Investment Canada Act - Guide for Foreign Investors in Cana…

Investment Canada Act Guide for Foreign Investors in Canada: 2026

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Contents

Introduction

Overview: National Security Review and Net Benefit Review

4 5 5 6 6

Who is a “Non-Canadian”?

What constitutes a “Canadian Business” or a “Canadian-Linked Entity”?

What is an Acquisition of Control? What is a State-Owned Enterprise? What are the available exemptions?

National Security Review Scope and Process

7 7 8

NSR timing

NSR resolution

Substantive NSR considerations Enforcement of the NSR provisions

10 11 12

Voluntary notifications under the NSR framework

Pending preclosing notice requirements under the NSR framework

Net Benefit Review Scope and Process

13 13 13 14 14 14 16 16 17 18

Which NBR threshold will apply?

Trade agreement investors

WTO investors

Indirect acquisitions Cultural businesses

Monetary thresholds for NBRs

Net benefit to canada assessment factors

NBR undertakings

NBR timing

Enforcement of the NBR provisions

Illustration of NSR and NBR Timing

Prohibitions and Remedies

Introduction Any non-Canadian who proposes establishing a new Canadian business, or acquiring or investing in an existing business in Canada should be aware of the provisions of the federal Investment Canada Act (ICA). 1 Under the ICA, the federal government reviews investments in Canada by non-Canadians to protect national security and, for certain significant investments, encourage investment, economic growth and employment opportunities in Canada. The review and notification provisions can apply not only to investments in Canadian-owned entities or businesses, but also to investments in businesses or entities that are currently controlled by non- Canadians. They can also apply to a Canadian business that is acquired (or to be acquired) indirectly through the acquisition of a foreign entity that has a Canadian subsidiary. The Foreign Investment Review and Economic Security (FIRES) branch of Innovation, Science and Economic Development Canada is responsible for administering the ICA and reviewing non- cultural investments in Canada by non-Canadians. The Department of Canadian Heritage reviews investments in cultural businesses. This guide provides a high level overview of the ICA. However, many provisions of the ICA are highly technical and counsel should be consulted to confirm the ICA’s application to particular investments.

1 RSC 1985, c 28 (1st Supp). Some other or additional sector-specific measures or approval requirements may apply to foreign investments in certain key sectors, such as telecommunications, broadcasting, mining and transportation. These provisions are beyond the scope of this guide. This guide is current to June 30, 2026.

Overview: National Security Review and Net Benefit Review

The ICA establishes two frameworks: national security review (NSR) and net benefit review (NBR).

Under the NSR framework, the Canadian government has broad discretion to review an investment by a non-Canadian on grounds that it could be injurious to Canadian national security. The NSR process may be invoked with respect to either: (i) a controlling or a minority investment in, or an acquisition of assets of, a Canadian business, or (ii) the acquisition of any portion of an entity that has a place of operations in Canada, employees in Canada or assets in Canada used in carrying on its Canadian operations. No minimum financial threshold applies for an investment to be subject to an NSR. The Canadian government has prescribed time periods (described below) within which it must initiate an NSR process. These time periods may be initiated with the filing of a notification or the implementation of the investment, permitting the government to undertake an NSR on a post-closing basis. Pending regulations will implement a new mandatory preclosing notification regime for certain types of investments in specified sensitive sectors that may raise national security concerns. Under the NBR framework, an acquisition of control of a Canadian business by a non-Canadian is either notifiable or reviewable. This will depend on the value of the Canadian business being acquired, who owns the non-Canadian investor prior to the acquisition, and whether the Canadian business is a “cultural business.” As monetary thresholds for NBRs of most types of transactions have substantially increased over time, relatively few transactions have been subject to preclosing NBRs in recent years. An NBR notification , when required, may be made either prior to closing or within 30 days of closing. It requires basic information concerning the acquisition, the investor and the acquired Canadian business. Notification does not itself represent an impediment to closing an acquisition and, apart from cultural businesses, the government does not currently have the ability to “call in” notifiable investments for review under the NBR framework. However, except in very limited circumstances, an acquisition that is subject to preclosing review under the NBR framework may not be completed until and unless the Minister of Industry or, in the case of an acquisition of a cultural business, the Minister of Canadian Identity and Culture (the Minister, as applicable), is satisfied that the acquisition is likely to be of net benefit to Canada. The ICA also requires non-Canadians to file a notification of an investment to establish a new Canadian business. Any such establishment may be subjected to an NSR and, in certain limited circumstances, the establishment of a new Canadian cultural business (or an acquisition of a Canadian cultural business below the applicable NBR threshold) may also be subject to an NBR.

Who is a “Non-Canadian”? A “non-Canadian” is an individual, government, 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 but 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 may deem such shares to be owned by the partners, joint venture members or beneficiaries, respectively. This “look through” principle does not apply to shares owned by corporations. Determining whether shareholders are Canadian may be practically impossible in the case of a widely held corporate investor, in which case the determination may be based on the citizenship or permanent resident status of the members of the investor’s board of directors. In this case, a corporation would be “Canadian” only if it is not controlled in fact by a non-Canadian (or a voting group of non-Canadians) through ownership of its voting shares, and at least two-thirds of the members of its board of directors are Canadians. An equivalent rule applies to limited partnerships whereby a widely held limited partnership is “Canadian” if it is not controlled in fact by a non-Canadian (or a voting group of non-Canadians) through ownership of its limited partnership interests, and at least two-thirds of its general partners are Canadians. The ICA also contains additional rules for determining whether partnerships and trusts are “Canadian.” In the context of NSRs, investments by state-owned enterprises or acquisitions of cultural businesses, the Minister may determine an entity that otherwise qualifies as a Canadian to be a non-Canadian if it is controlled in fact by non-Canadians.

What constitutes a “Canadian Business” or a “Canadian-Linked Entity”? 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. The NBR process applies only to acquisitions of control of Canadian businesses by non- Canadians. The NSR framework, on the other hand, may apply more broadly to not only an acquisition of control of a Canadian business, but also to any acquisition “in whole or in part” of an entity that carries on all or any part of its operations in Canada and has (i) a place of 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. However, 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. 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

Partnerships, Trusts or Joint Ventures

Corporations

Majority

Acquisition of control

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

One-third or more, but less than a majority

No acquisition of control

Less than one-third

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 determine that an investment by an SOE constitutes an acquisition of control in fact even if the investment does not otherwise meet the definition of an acquisition of control. As discussed below, acquisitions by SOEs attract generally lower thresholds for an NBR, and the government has issued some policy statements regarding NSRs and NBRs of investments by SOEs. What are the available exemptions? Certain acquisitions of control that are subject to approval under specified federal legislation governing banks and some other financial institutions are exempt from both NBRs and NSRs. The ICA also contains several additional exemptions from NBR review (but not NSR review), including, most notably, mergers and corporate reorganizations following which the ultimate direct or indirect control of the Canadian business through the ownership of voting shares remains unchanged. Other NBR exemptions include acquisitions of control pursuant to (i) ordinary course provisions of venture capital under certain conditions, (ii) trading in securities in the ordinary course of a person’s business, and (iii) the facilitation of short-term financing where certain conditions are met.

National Security Review Scope and Process The federal Cabinet may, on the recommendation of the Minister of Industry (after consultation with the Minister of Public Safety and Emergency Preparedness), order an NSR when there has been or is proposed to be – a n establishment of a new Canadian business or a Canadian-linked entity; – a n acquisition of control of a Canadian business; or – a n acquisition, “in whole or in part,” of a Canadian-linked entity. Once recent amendments to the ICA are proclaimed in force, – the ICA will expressly provide that an NSR is available for an investment to acquire, in whole orin part, the assets of a Canadian-linked entity; and – a n NSR may be ordered in respect of an acquisition by a non-Canadian SOE of any of the assets of a Canadian business. An investment does not need to exceed any monetary threshold for the government to conduct an NSR. NSR Timing An NSR is carried out by the Minister of Industry (the Minister) in consultation with the Minister of Public Safety. They consult with a wide range of other federal government departments with security, intelligence and investigative perspectives. The Minister has 45 days following the filing of a mandatory or voluntary notification or an application for an NBR, or up to five years following the implementation of a transaction not subject to notification or an NBR (e.g., minority investments for which no voluntary notification was filed), to issue a notice to a non- Canadian that its proposed investment may be subject to an NSR. Alternatively, the Minister may simply initiate an NSR within that same time period without first sending a notice of a potential NSR. The entire NSR process can take up to 200 days, or more if the review period is extended. If the Minister issues a notice of a potential or actual NSR in respect of a proposed investment that has not yet been implemented, the proposed investment cannot be implemented until the NSR process is terminated, or closing is approved. NSR Resolution Three outcomes are possible in the event of an NSR. First, the Minister may determine that the investment will not be injurious to national security, in which case the NSR will terminate or lapse, and a proposed investment can proceed. Second, the Minister may negotiate binding

undertakings with the investor to address national security concerns, as a result of which the Minister determines that the investment will not be injurious to national security. Third, the Minister may determine that the investment would be injurious to national security, in which case the matter is referred to the federal Cabinet, which is authorized to take any measures that it considers advisable to protect national security, including imposing conditions on the investment or the outright prohibition of a proposed investment (or divestiture in the case of a completed investment). In the context of establishments of new Canadian businesses, the investor may be ordered to wind up the Canadian business. The Minister may also impose interim conditions during an NSR, such as orders to maintain a Canadian business separate from the investor and limit an investor’s access to sensitive intellectual property and data of a Canadian business pending the outcome of an NSR.

Substantive NSR Considerations

Although the ICA does not define the concept of “national security,” the Canadian government’s National Security Review Guidelines (NSR Guidelines) confirm that it includes consideration of an investment’s potential impacts on the following:

1. Canada’s defence capabilities and interests;

2. the transfer of sensitive technology or know-how outside Canada: Canada’s Sensitive Technology List identifies areas of advanced technology with potential national security implications in relation to digital infrastructure, energy, surveillance, space, artificial intelligence and life science, among others;

3. SOE access to sensitive personal information, including through interactive digital media;

4. the supply of critical goods and services;

5. critical minerals, and all stages of the critical minerals value chain: Canada’s Critical Minerals List currently contains 34 minerals and metals, including aluminium, copper, lithium, magnesium, potash and nickel, uranium and zinc; 6. critical infrastructure: Canada’s National Strategy for Critical Infrastructure highlights, among other things, energy and utilities; finance; food; transportation; government; information and communication technology; health; water; safety; and manufacturing; and

7. Canada’s economic security, including impairment of Canadian supply chains.

ICA national security considerations may also involve whether the investment could enable foreign surveillance or espionage; hinder Canadian intelligence, law enforcement operations or foreign relations; facilitate criminal activity; or enable access to sensitive personal data more generally. An investor’s previous conviction of an offence involving corruption, whether in Canada or elsewhere, may also raise national security concerns. Acquiring a business or property in close proximity to sensitive government facilities could also raise national security concerns.

The investor’s status or affiliation is an important consideration in an NSR. For example, national security concerns are more likely to be raised where (i) the investor is controlled by persons in a state hostile to Canada or its allies, or (ii) the investor is an SOE, in particular where management and decisions are not exercised independently of the relevant state. Furthermore, the degree of control or influence exercised by the investor over the Canadian business is likely to inform the government’s national security risk assessment. Passive investments, investments in which ultimate control rests with another entity, or investments that do not enable the investor to access sensitive confidential information about the Canadian business or its operations may be mitigating factors, even if the business acquired or products produced are of strategic importance. In this regard, the government may look to the level of ownership interest; the rights of shareholders (e.g., whether the investor has a veto power); board representation or other ability to influence strategic decision-making; control over the day-to-day management and operations; and financial and commercial arrangements (e.g., investor rights triggered by default of contractual obligations) to assess the degree to which a Canadian business may be controlled or influenced by the investor and the ability of the investor to access sensitive confidential information. Depending on the particular circumstances, conditions or commitments for NSR clearance – short of a prohibition or full divestiture of a Canadian business – could potentially include the following:

1. excluding sensitive business segments or assets from a transaction;

2. maintaining a Canadian presence on affiliate corporate boards;

3. maintaining existing Canadian patents;

4. investing in modernization of Canadian facilities;

5. requiring that all servicing and support for some business lines be conducted in Canada;

6. establishing approved security protocols to safeguard information and data or access to sensitive sites;

7. appointing a security-cleared compliance officer to monitor and report on compliance;

8. requiring third-party compliance audits on request;

9. permitting facility access to the government for compliance inspections;

10. notifying the Minister of new prospective employees who would have access to sensitive information or technology as a part of their job description; and 11. requiring government approval of proposed business locations to avoid proximity to strategic assets.

Enforcement of the NSR Provisions In the government’s 2024-25 fiscal year, Canada conducted 30 NSRs that extended beyond an initial assessment or “triage” period. Six of those cases resulted in the investor abandoning the transaction or being subjected to a divestiture order, and NSR clearance was conditional on compliance with investor commitments in six other cases. From time to time, investors or Canadian businesses have reported that potential transactions were abandoned because the government expressed national security concerns without having initiated a formal NSR process. Details of NSRs are often not made public, but limited disclosure in recent years indicates that NSRs have considered investments in a wide range of sectors. While some sectors obviously attracted potential national security concerns – for example, metal ore mining, data processing, computer systems design, and scientific research and development services – others were less obvious (e.g., grocery stores, taxi and limousine services, and schools and instruction). This diverse range underscores the discretionary and at times unpredictable nature of the NSR process. A 2020 policy statement issued at the outset of the COVID-19 pandemic (COVID Policy) stated that all foreign investments by SOEs or private investors assessed as being closely tied to or subject to direction from foreign governments would be subject to enhanced scrutiny, including under the NSR provisions, because depressed valuations of Canadian businesses might lead to opportunistic or predatory investment behaviour. Although the policy was stated to apply only until the Canadian economy recovered from the effects of the COVID-19 pandemic, the subsequent NSR Guidelines confirmed that such investments will continue to be subject to enhanced scrutiny under the NSR process. The Guidelines clarify more generally that the potential for an investment to undermine Canada’s economic security through enhanced integration of the Canadian business with the economy of a foreign state is a relevant factor in assessing an investment’s impact on Canadian national security.

Investments by SOEs and other investors from China and Russia have been subject to particular scrutiny under the NSR framework. A 2022 policy statement on foreign direct investment in Canada by Russian entities or investors (Russia Policy) was issued in response to the Russian invasion of Ukraine. The policy states that direct or indirect ties between an investment and individuals or entities associated with, controlled by or subject to the influence of the Russian state will support a finding by the Minister that reasonable grounds exist to believe that the investment could be injurious to Canada’s national security. A 2022 policy statement on critical minerals indicates that the participation by a foreign SOE in an investment in the critical mineral sector in Canada, regardless of value or ownership interest, will support a finding that the investment could be injurious to Canada’s national security. Under that policy, the Canadian government has blocked or unwound at least six investments by Chinese SOEs in the critical minerals sector. Although the discretionary nature of the NSR provisions, including the lack of a definition of “national security” and the potentially long time frames for review, may create considerable uncertainty regarding the application of the ICA for certain foreign investments in Canada, some recent developments signal a relatively greater flexibility and pragmatism in NSR reviews. – In early 2026, the government announced a new strategic partnership with China with a view to accelerating Chinese investment opportunities in Canada. The Minister of Energy also publicly commented that the government is open to more investment by China in the oil sands sector. While national security reviews are likely to remain rigorous and important, including for Chinese SOE investments, the government may be relatively more inclined to grant ICA clearance of Chinese minority investment alongside other investors. – T he government’s 2026 decision to permit TikTok to continue to operate in Canada, reversing a 2024 NSR order to wind up TikTok’s Canadian operations, may indicate that the government is relatively more amenable to allowing investments to proceed with commitments to address NSR concerns rather than blocking the investment or requiring divestiture or cessation of operations. (That said, a 2025 order that Hikvision, a Chinese manufacturer of video surveillance equipment, wind up its Canadian operations appears to remain in effect.) Voluntary Notifications under the NSR Framework In 2022, the government introduced a voluntary NSR preclearance filing mechanism for investments that are not captured by the mandatory NBR process (including minority investments). Following receipt of a complete voluntary notification, the Minister has an initial 45 days to determine whether to pursue a full NSR (subject to a right to extend this period by a further 45 days). If the non-Canadian investor does not utilize the voluntary filing option, the Minister may commence an NSR at any time prior to closing and for up to five years after the implementation of the investment. As a result, non-Canadian investors who are not otherwise required to submit an application for an NBR or a notification of an investment in a Canadian business may voluntarily notify FIRES if they want to obtain certainty that an NSR process will not be subsequently undertaken.

Pending Preclosing Notice Requirements under the NSR Framework Amendments to the ICA passed by Parliament, but not yet proclaimed in force, will introduce a new mandatory preclosing notification regime for investments in specific sectors to be prescribed. Draft regulations identifying these sectors have not yet been released, but they are expected to reflect the business activities highlighted in the NSR Guidelines. The pending amendments will require non-Canadian investors to notify the Minister of the investment in advance of implementation of either – a n acquisition of control of a Canadian business carrying on a prescribed business activity that is not subject to an NBR – that is, indirect acquisitions of control and acquisitions of control below the applicable monetary thresholds summarized below under Monetary Thresholds for NBRs; or – a n acquisition, in whole or in part, of a Canadian-linked entity carrying on a prescribed business activity if the investor would acquire (i) access to, or direct the use of, material non-public technical information or material assets, (ii) the power to appoint or nominate a person with the capacity to direct the business and affairs of the Canadian-linked entity, such as a member of the board of directors or senior management, a trustee or a general partner, or (iii) any other types of special rights that may be prescribed. The government will prescribe a minimum waiting period following such a notification before implementation can occur. If the Minister initiates an NSR process in that period, the investment cannot be implemented until the NSR process is terminated or the investment is approved.

Net Benefit Review Scope and Process

Which NBR Threshold Will Apply? Acquisitions of control of Canadian businesses are subject to an NBR if they exceed certain prescribed monetary thresholds. If the relevant thresholds are not exceeded, the foreign investor need only submit a notification preclosing or within 30 days of closing. Investments to establish a new Canadian business (other than a cultural business) are also not subject to an NBR; the only requirement under the NBR framework for such investments is to submit a notification. The applicable threshold for an NBR depends upon several considerations, including the following: – Is the foreign investor or the Canadian business that is being acquired ultimately controlled by “trade agreement investors”? – Is the foreign investor or the Canadian business that is being acquired ultimately controlled by

World Trade Organization (WTO) investors? – Is the acquisition of control direct or indirect? – Is the foreign investor an SOE? – Is the Canadian business a cultural business?

Trade Agreement Investors In general, individuals will be “trade agreement investors” if they are nationals of a country (other than Canada) that is a “trade agreement country” – namely, a country that has a trade agreement with Canada. Currently, the list of trade agreement countries includes Australia, Brunei, Chile, Colombia, Honduras, Japan, Malaysia, Mexico, New Zealand, Panama, Peru, Singapore, South Korea, Ukraine, the United Kingdom, the United States, Vietnam, and the European Union and its member states. (This list may change as the Canadian government enters or exits trade agreements.) Further, a corporation or other entity will be a trade agreement investor if it is ultimately controlled by one or more trade agreement investors. A widely held public company will generally be a trade agreement investor for the purposes of the ICA if (i) a majority of the voting shares of the company are owned by trade agreement investors; or (ii) no person or voting group controls the company, and at least two-thirds of the members of the company’s board of directors are any combination of trade agreement investors and Canadians. WTO Investors In general, individuals will be WTO investors if they are nationals of countries (other than Canada) that are members of the WTO or have a right of permanent residence in a WTO member country. Similarly to the definition of a trade agreement investor, a corporation or other entity will be a WTO investor if it, in turn, is ultimately controlled by one or more WTO investors.

A widely held public company will generally be a WTO investor for the purposes of the ICA if (i) a majority of the voting shares of the company are owned by WTO investors; or (ii) no person or voting group controls the company, and at least two-thirds of the members of the company’s board of directors are any combination of WTO investors and Canadians. Indirect Acquisitions Generally, an “indirect acquisition” for the purposes of the ICA occurs if an investor is acquiring control of a corporation that is incorporated outside Canada that directly or indirectly controls an entity in Canada carrying on a Canadian business. Cultural Businesses The acquisition of a Canadian cultural business is subject to lower NBR thresholds for the purpose of, among other things, promoting Canadian content and cultural participation, as well as strengthening connections among Canadians. A “cultural business” includes a business that carries on any of the following activities: (i) publication, distribution or sale of books, magazines, periodicals or newspapers in print or machine-readable form, other than the sole activity of printing or typesetting; (ii) production, distribution, sale or exhibition of film or video recordings (including video games); (iii) production, distribution, sale or exhibition of audio or video music recordings; (iv) publication, distribution or sale of music in print or machine-readable form; and (v) any radio communication in which the transmissions are intended for direct reception by the general public and any radio, television and cable television broadcasting undertakings as well as any satellite programming and broadcast network services. The ICA does not include any express de minimis exception to the determination whether a business is a cultural business. A business may be considered a cultural business even if its cultural activities represent only a small part of its overall operations. The Canadian government has also generally treated the production or supply of video games and interactive digital media as cultural businesses. Moreover, the federal Cabinet may subject an acquisition of control of a Canadian cultural business to an NBR even if the acquisition does not exceed the relevant NBR monetary threshold. Monetary Thresholds for NBRs A non-Canadian’s acquisition of control of a Canadian business that exceeds the applicable monetary threshold set out below will be subject to an NBR under the ICA. The thresholds for investments by or from trade agreement investors, WTO investors and SOE WTO investors are adjusted annually on the basis of changes in Canada’s GDP.

Monetary Thresholds for NBRs, 2026

Trade Agreement Investor (Non-SOE)

Acquisitions Involving a Cultural Business

WTO Investor (Non-SOE)

WTO Investor (SOE)

Non-WTO Investor

C$578 million (book value of assets)

C$2.179 billion (enterprise value)

C$1.452 billion (enterprise value)

C$5 million (book value of assets)

Direct Acquisition

Indirect Acquisition (through

C$50 million (book value of assets) (Application for NBR can be filed post-closing)

C$50 million (book value of assets)* (Application for NBR can be filed post-closing)

Not reviewable (unless acquisition involves a cultural business)

acquisition of a non-Canadian corporation)

* F or an indirect acquisition of a cultural business, a lower threshold (C$5 million) applies when the value of the worldwide assets of the Canadian business being acquired exceeds 50% of the value of all assets being acquired. The federal Cabinet also has a discretionary power to order NBRs for acquisitions of cultural businesses below these thresholds where it determines such a review to be in the public interest.

More complex rules may apply to acquisitions of only non-corporate entities.

“Enterprise value” and “asset value” are calculated according to detailed formulae set out in the Investment Canada Regulations. The formulae vary depending on the structure of the transaction (share or asset acquisition) and, in the case of share acquisitions, whether the acquired entity is publicly traded. Recent amendments to the ICA that have not yet been proclaimed in force would authorize the federal Cabinet to subject an acquisition of control by an SOE (other than a trade agreement investor) to an NBR irrespective of the value of the investment if the Cabinet determines that such an NBR is in the public interest. Under the NBR framework, apart from the Canadian government’s ability to “call in” for review below-threshold acquisitions of control of cultural businesses and the government’s pending ability to do the same for acquisitions of control by certain SOEs, a non-Canadian’s acquisition of control of a Canadian business that does not exceed these thresholds is subject only to notification. Very few NBRs have been conducted each year relative to the number of notifications: over the five reported years between 2020-25, on average, over a thousand notifications were made annually under the NBR framework, and only about six applications for an NBR are filed each year.

Assessment Factors for Net Benefit to Canada If a proposed acquisition is subject to an NBR, the Minister must be satisfied that it is likely to be of net benefit to Canada before the investment may proceed. The ICA requires the Minister to consider certain factors, including (i) the effect of the acquisition on the level and nature of economic activity in Canada (including employment, resource processing and utilization of parts and services produced in Canada and exports from Canada); (ii) the degree and significance of participation by Canadians in the Canadian business in particular and in the relevant industry in general; (iii) the effect of the investment on productivity, industrial efficiency, technological development, product innovation and product variety in Canada; (iv) the effect of the investment on competition in the relevant industries in Canada; (v) the compatibility of the investment with Canadian industrial, economic and cultural policies, taking into account the policy objectives of affected provinces; (vi) the effect of the investment on the use and protection of personal information about Canadians; and (vii) the effect of the investment on Canada’s ability to compete in world markets. When FIRES or Canadian Heritage receives an application for an NBR, it will consult with all the provinces in which the Canadian business has assets or employees, as well as federal government departments with relevant expertise or interests. Independent of its jurisdiction under the Canadian Competition Act , the federal Competition Bureau is charged with providing advice to the Minister regarding the effect of the investment on competition in relevant industries in Canada. Interested private parties or industry stakeholders may also make submissions and advocate for the Minister to take certain actions or seek certain commitments as part of an NBR. NBR Undertakings To establish a likely net benefit to Canada in an NBR review, the Minister usually requires undertakings from the investor. NBR undertakings are typically five years in duration, although the duration of any specific undertaking is subject to negotiation between the investor and the Minister. Typical undertakings relate to maintaining certain employment levels in Canada, guaranteeing participation of Canadians as directors and in management of the Canadian business,

processing resource products in Canada, making capital expenditures or investing in research and development in Canada, making community and charitable contributions, and transferring to or maintaining technology or intellectual property rights in Canada. For reviews involving the acquisition of a cultural business, the Minister of Canadian Identity and Culture may also require the investor to commit to promoting, distributing and marketing Canadian content and cultural products, ensuring that Canadians continue to participate in the cultural business, and contributing to cultural initiatives in Canadian communities. ICA guidelines for NBRs of investments by SOEs (SOE Guidelines) state that such NBR reviews will also focus on whether the investor adheres to Canadian standards of corporate governance (such as commitments to transparency and disclosure, and independence of board and audit committee members) and whether the Canadian business will continue to operate on a commercial basis (for example, with respect to where the Canadian business will process and export its products). Additional ICA guidelines recognize that NBR undertakings are based to some extent on projected circumstances, and state that, where inability to fulfill an undertaking is clearly the result of factors beyond the control of the investor, the investor will not be held accountable. That said, where there is an issue regarding compliance with an undertaking, the ICA allows the Minister to accept a new or “replacement” undertaking. In one case, the Canadian government sued an investor in court for alleged non-compliance with ICA undertakings given in an NBR. The matter was eventually settled, with the investor providing new enhanced undertakings relating to employment and production levels at the acquired Canadian business. NBR Timing For NBRs, within 45 days of receipt of a completed NBR 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, average review times for NBRs have ranged from about 70 to 100 days, with some high-profile transactions taking much longer. That said, the Teck Resources/Anglo American merger received NBR clearance within about three months of announcement in September 2025, notwithstanding that it involved an acquisition of a major Canadian company in the critical minerals sector. If the Minister has advised the investor that he or she is not satisfied that the investment is likely to be of net benefit to Canada, the investor has an additional 30 days (or any longer period that may be negotiated) to make further representations and submit additional undertakings. Generally, the ICA prohibits the implementation of an investment subject to an NBR until the completion of the Minister’s review. While rarely invoked, the ICA allows closing before completion of an NBR if the Minister is satisfied that the delay in implementing the acquisition would result in undue hardship to the non-Canadian investor or would jeopardize the operations of the Canadian business that is the subject of the investment. Nevertheless, even if closing before completion of the NBR is permitted, subsequent divestiture could be required if the Minister is not ultimately satisfied that the transaction is likely to be of net benefit to Canada.

Enforcement of the NBR Provisions Acquisitions are rarely refused approval under an NBR – since the ICA came into force in 1985, only two proposed acquisitions in non-cultural sectors have resulted in ministerial decisions that the transaction failed to meet the net benefit standard. In 2008, the Minister denied approval of a proposed C$1.325 billion acquisition by Alliant Techsystems Inc. of the space division of MacDonald, Dettwiler and Associates Ltd. In 2010, the Minister announced that BHP Billiton’s unsolicited C$38 billion offer to acquire Potash Corporation of Saskatchewan Inc. was not likely to be of net benefit to Canada. However, government policy statements or initial feedback during an NBR may have either deterred some investments from being proposed at all or prompted parties to abandon proposed transactions before forcing the Minister to make a formal NBR decision. FIRES and Canadian Heritage have issued policies with respect to the application of the NBR criteria to some specific sectors, including critical minerals, book publishing, films and video games. They have also issued guidelines relating to NBRs involving certain categories of investors. SOEs have been a particular focus of such NBR guidance. Other government NBR policies provide that investments by foreign SOEs to acquire control of a Canadian oil sands business (2012) or important Canadian mining companies with core assets in the critical minerals sector (2022) will be found to be of net benefit on an exceptional basis only. The oil sands policy noted more broadly that the Minister will carefully monitor SOE transactions throughout the Canadian economy. The oil sands policy was prompted by the US$15.1 billion acquisition of Nexen by China’s CNOOC. As noted above, however, more recently the government has undertaken initiatives to increase investment from China generally and specifically indicated that the government is open to more investment by China in the oil sands sector. Pursuant to the Russia Policy, only on an exceptional basis would the Minister find an acquisition of control of a Canadian business by a direct or indirect Russian investor to be of net benefit to Canada. Having regard to the COVID Policy, concerns about opportunistic foreign investments by SOEs or private investors closely tied to or subject to direction from foreign governments taking advantage of depressed valuations of Canadian businesses could lead to enhanced scrutiny under NBRs in similar challenging economic circumstances.

Illustration of NSR and NBR Timing

The following chart illustrates the timelines for NSR and the NBR processes. Notably, both an NSR and an NBR can be conducted in parallel with respect to the same transaction. Investment Canada Act (ICA) : Review Timing

NET BENEFIT REVIEW

NATIONAL SECURITY REVIEW

ICA application for review filed

ICA application for review or notification filed

DAY 45 45-day assessment period expires Minister may allow

DAY 45 45-day waiting period expires Minister may extend 30 days (or longer on consent) Waiting period pauses if a national security review begins

period to lapse, extend 45 days or issue formal review order

Day 75 (or longer) Net benefit review and/or undertakings decision

If Minister is not satisfied, investor has 30 days for additional representations and/or undertakings

DAY 90 Second assessment period expires Minister may order review

Net Benefit Decision

DAY 135 Minister extends review by 45 days (or longer on consent)

Day 180 (or longer) Decision referred to Cabinet

National Security Decision

Prohibitions and Remedies The Minister may apply to a court to sanction a non-Canadian investor for, among other things, (i) failing to file a required notification or application for review; (ii) implementing an investment that has not received the necessary approval or has been prohibited; (iii) failing to provide information requested by the Minister; (iv) failing to divest as required; or (v) failing to comply with undertakings or conditions imposed on an investment. Available sanctions for non-compliance with the ICA include compulsory divestiture, revocation or suspension of voting rights, and financial penalties up to C$25,000 for each day the non-Canadian is in breach of the ICA. Once pending amendments contemplating prescribed business activities that may trigger mandatory preclosing NSR clearance are proclaimed in force, courts will be empowered to impose penalties of up to C$500,000 (or such greater amount as may be prescribed) for failure to file a requisite notice or application.

If you are interested in receiving more information, please contact us or visit our website at www.dwpv.com. The information in this guide should not be relied upon as legal advice. We encourage you to contact us directly with any specific questions. Key Contacts

Anita Banicevic abanicevic@dwpv.com 416.863.5523

John Bodrug jbodrug@dwpv.com 416.863.5576

Jim Dinning jdinning@dwpv.com 416.367.7462

Elisa Kearney ekearney@dwpv.com 416.367.7450

Charles Tingley ctingley@dwpv.com 416.367.6963

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