The Canadian government recently announced changes to monetary thresholds to see if a regulatory review is required Competition law and Investment Canada Act. If a transaction exceeds the applicable money and control thresholds under these Articles of Association, the parties to the transaction must file a request and undergo a review before the transaction can be completed.
Given the technical nature of the regulations and the agencies’ ability to review transactions before or after they close, it is important to check with your Canadian attorney to assess what thresholds apply even if they don’t meet the relevant thresholds.
COMPETITION ACT
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A transaction is usually auditable when both the “transaction size” and “party size” thresholds are exceeded.
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The transaction size threshold has been lowered from $ 96 million in 2020 to $ 93 million for the remainder of 2021. This threshold is based on the book value of the assets of the target company and its subsidiaries in Canada or the gross income from sales in or from Canada generated by those assets.
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A reduction in the transaction size threshold is unusual; however, it is indexed to nominal GDP, which was adversely affected by COVID-19 in 2020.
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The party size threshold remains unchanged at $ 400 million. This threshold is based on the book value of the assets in Canada of all parties to the transaction (including their affiliates) or their gross income from sales to, from or to Canada.
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The competition bureau has one year from closing to review and contest mergers, even if they do not exceed the applicable thresholds.
INVESTMENT CANADA ACT
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the Investment Canada Act applies to all investments in Canadian companies by non-Canadian investors, regardless of whether the investment is made directly or indirectly through an investment in a non-Canadian parent company.
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The threshold that determines whether a review is required depends on the nationality of the buyer, whether the buyer is a government company, and whether the Canadian company is a cultural company.
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The threshold for investors based in countries with a trade agreement with Canada decreased from $ 1.613 billion to $ 1.565 billion in enterprise value. The threshold for investors based in other World Trade Organization countries decreased from $ 1.075 billion to $ 1.043 billion in enterprise value.
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State-owned corporate investors from World Trade Organization countries also saw the book value of the acquired Canadian company’s assets decrease to $ 415 million (down from $ 428 million).
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The threshold for investing in Canadian cultural companies remained the same: $ 5 million in assets of the Canadian target company for direct acquisitions and $ 50 million in assets of the Canadian target company for indirect acquisitions.
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Investors will continue to be required to file a notification prior to or up to 30 days after closing to acquire control (or control) below the applicable thresholds and to start new Canadian businesses.
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In addition, there are no monetary or control thresholds for inspections for reasons of national security.
