The Government of Canada recently announced the monetary thresholds that determine whether a review is required under the Competition Act and Investment Canada Act for 2023. Where a transaction exceeds the applicable monetary and control thresholds under these statutes, parties to the transaction are required to submit a filing and undergo a review before the transaction can close.

It is important to consult with Canadian counsel to assess which thresholds apply given the technical nature of the rules and the government’s ability to review transactions before or after closing, even if they do not meet the relevant thresholds.

COMPETITION ACT

A transaction is subject to mandatory pre-merger notification if both the “size of transaction” and “size of parties” thresholds are exceeded. The size of transaction threshold is based on the book value of the assets in Canada of the target and its subsidiaries or the gross revenues from sales in or from Canada generated by those assets. The size of parties threshold is based on the book value of the assets in Canada of all parties to the transaction (including their affiliates) or their gross revenues from sales in, from or into Canada.

• The size of transaction threshold remains unchanged at C$93-million for 2023. Historically, the size of transaction threshold has been indexed to nominal GDP; however, 2023 is the third consecutive year it has remained at C$93-million.

• The size of parties threshold remains unchanged at C$400-million.

The Competition Bureau has one year from closing to review and challenge mergers even if they do not exceed the applicable thresholds.

INVESTMENT CANADA ACT

The Investment Canada Act applies to all investments in Canadian businesses by non-Canadian investors, irrespective of whether the investment is made directly or indirectly through an investment in a non-Canadian parent company. The applicable monetary threshold determining whether a pre-closing “net benefit to Canada” review is required varies depending on the nationality of the buyer, whether the buyer is a state-owned enterprise and whether the Canadian business is a cultural business. All investments in a Canadian business by a non-Canadian investor remain subject to potential scrutiny or more formal review under the national security–related provisions of the Investment Canada Act. For purposes of the “net benefit to Canada” review thresholds:

• The threshold for private investors based in countries with a trade agreement with Canada increased to C$1.931-billion in enterprise value (up from C$1.711-billion in 2022).

• The threshold for private investors based in other World Trade Organization countries increased to C$1.287-billion in enterprise value (up from C$1.141-billion in 2022).

• The threshold for state-owned enterprise investors from World Trade Organization countries increased to C$512-million in book value of assets of the target Canadian business (up from C$454-million in 2022).

• The threshold for non-Canadian investments in Canadian cultural businesses remains at C$5-million in asset value of the target Canadian business for direct acquisitions and C$50-million in asset value of the target Canadian business for indirect acquisitions.

For acquisitions of control (or deemed control) below the applicable thresholds, and for the establishment of new Canadian businesses, investors are still required to submit a notification filing before or up to 30 days after closing. In addition, no monetary or control thresholds apply for reviews on national security grounds.

Finally, in August 2022, the government introduced a voluntary filing mechanism for investments in Canadian businesses by non-Canadian investors that are not otherwise required subject to a mandatory filing obligation. It has also extended the period in which a national security review may be commenced to 45 days from when a voluntary filing was made to up to five years after the investment’s implementation where no voluntary filing was made.