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.
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