Two key financial thresholds relevant to the review of proposed transactions under Canada’s Competition Act and Investment Canada Act were recently confirmed for 2020 as a result of annual adjustments.
1. Competition Act
On April 1, 2020, the Competition Bureau announced that the “size of transaction” threshold would remain unchanged from its 2019 level, staying at CA$96 million for the remainder of the year.1 While the Minister of Innovation, Science and Economic Development (ISED) generally increases the size of transaction threshold in the first weeks of a new year as a result of a GDP-based indexing formula, the Minister is also permitted to refrain from adjusting the threshold, which results in the previous year’s threshold applying. We note that the Minister’s decision to maintain the former threshold comes in the midst of the COVID-19 pandemic and the economic uncertainty engendered by the public health crisis. The last time a Minister refrained from adjusting the size of transaction threshold was 2010, during a global recession, and the indexing formula would have resulted in the threshold decreasing from the year prior.
Under the Competition Act, parties to transactions over certain financial thresholds must notify the Competition Bureau in advance of closing and pay a $75,055.68 filing fee.2 While these thresholds vary by type of transaction, in 2020, a transaction will generally require notification if it is above both of the following thresholds:
- The target’s assets in Canada, or revenues from sales generated from those assets, exceed $96 million; and
- The assets in Canada or revenues in, from or into Canada, of all of the parties to the transaction and their affiliates, on a combined basis, exceed $400 million.
2. Investment Canada Act
On February 15, 2020, the government also published increased 2020 Investment Canada Act thresholds for review of various categories of transactions in which non-Canadian investors may acquire control of Canadian businesses. If the threshold regarding any particular transaction is exceeded, the relevant Minister (either the Minister of ISED or the Minister of Canadian Heritage, depending on whether the target business is involved in a “cultural business”) must review and approve the transaction based on whether the investment results in a “net benefit to Canada.”
Private sector trade agreement investments in non-cultural businesses
For direct acquisitions of Canadian businesses by private sector investors from certain countries with a free trade agreement with Canada (currently, EU member countries, the United States, Mexico, Australia, Japan, New Zealand, Singapore, South Korea, Chile, Peru, Colombia, Panama and Honduras), the threshold has increased from $1.568 billion to $1.613 billion, measured by the enterprise value of the target Canadian business.3 Indirect acquisitions by these investors are not subject to review.4
Private sector World Trade Organization (WTO) investments in non-cultural businesses
For direct acquisitions by other private sector WTO investors, the government increased the threshold from $1.045 billion to $1.075 billion in enterprise value. As with trade agreement investors, indirect acquisitions by these investors in non-cultural businesses are not subject to review.
State Owned Enterprise (SOE) WTO investments
The government raised the review threshold for direct acquisitions of a non-cultural Canadian business by an SOE of a WTO member country from $416 million to $428 million in the book value of the target’s assets.
Non-WTO investments and investments in cultural businesses
For direct acquisitions of cultural businesses (such as those involving the production, publication, distribution, sale or exhibition of books, magazines, film and music recordings), and direct acquisitions of non-cultural businesses by investors from the few countries that are not WTO members, the threshold remains unchanged at $5 million in book value of the target’s assets. Indirect acquisitions of cultural businesses and indirect acquisitions of non-cultural businesses by non-WTO investors are subject to a $50 million threshold, based on the book value of the target’s assets.5
For more information, please contact a member of Dentons’ Competition and Foreign Investment Review group.
For the latest information and developments in regulatory law across Canada, see our Canada Regulatory Review blog.