the business activity of the target, are published in the government’s decision database.
Key Takeaways
- Assess the ICA early. Filing and approval requirements can affect transaction structure, conditions and timing.
- Consider the ICA even for small or minority investments, as they may still be subject to review on national security grounds.
- Identify sensitive features at the outset. Technology, data, critical infrastructure, critical minerals, defence activities and state ownership may increase national security risk.
- Consider filing before closing. A pre-closing notification or voluntary notification can provide greater regulatory certainty where national security concerns may arise.
- Confirm the applicable threshold and filing regime for each transaction. The rules depend on the investor, the target, the structure of the investment and the nature 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.
