CHAPTER 06 Foreign Investment
WHO IS A NON-CANADIAN? A “non-Canadian” is an individual, government,
WHAT IS A CANADIAN BUSINESS? The term “Canadian business” is defined in the ICA to mean a business carried on in Canada that has (i) a place of business in Canada; (ii) an individual or individuals in Canada who are employed or self- employed in connection with the business; and (iii) assets in Canada used in carrying on the business. The term “business” is, in turn, defined to include any undertaking or enterprise capable of generating revenue and carried on in anticipation of profit. As set out above, the net benefit review process applies to any acquisition of control of a Canadian business by a non-Canadian. The national security review process, on the other hand, may apply to any acquisition “in whole or in part” of an entity carrying on all or any part of its operations in Canada if the entity has (i) a place of operations in Canada; (ii) an individual or individuals in Canada who are employed or self-employed in connection with the entity’s operations; or (iii) assets in Canada used in carrying on the entity’s operations.
government agency or entity that is not a “Canadian.” An individual is a “Canadian” for the purposes of the ICA if the person is a Canadian citizen or a permanent resident of Canada who has been ordinarily resident in Canada for not more than one year after first becoming eligible to apply for Canadian citizenship. (A permanent resident may apply for Canadian citizenship after three years in Canada.) The rules for determining whether a corporation is a Canadian under the ICA are complex and essentially require a determination of whether the individuals who are the ultimate controlling shareholders of the corporation are “Canadians.” When shares in a corporation are owned by a partnership, joint venture or certain trusts, the ICA deems such shares to be owned by the partners, joint venture members or beneficiaries, respectively. This “lookthrough” principle does not apply to corporations. Determining whether shareholders are Canadian may be practically impossible in the case of a widely held corporate acquirer, in which case the determination may be based on the citizenship or permanent resident status of the members of the board of directors of the acquirer. In this case, a corporation would be “Canadian” only if it is not controlled in fact through ownership of its voting shares and at least two-thirds of the members of its board of directors are Canadians. There are also special rules for determining whether partnerships and trusts are “Canadian.”
Net Benefit Review
ACQUISITION OF CONTROL The ICA contains detailed provisions defining the concept of an “acquisition of control.” In summary, these provisions provide that control can be acquired only through 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 shares of a non-Canadian company with a Canadian division, but no Canadian subsidiaries, is not an acquisition of control of a Canadian business within the meaning of the ICA.
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