CHAPTER 06 Foreign Investment
of the investor and the degree of control the investor will have over the Canadian business following the investment. For example, in recent years investments by foreign SOEs and investors from China, Russia and other countries considered potentially “unfriendly” have been subject to enhanced scrutiny. National security reviews in recent years have considered investments in a wide range of sectors, from metal ore mining to taxi and limousine services, but investments into intuitively sensitive sectors (e.g., personal data, military and defence, critical infrastructure) are more likely to attract scrutiny.
a new pre-closing filing regime for investments in prescribed sectors. Regulations prescribing these sectors have not yet been released but such sectors are expected to be closely tied to the Canadian government’s national security priorities (e.g., the critical minerals sector). Specifically, non-Canadian investors in new or existing Canadian businesses engaged in the prescribed sectors would be required to provide notice of their investments in advance of closing and could not implement the investment until the statutory review time period had lapsed or been terminated. This proposed mandatory notice requirement would apply to both direct and indirect investments in the prescribed sectors and, in certain circumstances, to investments to acquire less than control of the Canadian business. Timing of ICA Reviews The ICA sets out certain time limits for both the net benefit and the national security review procedures. In a net benefit review, within 45 days of receipt of a completed application , the Minister must either indicate whether he or she is satisfied that the investment is likely to be of net benefit to Canada or extend the review period for a further 30 days (with potential further extensions of the review period with the consent of the investor). In practice, it takes approximately 75 to 90 days to receive net benefit approval. However, it is not uncommon for the review process to take even longer – for example, up to 105 days or beyond. If the Minister has advised the applicant that he or she is not satisfied that the investment is likely to be of net benefit to Canada, the applicant has the right to make representations and submit undertakings within 30 days of the date of the notice of the Minister’s decision (or any longer period that may be negotiated).
VOLUNTARY FILING FOR MINORITY INVESTMENTS
In August 2022, amendments to the ICA’s National Security Review of Investments Regulations introduced a new voluntary pre-clearance filing mechanism for investments that are not captured by the mandatory net benefit review filing requirements (e.g., minority investments). As a result, non-Canadian investors that are not otherwise required to submit an application for review or notification under the ICA may voluntarily provide the prescribed information if they want greater certainty as to whether their transactions will be subject to a national security review. Following receipt of a complete filing, the Minister has an initial 45 days to determine whether to pursue a national security review (subject to a right to extend this period by 45 days). However, if the non-Canadian investor does not choose to utilize the voluntary filing option, the Minister may commence a national security review up to five years after the implementation of the investment. PROPOSED AMENDMENTS TO THE NATIONAL SECURITY REVIEW PROCESS In December 2022, the federal government introduced Bill C-34, National Security Review of Investments Modernization Act (Bill C-34). Bill C-34 would introduce
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