operations in Canada; (ii) persons in Canada employed or self-employed in connection with the entity’s operations; or (iii) assets in Canada used in carrying on the entity’s operations. For convenience of reference, this guide refers to such an entity as a “Canadian-linked entity.” WHAT IS AN ACQUISITION OF CONTROL? – For the purposes of the ICA, an “acquisition of control” of a Canadian business can occur only by means of the acquisition of (i) voting shares of a corporation; (ii) “voting interests” of a non-corporate entity (which for partnerships and trusts means an ownership interest in the assets of the entity that entitles the owner to receive a share of the profits and to share in the assets on dissolution); or (iii) all or substantially all of the assets of a Canadian business. The acquisition of voting interests of a non-Canadian entity that directly or indirectly controls a Canadian subsidiary carrying on a Canadian business is considered an acquisition of control of the Canadian business. – The following chart summarizes the general rules for determining whether an investor has acquired control of a Canadian business:
Acquisitions of Control Proportion of Voting Shares or Voting Interests Acquired
Corporations
Partnerships, Trusts or Joint Ventures
Majority
Acquisition of control
Acquisition of control
One-third or more, but less than a majority
Presumed acquisition of control, unless it can be shown that the corporation will not be controlled in fact by the investor through the ownership of voting shares
No acquisition of control
Less than one-third
No acquisition of control
No acquisition of control
– However, in the context of NSRs, cultural businesses or investments by state-owned enterprises, the Minister may deem that an entity is or is not controlled by another entity, or that there has or has not been an acquisition of control of another entity, on the basis of an assessment of whether control in fact exists or has been acquired. WHAT IS A STATE-OWNED ENTERPRISE? – The ICA broadly defines a state-owned enterprise (SOE) to include a foreign government or agency, or an entity or individual controlled or influenced, directly or indirectly, by a foreign government or agency. The ICA does not define the term “influenced,” but it may include something less than legal control. – The ICA also allows the Minister to deem an entity to be a non-Canadian if the Minister is satisfied that the entity is controlled in fact by one or more SOEs. Moreover, the Minister may
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Canadian Mergers & Acquisitions
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