CANADA
However, as a matter of policy, the government has stated that investments by state-owned enterprises (defined very broadly under the ICA to include even entities that are influenced by a foreign government) in Canada’s oil sands will be permitted only in ‘exceptional circumstances’. Although this policy does not apply to other sectors or regions, the Canadian government will carefully scrutinise all acquisitions of control by state-owned enterprises.
c) Which party must notify and when/if notification is mandatory of voluntary; The obligation to comply with the ICA is that of the investor alone.
If a transaction is subject to review under the ICA, a pre-closing application for review is mandatory and must be submitted to Industry Canada by the investor (the acquirer) before closing.
As noted above, if a transaction is not subject to review under the ICA, the investor must simply submit a notification form, which is mandatory but which may be submitted any time up to 30 days following closing.
d) What information must be included with notification and what is the review fee; If a transaction is subject to review, the application for review must include prescribed information about the investor (including its business activities, its ownership structure), a copy of the purchase and sale agreement, and information about the Canadian business being acquired (including its annual reports and financial information as well as a description of its activities and number of employees). In addition, and most importantly, the application must attach a so-called plans document, setting out a detailed description of the investor’s plans for the Canadian business, comparing them with the operations of the Canadian business.
If a transaction is not subject to review, the notification form must include basic information about the investor (including its ultimate owner) as well as basic financial and operational information about the acquired business.
No governmental review fees apply to either applications for review or notification forms.
e) How long does the review and approval process take, and are there any fast-track options; Once an application for review has been filed and certified to be complete, the minister of industry has a 45-day period within which to make a net benefit determination, which period may be unilaterally extended once by the minister for up to an additional 30 days, and thereafter extended with the consent of the investor. If, during the course of the review, the investor is provided with notice that the transaction will be subject to a national security review, additional time periods apply.
In practice, ICA reviews typically take a minimum of 60-75 days, and may last longer depending on the complexity of the transaction and the willingness of the investor to commit to undertakings regarding the conduct of the Canadian business.
f) Is there the ability to consult on a named or unnamed basis; The Investment Review Division of Industry Canada is typically willing to consult with parties (or their counsel) and to provide non-binding, informal guidance on either a named or unnamed basis.
The ICA also includes a provision by which anyone may request a formal, written opinion from the minister of industry as to whether the ICA applies to them. However, this provision is rarely used, as the minister is, in most cases, granted the discretion to choose not to provide a written opinion.
g) Does the notification/review occur pre- or post-closing, and are there are any pre- or post-filing requirements unique to FDI; Other than the processes described above – application and assessment for transactions subject to review, or notification for transactions not subject to
26 IFLR REPORT | FOREIGN DIRECT INVESTMENT 2014
review – there are no other, FDI-specific pre- or post-closing filing requirements under the ICA.
h) What is the position if no response is received on an application for approval and are there any rights of appeal from disapprovals? Technically, if the minister of industry does not notify the investor within the initial 45-day waiting period that he will extend the period for 30 days, or if the minister allows a subsequent 30-day period to expire without further extension, he is deemed to be satisfied that the impugned investment is likely to be of net benefit to Canada.
However, in practice, the minister will not allow a waiting period to expire without either making a net benefit determination or seeking an extension of time. If the minister requests an additional 30-day extension (after the first such extension, which he may impose unilaterally without the consent of the investor) and the investor refuses to grant such extension, the minister will very likely make an adverse net benefit determination to avoid the deeming provision described above. As such, investors must effectively consent to extend the statutory waiting period until the minister has completed his review.
3.2 Briefly explain the investment restrictions for any special/restricted sectors. No sectors are formally restricted or otherwise subject to a higher standard of review under the ICA. However, Canadian Heritage (a department of the Canadian federal government) has released two policies which severely restrict foreign investment in the book publishing and distribution sector and in the film distribution industry. As noted above, the Canadian government has also determined as a matter of policy that acquisitions of Canadian oil sands businesses by entities controlled or influenced by a foreign state will be permitted only in exceptional circumstances.
In addition, certain sector-specific laws and regulations impose limitations (or, in some cases, prohibitions) on foreign investment. For example, legislation in the following sectors of the Canadian economy imposes restrictions on foreign investment: (i) telecommunications; (ii) broadcasting; and (iii) financial institutions.
Also as noted above, the ICA includes broad national security provisions for investments which, in the opinion of the Canadian government, may be injurious to Canadian national security. Recent experience has indicated that the government is prepared to apply the national security provisions very expansively in the telecommunications sector.
3.3 Which authority oversees competition clearance, when is notification mandatory, and briefly explain the merger clearance process. Competition clearance is governed by the Competition Act and overseen by the Competition Bureau, an independent government agency. All mergers are subject to review and may be challenged by the Competition Bureau, regardless of their size or the nationality of the purchaser. In addition, mergers are subject to mandatory pre-closing notification if certain size thresholds are exceeded. In general, a merger must be notified to the Competition Bureau if: (i) the Canadian assets of the target, including all affiliates (or, in the case of an acquisition of assets, the Canadian assets being acquired), exceed C$80 million, or the revenues in or from Canada generated by those assets exceed C$80 million; and (ii) the total assets in Canada or the total revenues in, from or into Canada of all of the parties to the transaction (including all upstream and downstream affiliates), on a combined basis, exceed C$400 million.
If a transaction is subject to mandatory pre-merger notification, it may not close for 30 days following the submission of a complete notification form by both parties to the transaction. The Competition Bureau may extend the statutory waiting period by issuing a supplementary information request, similar to a second requested in the US.
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