Archived — Overview of the Administration of the Investment Canada Act

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The purpose of the Investment Canada Act (Act) is to review significant investments in Canada by non-Canadians to determine whether they are likely to be of net benefit to Canada, and to provide for the review of investments that could be injurious to national security.

Under the Act, when a foreign investor establishes a new Canadian business or acquires control of a Canadian business, the investor must file either an application for review or a notification.

An application for review is required where the book value of the assets of the Canadian business is equal to or above the established threshold. The threshold for review for direct acquisitions by investors from World Trade Organization (WTO) member countries is $330 million for 2012.

A notification is required in one of three situations: the establishment of a new Canadian business; where the assets of the Canadian business being acquired fall below the legislative threshold; or where the transaction is indirect, and a WTO investor proposes to acquire a foreign corporation that has subsidiaries in Canada.

Net Benefit:

Where an investment is subject to review under the Act, the Minister's approval is required prior to it proceeding. The Minister approves applications only where he is satisfied that a proposed investment is likely to be of net benefit to Canada. In making this determination, the Minister considers plans, undertakings and other information submitted by the investor in light of the six net benefit factors listed in section 20 of the Act:

  1. the effect of the investment on the level and nature of economic activity in Canada, including the effect on employment, on resource processing and on the utilization of parts, components and services produced in Canada;
  2. the degree and significance of participation by Canadians in the Canadian business;
  3. the effect of the investment on productivity, industrial efficiency, technological development, product innovation and product variety in Canada;
  4. the effect of the investment on competition within any industry or industries in Canada;
  5. the compatibility of the investment with national and provincial industrial, economic and cultural policies; and,
  6. the contribution of the investment to Canada's ability to compete in world markets.


Industry Canada consults with: the federal departments with policy responsibility for the industrial sector of the Canadian economy involved; the Competition Bureau; and affected provinces or territories. In addition, any person or group that has comments on a specific investment proposal can provide those views to the Minister in writing at any time during the review process.

Guidelines on State-Owned Enterprises

Since 2007, there have been Guidelines under the Act to clarify how it is applied to investors that are state-owned enterprises (SOEs). Under the Guidelines, an SOE is an enterprise that is owned, controlled or influenced – directly or indirectly – by a foreign government. The Guidelines clarify that, as part of the review, the Minister examines whether the investor adheres to Canadian standards of corporate governance and whether the Canadian business, if acquired, will continue to operate on a commercial basis.

Net Benefit Test Timelines:

The Minister has an initial 45 days to make a decision. This timeline begins on the date a full and complete application has been received. If required, the Minister can extend this period by 30 days. In addition, the Minister may send a notice to an investor that he is not satisfied that the investment will be of net benefit, and give the investor an additional 30-day notice to make further representations and/or submit undertakings. Further extensions require agreement of both the Minister and the investor. A review period (including extensions) refers to calendar days and the Minister's decision can be made at any time within the review period. Extensions are not unusual.

Monitoring and Compliance:

The Act requires the investor to provide information to Industry Canada to determine compliance with plans and undertakings. Undertakings are legally binding commitments. The Administrative Guidelines under the Act indicate that an evaluation of the implementation of undertakings is ordinarily performed 18 months after an investment is implemented. Additional evaluations can be performed based on the performance of the investor and the duration of the undertakings.

In April 2012, changes were made to promote investor compliance with undertakings by allowing the Minister to accept security for payment of any penalties ordered by a court for a contravention of the Act. In addition, to establish an alternative to potentially costly and time-consuming litigation, formal mediation procedures were made available under the Act.

Performance is judged in the context of overall results. The Government has many tools at its disposal under the Act to ensure compliance with these undertakings, including mediation, the negotiation of new undertakings, and litigation, which could result in a court order imposing fines of up to $10,000/day, or requiring full or partial dissolution of the investment.

National Security Provisions:

The Government introduced national security provisions in the Act in 2009 to allow it to review proposed investments of any value that could be injurious to national security. As a result, the Governor in Council now has the authority to take any measures it considers necessary to protect national security. The Minister of Industry will be introducing amendments to provide greater flexibility, when it is considered necessary, to extend the time available to conduct national security reviews of proposed foreign investments. These extensions will only be used in exceptional circumstances.


The Act sets out strong protections for information obtained from an investor or a Canadian business. This protection is necessary to ensure that investors are comfortable with providing the Government all the information required to conduct a careful and thorough review, and to prevent harm to both investors and Canadian businesses. The confidentiality requirements are set out in Section 36 of the Act.


In determining whether a transaction is likely to be of net benefit to Canada, the Minister establishes a baseline against which to review a proposed transaction. To do so, he looks at the Canadian business, taking into account its likely prospects on a stand-alone basis, its key strengths, areas requiring improvement and the key business challenges it is facing.

The Minister then looks at what the foreign investor brings to the investment such as capital or expertise that is not accessible to the Canadian business, any legally enforceable undertakings and the investor's plans for the Canadian business.

This information is provided to the Minister by the Director of Investments and includes the investor's plans, written undertakings and other information, as well as representations from affected provinces and territories, the results of the consultations held with other federal government departments and any comments submitted in writing by Canadians.

The Minister considers both the positive and negative effects of a proposed investment in relation to each factor listed in Section 20 of the Act. The Act does not assign set weights to the factors nor does it indicate whether any factor is more important than another in the net benefit determination. As each transaction presents its unique features, the Minister examines proposed investments on a case-by-case basis and makes a decision based on the facts and merits of each proposed investment.

The decision about whether a proposed transaction is likely to be of net benefit to Canada is solely under the purview of the Minister of Industry.

Evolution of the Act:

The Act came into force in 1985. In 2006, as part of its long-term economic plan, Advantage Canada, the Government raised concerns about acquisitions of control by SOEs with non-commercial objectives and unclear corporate governance. This was followed by Guidelines on State-Owned Enterprises issued by the Minister of Industry in 2007 to clarify the factors taken into consideration in assessing the net benefit of investments by SOEs.

In 2009, in response to the Competition Policy Review Panel report, the Government introduced legislation to amend the Investment Canada Act and the Competition Act. A national security review mechanism was included, allowing the Government to review foreign investments that could be injurious to national security.

In 2009 and April 2012, the Government introduced transparency and enforcement provisions. These targeted improvements enhanced the Minister's ability to communicate information on the review process and promote investor compliance with undertakings.

The government also published an Annual Report in May 2012 on the Act's administration. Going forward, reports will be published yearly. In addition, the guidelines were issued to inform investors of voluntary mediation procedures to apply in cases where an investor's compliance with undertakings is in question.

In June 2012, the Government published proposed amendments to the Investment Canada Regulations in the Canada Gazette for public comment. These amendments are necessary to raise the threshold for net benefit reviews to $1 billion over a four-year period and change the basis of the threshold from asset value to enterprise value.

In December 2012, the Government made additional changes to the investment review process to ensure Canada continues to benefit from foreign investment. The Government revised the Guidelines for SOEs; clarified how proposed investments by SOEs are assessed under the Act; and announced it would proceed with legislative amendments to exclude SOE investors from the $1 billion net benefit threshold increase and to give the Minister the flexibility to extend the timelines for national security reviews, as necessary.

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