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
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
No acquisition of control
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