The Canadian government has increased the monetary thresholds to determine whether a net benefit review of a foreign investment in Canada is required under the Investment Canada Act for 2024.

All acquisitions of control of Canadian businesses by non-Canadian investors are subject to the Investment Canada Act. Transactions exceeding certain prescribed thresholds are subject to mandatory pre-closing net benefit review by the Minister of Innovation, Science and Industry (the “Minister”). The applicable thresholds, adjusted annually based on growth in nominal GDP, have been increased for 2024 as follows:

• For direct acquisitions of control of Canadian businesses by investors controlled in a World Trade Organization (“WTO”) country, review is required if the enterprise value of the target Canadian businesses exceeds C$1.326 billion (up from C$1.287 billion).
• For direct acquisitions of control of Canadian businesses by investors controlled in certain countries that have a free trade agreement with Canada (including the US and EU member states), review is required if the enterprise value of the target Canadian business exceeds C$1.989 billion (up from C$1.931 billion).
• For direct acquisitions of control of Canadian businesses by investors that are state-owned enterprises, review is required if the target business has total assets in Canada the book value of which exceeds C$528 million (up from C$512 million).
• The thresholds for investments by investors controlled in non-WTO member countries and investments in “cultural businesses” have remained the same: C$5 million in asset value for direct investments and either C$5 million or C$50 million in asset value for indirect transactions.

When conducting a net benefit review, the Minister considers a range of statutory factors to determine whether the investment will be of net benefit to Canada and the approval process can take several months, although timing is typically case specific.

Foreign investors should note that (i) direct acquisitions of control of Canadian businesses below the applicable thresholds and (ii) indirect acquisitions of control still require a notification filing, which can be submitted up to 30 days post-closing (although pending amendments may impose pre-closing filing obligations for transactions in certain sensitive sectors ). A similar notification obligation applies to the establishment of a new business in Canada.

Submission of the application for review or the notification filing also starts a 45-day period during which the government can choose to initiate a national security review of the investment; if the government initiates such a review, it can last 200+ days and the parties are prohibited from closing (if not already implemented). Foreign investors that are acquiring Canadian businesses operating in sensitive sectors should consult with Canadian counsel to conduct a national security risk assessment in advance of implementing their investment.