The 2021 updates to the merger thresholds under Canada s
Competition Act and
for the first time ,
the
Competition Act s size-of target threshold
decreased by C$3 million to C$93 million.
Competition Act
The
Competition Act requires advance notification of
certain merger transactions involving operating businesses in
Canada where size-of-parties and size-of-target financial tests both are exceeded:
The size-of-target test
requires that the value of assets in Canada to be acquired, or
owned by the corporation the shares of which are being acquired, or
the annual gross revenue from sales in or from Canada generated by
those Canadian assets, exceeds a specified threshold. The
ertain merger notification thresholds under Canada's Competition Act and foreign investment review thresholds under the Investment Canada Act (ICA) are updated on a yearly basis.
The Competition Bureau
the 2021
transaction-size pre-merger notification threshold under the
Competition Act is decreasing to C$93 million, effective February
13, 2021. Innovation, Science and Economic Development Canada also
announced new, lower foreign investment review thresholds under the
Investment Canada Act, effective January 1, 2021.
These thresholds are adjusted annually based on GDP formulas. As
a consequence, they generally increase each year. This year s
decrease in merger review thresholds is a consequence of
Canada s economic contraction following from extensive
restrictions on economic activity imposed by governments which were
intended to slow the spread of COVID-19. If the economy recovers,
it is likely these thresholds will increase in 2022.
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Most foreign investors will enter Canada without a hiccup. However, a small number of transactions may receive closer scrutiny under Canada’s foreign investment review law, the Investment Canada Act (ICA). In 2021, that scrutiny is increasingly likely to be in the form of review under the ICA’s national security review process rather than its “net benefit to Canada” review process.
As the monetary thresholds for “net benefit to Canada” review have risen dramatically in the past six years (at least for private sector investors), fewer transactions are subject to ministerial approval under this process. At the same time, however, the ICA’s national security review process gives the Canadian government wide discretion to screen a broader range of investments - the acquisition of an existing business or the establishment of a new Canadian business, whether large or small, and whether involving minority interests
New thresholds for mergers and acquisitions under the
Competition Act and
Investment Canada Act are now
in effect. These thresholds are adjusted annually based on GDP
formulas and, for the first time, they have decreased. This was a
result of Canada s economic contraction due in large part to
the COVID-19 pandemic.
Under the
Competition Act, the threshold change is not
mandatory and the government s recent approach to the annual
adjustment suggests a belief that the notification threshold should
remain low: it was unchanged in 2020 (when it could have increased
per the GDP formula) and decreased this year (when it could have