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 2025.
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 2025 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$1.386 billion (up from C$1.326 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$2.079 billion (up from C$1.989 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$551 million (up from C$528 million).
- The thresholds for (a) investments by investors controlled in non-WTO member countries or (b) investments in “cultural businesses” have remained the same: C$5 million in asset value for direct investments and C$50 million in asset value for indirect transactions. However, for indirect investments in “cultural businesses”, the threshold is reduced to C$5 million if the asset value of the Canadian business represents more than 50% of the worldwide assets of all entities which control is being acquired.
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.
Direct acquisitions of control of Canadian businesses below the applicable thresholds and indirect acquisitions of control of Canadian businesses still require a notification filing, which can be submitted up to 30 days post-closing. A similar notification obligation applies to the establishment of a new business in Canada.
However, following recent amendments to the Investment Canada Act, pre-closing filing obligations are soon to be mandatory for investments in certain sensitive sectors, even if these investments fall below the thresholds for mandatory net benefit review. While the list of prescribed sensitive sectors has not yet been published, we expect that these will largely mirror those identified in the Guidelines on the National Security Review of Investments. These include, for example, businesses operating in the critical minerals supply chain or other critical infrastructure, advanced technologies (such as AI or quantum computing), military or defence technologies, and businesses that handle sensitive personal data/information of Canadian citizens.
Submission of an application for review or a 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 (including those identified above) should consult with Canadian counsel to conduct a national security risk assessment in advance of implementing their investment.
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