04. Competition and Antitrust Legislation Canada’s antitrust regime does not impose notification or government-clearance obligations at the early stake-building stage by an activist and does not, unlike the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act) in the United States, distinguish between shareholders with passive intent and those with an intention to effect change in the policies of the target company. In Canada, notification under the Competition Act is not required until the acquirer acquires more than 20% of the target company’s voting shares, and notification under Canada’s Investment Canada Act (ICA) is not required for an acquisition of less than a one-third voting interest in a Canadian business. In contrast, in the United States, the HSR Act can work, in effect, as an early warning system requiring notification to the target and government clearance at the early stake-building stage and a lengthy moratorium on purchases after the filing with the regulatory authority — even where the target is a Canadian company. The notification regime under the HSR Act is largely based on (i) the value of voting securities of the target company to be held as a result of the transaction, (ii) the size of the parties and (iii) whether the target company is considered a foreign issuer or a U.S. issuer. A Canadian company may be considered either a foreign issuer or a U.S. issuer; it is a foreign issuer if it is not incorporated in the United States and does not have its principal offices there. The term “principal offices” is not defined, but longstanding guidance explains that the principal office should be “that single location which the person regards as the headquarters office of the ultimate parent entity. This location may or may not coincide with the location of its principal operations.” For 2023, notification may be required for an acquisition of voting securities of a U.S. issuer where (i) the acquirer will hold voting securities of the target company valued in excess of US$445.5 million or (ii) the acquirer will hold voting securities of the target company valued in excess of US$111.4 million and one party to the transaction has total assets or annual net sales in excess of US$222.7 million and the other party has total assets or annual net sales in excess of US$22.3 million. These thresholds are adjusted annually. An acquisition of voting securities of a foreign issuer is subject to the same thresholds. However, in addition, thresholds relating to the value of the target company’s U.S. assets or sales apply. For 2023, this threshold requires that the foreign issuer have U.S. assets or annual sales of at least US$111.4 million. Furthermore, if the purchaser is also a foreign person, no notification is required unless the transaction will confer control over the target foreign issuer. If the applicable thresholds are satisfied, the investor is required to make a filing with the U.S. antitrust agencies (the Federal Trade Commission and the Antitrust Division of the Department of Justice) and to not acquire control of the target company or voting securities of the target company in excess of the US$111.4 million threshold until the expiry of the applicable waiting period (generally 30 days after the notice has been filed).
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Davies | dwpv.com
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