> The acquisition of less than 1/3 of the voting shares of a corporation is deemed not to be an acquisition of control. > The acquisition of all or substantially all of the assets used in carrying on a Canadian business is an acquisition of control of that business. – Special considerations apply to the acquisition of any interest in a Canadian business by a state-owned enterprise (discussed below). – Less-than-control investments remain subject to scrutiny under the ICA’s national security review jurisdiction. NOTIFICATION – Acquisitions of control that do not exceed the prescribed net benefit review thresholds (discussed below) are rarely reviewable and instead require an informational notification. Notifications may be made up to 30 days after closing. Notifications have the effect of triggering timelines under the ICA’s national security review screening process. – A notification requirement is not currently an impediment to the closing of an acquisition. However: > Given that a notification commences the timelines within which the government may assess an investment on national security grounds, investors may elect to file a notification pre-closing and allow national security screening timeframes to lapse, in order to obtain comfort that the transaction will not be subject to a national security review after closing. > In addition, at the time of writing Parliament is considering draft legislation that would introduce a mandatory pre-closing notification and national security screening process for investments in certain sensitive sectors that have yet to be defined. TRANSACTIONS REVIEWABLE FOR NET BENEFIT TO CANADA: TRADE AGREEMENT AND WTO INVESTORS – A direct acquisition of control by or from a “trade agreement investor” (i.e., an entity ultimately controlled by citizens of a country with which Canada has a trade agreement) is generally reviewable for net benefit to Canada only when the enterprise value of the entity carrying on the Canadian business and all other entities in Canada whose control is being acquired is $1.931 billion or more for 2023 (adjusted annually). Currently, the list of trade agreement countries includes the United States, the European Union and its member states, the United Kingdom, Australia, New Zealand, Japan, South Korea, Singapore, Malaysia, Brunei, Vietnam, Chile, Colombia, Honduras, Mexico, Panama, and Peru. The review threshold is lower, $1.287 billion or more in enterprise value for 2023 (adjusted annually), where the direct acquisition of control is by or from a “WTO investor” (i.e., an entity ultimately controlled by citizens of a World Trade Organization member state) that is not also a trade agreement investor. (The vast majority of Canada’s trading partners are WTO members.) > In the case of an acquisition of control of a Canadian business that is publicly traded,
40
Canadian Mergers & Acquisitions
Powered by FlippingBook