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The Investment Canada Act, an overview

What is the Investment Canada Act?

The Investment Canada Act (ICA) is a Canadian federal law that governs foreign investment in Canada. The primary purpose of the act is to provide a framework for reviewing and regulating significant investments by non-Canadians in Canadian businesses to ensure they are in the best interest of Canada.

Key features of the Investment Canada Act include:

  1. Review Thresholds: The ICA sets out monetary thresholds that determine when a foreign investment triggers a review. These thresholds are periodically adjusted and vary based on the nature of the investor and the industry involved. Generally, transactions that exceed certain financial thresholds require review and approval by the Canadian government.
  2. Review Process: The act establishes the Investment Review Division within Innovation, Science and Economic Development Canada (ISED). The division is responsible for reviewing foreign investments that meet the applicable threshold requirements. The review process assesses factors such as the impact on national security, the economic benefits to Canada, and whether the investment is likely to be of “net benefit” to Canada.
  3. Net Benefit Test: One of the key considerations under the ICA is the “net benefit” test, which assesses whether a proposed foreign investment is likely to provide a net benefit to Canada. Factors taken into account include the effect on employment, the level of Canadian participation in the business, the impact on productivity and innovation, and the compatibility of the investment with Canadian economic and industrial policies.
  4. National Security Review: The ICA provides provisions for the review of foreign investments on national security grounds. If a transaction raises potential national security concerns, the government has the authority to conduct a separate review to assess and address those concerns.
  5. Remedies and Conditions: If the government determines that a proposed foreign investment does not meet the net benefit test or raises national security concerns, it can impose conditions on the investment or even block it entirely. Conditions may include requirements related to employment, research and development, capital investment, and other commitments deemed necessary to secure the net benefit to Canada.

The Investment Canada Act aims to balance the promotion of foreign investment with the protection of Canadian interests, including national security and economic benefits. It provides a regulatory framework to ensure transparency, review, and oversight of significant foreign investments in Canada.

What is the purpose of the investment Canada Act?

The Investment Canada Act (ICA) serves several purposes related to foreign investment in Canada. Its primary objectives are as follows:

  1. Review and Approval of Significant Investments: The ICA provides a framework for reviewing and regulating significant foreign investments in Canadian businesses. Its purpose is to ensure that these investments are in the best interests of Canada.
  2. Net Benefit to Canada: The ICA includes a “net benefit to Canada” test, which assesses whether a proposed foreign investment is likely to provide a net benefit to Canada. This test considers various factors such as employment, Canadian participation in the business, economic growth, and technological advancements. The aim is to evaluate the potential positive impact of the investment on the Canadian economy and society.
  3. National Security Review: The ICA includes provisions for conducting national security reviews of foreign investments. The government can assess whether a proposed investment could pose potential risks to national security and take appropriate measures to address those concerns.
  4. Transparency and Accountability: The ICA establishes a clear process for foreign investment review, providing transparency and accountability. It ensures that foreign investors and Canadian businesses are aware of the requirements and obligations under the act.
  5. Safeguarding Canadian Interests: The ICA aims to strike a balance between promoting foreign investment and safeguarding Canadian interests. It considers factors such as economic benefits, job creation, industry competitiveness, and national security concerns in its evaluation of foreign investments.

By providing a regulatory framework for foreign investment, the Investment Canada Act seeks to promote economic growth, protect national security interests, and ensure that foreign investments contribute positively to Canada’s economy and society. It helps maintain a balance between attracting foreign investment and protecting Canadian interests in key sectors and industries.


What are the thresholds?

The monetary thresholds under the Investment Canada Act (ICA) determine when a foreign investment triggers a review by the Canadian government. The thresholds are subject to change and may differ based on the nature of the investor and the industry involved. As of my knowledge cutoff in September 2021, the thresholds were as follows:

  1. WTO Investor: For investors from countries that are members of the World Trade Organization (WTO), the review threshold is generally based on the book value of the Canadian target’s assets. If the book value of the Canadian business being acquired exceeds CAD 1.613 billion, a review is required.
  2. Non-WTO Investor: For investors from countries that are not members of the WTO, the review threshold is lower. If the book value of the Canadian business being acquired exceeds CAD 428 million, a review is required.

It’s important to note that these thresholds are subject to change, and there may be specific exceptions or variations for certain industries or circumstances. Additionally, the thresholds may be adjusted periodically based on economic factors and government policies.

It is recommended to consult the official website of Innovation, Science and Economic Development Canada (ISED) or seek professional advice for the most up-to-date information regarding the review thresholds under the Investment Canada Act.

What are approval wait times like with the Investment Canada Act?

The wait times for approvals under the Investment Canada Act (ICA) can vary depending on various factors, including the complexity of the transaction, the nature of the industry involved, and the specific circumstances of the investment. The review process aims to be thorough while also taking into account the need for timely decision-making. Here are some points to consider regarding approval wait times:

  1. Initial Screening Period: Upon the submission of a notification or application under the ICA, an initial screening period takes place. During this period, the government reviews the submission to determine whether it triggers a formal review or is subject to any specific provisions or exceptions. The length of the initial screening period is typically shorter compared to the overall review process.
  2. Timelines for Review: The ICA sets out timelines for different types of reviews. For most transactions subject to a net benefit review, the review period is typically 45 calendar days starting from the date of receipt of a complete application or notification. However, in certain circumstances, the government may extend the review period if additional information is required or if there are national security considerations.
  3. Complex Transactions: Transactions that involve complex issues, potential national security concerns, or significant public interest considerations may require a longer review period. In such cases, the government may initiate discussions with the parties involved to gather more information or negotiate potential remedies or conditions.
  4. Proactive Communication: It is advisable for parties to engage in proactive communication with the Investment Review Division of Innovation, Science and Economic Development Canada (ISED) to ensure a smooth review process. This can help address any concerns or clarifications promptly and potentially expedite the approval process.
  5. Voluntary Extension: In some cases, the parties involved in the transaction may voluntarily agree to extend the review period beyond the prescribed timelines. This can occur when additional time is needed for discussions, negotiations, or the resolution of outstanding issues.

It’s important to note that the actual approval wait times can vary from case to case. Parties seeking approval under the ICA should consult the official guidelines, engage with ISED, and consider seeking legal or professional advice to better understand the specific timelines and requirements applicable to their situation.


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