Higher Foreign Investment Review Threshold expected to be in force by summer of 2017

William Wu - 

In November 2016, the Canadian government announced that it will significantly raise the financial threshold above which foreign investments into Canada are subject to a pre-closing “net benefit” review under the Investment Canada Act (ICA). All legislative amendments required to implement these proposed changes are now before Parliament and are expected to pass and come into force by the summer of 2017.

Currently, for direct acquisitions of non-cultural Canadian businesses by a non-state-owned WTO investor, transactions are subject to a pre-closing “net benefit” review where the enterprise value of the acquired Canadian business exceeds C$600 million. This threshold is scheduled to increase to C$800 million on April 24, 2017, and then to C$1 billion on April 24, 2019 (and indexed annually to GDP growth beginning in January 2021).

The budget implementation bill (Bill C-44) introduced in Parliament on April 11, 2017 will amend the ICA to raise the review threshold for WTO investors directly to C$1 billion (then to be indexed annually to GDP growth).

Separately, the bill to implement the Comprehensive Economic and Trade Agreement between Canada and the European Union (Bill C-30 ), which already passed the House of Commons and is currently before the Senate, will raise the review threshold to C$1.5 billion (then to be indexed annually to GDP growth) for investors from the European Union and other countries with which Canada has pre-existing free-trade agreements (the United States, Mexico, Chile, Peru, Colombia, Panama, Honduras and Korea).

Parliament is expected to pass both Bills C-30 and C-44 before it breaks for summer recess in late June. The review threshold for WTO investors will increase to C$800 million on April 24, 2017 as scheduled and the new C$1 billion threshold for WTO investors and C$1.5 billion threshold for trade agreement investors are expected to be proclaimed in force by the summer of 2017. 

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