Foreign investment update - Investment Canada Act filings in the first quarter of 2010
Shawn Neylan and Michael Kilby
In the first quarter of 2010, the Investment Review Division of Industry Canada (IRD) received approximately 115 notifications in respect of the acquisition or establishment of Canadian businesses pursuant to the Investment Canada Act (ICA). In addition, 4 Ministerial decisions based on applications for review were made. By way of contrast, in the full 2007 year, likely a high water mark for foreign investment in Canada, approximately 676 notifications and 62 Ministerial decisions based on applications for review were made.
The key distinction between an application for review and a notification is that an application for review requires that a foreign investor establish for the Minister of Industry (or the Minister of Heritage in the case of cultural businesses) that a proposed investment is of "net benefit to Canada". This is usually achieved by providing binding undertakings to the Minister in respect of the future conduct and management of the Canadian business. A notification does not trigger any approval requirement but is largely an administrative formality. Applications for review are usually triggered by large, direct acquisitions of Canadian businesses.
Amendments to the Investment Canada Act, not yet implemented, will alter the thresholds at which an application for review is triggered. It is not yet known what specific impact the change in thresholds will have on the number of applications for review filed, but it is anticipated that they will decrease the number of such applications, leaving only the largest investments in Canadian businesses as subject to approval under the economic review provisions of the Investment Canada Act.
In terms of acquisitions of Canadian cultural businesses, a significantly restricted area for foreign investment, the website of the Department of Canadian Heritage - Cultural Sector Investment Review (CSIR) suggests that no Ministerial decisions and only 5 notifications were made in respect of the acquisition or establishment of cultural businesses in the first quarter of 2010.
