CHAPTER 07 Competition Act, Investment Canada Act and Other Restrictions on Foreign Ownership
the enterprise value of the Canadian business is its market capitalization plus its liabilities (excluding operating liabilities), minus its cash and cash equivalents. Market capitalization is determined on the basis of the average daily closing price of each class of security outstanding multiplied by the average number of that security outstanding, calculated over a prescribed time period. > In the case of an acquisition of control of a Canadian business that is not publicly traded or in the case of an asset acquisition, the enterprise value of the Canadian business is the acquisition value plus assumed liabilities (excluding operating liabilities), minus cash and cash equivalents. – A direct acquisition by or from a WTO investor when the purchaser is a state-owned enterprise (discussed below) is reviewable when the book value of the assets of the entity carrying on the Canadian business and all other entities in Canada whose control is being acquired is $512 million or more for 2023 (adjusted annually). – An indirect acquisition of control by or from a WTO investor is generally not subject to net benefit review, regardless of the value of the Canadian business, but is still subject to notification. – Transactions reviewable for net benefit to Canada must be approved before closing. SPECIAL NET BENEFIT REVIEW THRESHOLDS – Acquisitions of control that do not involve WTO investors (including trade agreement investors) and acquisitions of control of Canadian cultural businesses are subject to lower thresholds for review. > These lower thresholds are (i) $5 million in book value of assets for direct acquisitions; and (ii) $50 million in book value of assets for indirect acquisitions, except that the $5-million threshold applies to indirect acquisitions if the asset value of the Canadian business being acquired exceeds 50% of the asset value of the global transaction. – A “cultural business” includes a business that engages in the publication, production, distribution, exhibition or sale of books, magazines, periodicals, newspapers, film, video or music. > There is no de minimis exception to the determination whether or not a business constitutes a cultural business. For example, department or convenience stores may be cultural businesses if they sell even a few books and magazines. Moreover, the concept of a cultural business may evolve as it has, for example, with respect to certain video game businesses which have in numerous cases been considered to be “cultural businesses” since they involve one or more elements of film, video, audio and music. > In addition, even where the acquisition of a cultural business does not exceed the applicable financial thresholds for a net benefit review such that only a notification is required, the Minister of Canadian Heritage may nevertheless decide to commence a net benefit review within 21 days of receiving a notification. – There is no financial threshold applicable to a national security review (see further details below).
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