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Foreign investment act pdf 2015
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For permission to reproduce the information in this publication for commercial purposes, please fill out the Crown Copyright Clearance at www. The Act continues to play an important role in encouraging investments from global companies that will contribute to innovation, growth, and job creation in Canada.
Over fiscal year —19, foreign direct investment FDI inflows and cross-border mergers and acquisitions activity in Canada increased, in contrast with decreases in FDI worldwide.
The increased investment flows to Canada translated into an all-time high number of filings under the ICA in — Sustained outreach and transparency efforts to inform Canadian businesses, investors, their advisors and other levels of Government of the ICA review process and obligations contributed to the higher number of filings as well.
These outreach initiatives have also led to a notable change and maturity in practice among external advisors to better account for the national security review process under the Act in planning investments in Canada. Indeed, this was one of the policy objectives underlying the Guidelines on the National Security Review of Investments published in and amendments to the ICA to require annual public reporting on the administration of the national security review provisions.
We are encouraged to see the results of these efforts. In addition to the continuing evolution of practice under the ICA, fiscal year —19 saw increased international policy attention on national security concerns associated with foreign investment. Canada has had a legal framework with broad national security review authorities in place since , and has steadily increased its application over the ensuing years as our FDI profile has diversified; in recent years, our comparator jurisdictions have recognized the need for a regime, and many are considering introducing new legislation, or expanding existing authorities.
At the same time, the policy discourse has emphasized a foundational commitment to maintaining an open investment climate for positive foreign investment. In this regard, in fiscal year —19 there were nine applications for net benefit review all of which were approved.
These reviews helped to ensure that the most significant investments to the Canadian economy will promote employment opportunities for Canadians, innovation and competition in Canada. These nine investments, as well as all other investments whether or not filings were required were subject to national security review.
Of these, seven investments required an order by the Governor-in-Council under section The characteristics of these investments and the outcomes of the reviews are provided in this Report. Over the coming year, I look forward to continuing to support the administration of the Act in a manner that encourages investment, economic growth and employment opportunities in Canada while protecting Canada's national security.
Applied to a broad range of investments across all sectors, it has two primary purposes: to review significant acquisitions of control to ensure they are likely to be of net economic benefit to Canada, and to review investments that could be injurious to national security. Under section This is the Annual Report for fiscal year — A net benefit review is required under the Act when a non-Canadian investor seeks to acquire control of an existing Canadian business valued at or above the relevant threshold.
The investment cannot be implemented unless the Minister is satisfied that the investment is likely to be of net benefit to Canada. In making a determination of likely net benefit, the Minister considers the six factors set out in the Act:. For investments by a State Owned Enterprise SOE , the Minister takes into account the governance and commercial orientation of the investor, and for commitments to transparent and commercial operations.
No net benefit review is required for acquisitions of control of Canadian businesses valued below the relevant thresholds. However, investors are required to submit a notification of the acquisition of control. A notification is also required to be filed whenever an investor from a WTO member country indirectly acquires control of an existing Canadian business, or when a non-Canadian investor makes an investment to establish a new Canadian business.
An indirect acquisition is an acquisition of a foreign company that has Canadian subsidiaries. A notification is also required in cases where an international investor starts a new business, or acquires control of a Canadian business valued below the net benefit review threshold Endnote iii.
These provisions, in Part IV. All investments by non-Canadians into Canada are subject to a multi-step national security review process under these provisions. This includes investments where no application for net benefit review or notification is required, such as the acquisition of less than control of a Canadian entity. The following section provides information on the scope, scale and origin of investments by non-Canadians in Canada over the last fiscal year that were subject to the filing requirements in the Act.
The value of an investment is calculated in one of these two ways, depending on the nature of the investment. Enterprise Value is a calculation that takes into account market value, debt and cash. Asset value is the value of the assets according to the business' financial statements book value. Acquisitions are recorded by the Enterprise Value of the Canadian business to be acquired or the Asset Value based on its most recent audited financial statements.
Figure 1 shows the breakdown of investments across a range of Asset Values and Enterprise Values.
An application for net benefit review is required for acquisitions of control of a Canadian business valued above the relevant threshold. This meant net benefit reviews were focused on those investments that are most significant to the economy and lessened the regulatory burden for international investors and Canadian businesses involved in smaller transactions.
As such, applications for review received in —19 continued to be fewer than in years past.
An average of 17 applications for review were approved over to , while 9 applications for review were approved each in —18 and in —19 Figure 2. The statutory timeframe for net benefit reviews is 45 days with a potential additional 30 days if needed. In —19, the actual average length of review was 72 days from certification to approval, with a median review period of 64 days. The average was affected by one review that was longer than usual days , with the consent of the investor.
A notification is required to be filed for acquisitions of control of a Canadian business valued below the net benefit review threshold and for investments to establish a new Canadian business. There was a significant increase in the number of investments notified relative to —18, where there were notifications certified. These increases can in part be attributed to the corresponding increased FDI inflows to Canada, and in part the continuing increase in the threshold for net benefit reviews.
Indirect transactions are another factor in the high total asset value. These investments were not subject to net benefit review because they were part of a larger global transaction and therefore the investor was not required to submit an application for review but a notification under the Act.
Figure 4 below demonstrates the relative values of investment in each of these sectors across the last five fiscal years.
China approves new foreign investment law - Money Talks
The European Union remained the second largest regional source of in-bound investment. In particular, there were 74 investments from the United Kingdom in —19, compared to 33 in —18 and 41 in — A breakdown of European Union investment is at Table 3 below. As indicated in Table 2, the value of investments from China continued to fall significantly behind the United States and the EU in terms of Enterprise Value and overall number of investment filings.
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In the last fiscal year, most investments from China were for the establishment of new businesses 19 out of 36 , not acquisitions of existing businesses or assets. A detailed breakdown by sector for each of the top three source countries or regions of origin is as follows:.
Since , this Report has included information on the administration of the national security provisions of the Act. This information on the process and outcomes under these provisions is to further transparency and to improve regulatory certainty for Canadian businesses and investors.
In addition to the information provided in this report, prospective investors and Canadian businesses seeking information on the administration of the national security provisions of the Act are encouraged to review the Guidelines on the National Security Review of Investments , published in December The Guidelines describe the national security review process, including setting out a non-exhaustive list of factors that the Government may consider when assessing whether an investment poses a national security risk.
With respect to specific investments, it is recommended that international investors, Canadian businesses, and their advisors contact the Investment Review Division to discuss proposed investments and, where applicable, to file a notification at least 45 days prior to planned implementation, whenever such investments may involve the factors outlined in the Guidelines.
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Set out below are statistics on the administration of Part IV. This report also includes information on characteristics of investments that have required intervention under the ICA and on mitigation conditions.
However, details of specific cases are not included in this Report, in accordance with the confidentiality and privileged information requirements of the Act, and national security considerations. All certified notifications or approved applications for net benefit review submitted in fiscal year , as well as other investments which were not subject to filing requirements, were reviewed under the multi-step national security process set out in the Act.
The initial period of review begins as soon as the Minister becomes aware of the investment, which may be pre-filing, and ends 45 days after the application or notification is certified as complete. During the initial period of review and throughout the review process, the security agencies and the other relevant prescribed investigative bodies, including Innovation, Science and Economic Development Canada, assess information and intelligence related to the Canadian asset being acquired or business being established, the terms of the investment and the foreign investor.
The Minister may also require the investor or the Canadian business or entity to provide any information considered necessary for purposes of the review of the investment. A section This order can block the investment, order divestiture, or impose conditions on the investment to protect national security.
Foreign Investment and U.S. National Security
However, a section The legal authorities under the Act to investigate are the same throughout each period of the multi-step review process. Of all of the investments reviewed over the past year, there were nine notices issued under section With respect to two of those nine, further notices were issued advising that no further action would be taken under the ICA.
For the remaining seven investments, a section As the result of that further review, in three cases no further action was required under the ICA; in two cases the investor withdrew the investment proposal; and in two cases the GiC issued an order directing the investor to divest itself of the investment.
The average length of review for the seven investments subject to a section Table 4 below sets this data out for the last fiscal year and going back to , when the provisions were first introduced. Note: The fiscal year runs April 1 to March Actions following the issuance of a For example, for fiscal year April 1, to March 31, , nine The resulting actions may have been in the or fiscal year.
Where a As a result of this method of reporting, one investment that had been previously reported under is now being reported under Under Part IV.
How does the United States benefit from foreign investment?
In assessing investments under the national security provisions of the Act, and as articulated in the Guidelines on the National Security Review of Investments, the terms of the investment, the nature of the asset or business activities involved, and the parties, including the potential for third-party influence, are considered.
The information provided below on the characteristics of investments that have been subject to orders under section Prior to , the Standard Industrial Classification system was used. The s. If no such notice was issued, the action is ascribed to the fiscal year in which the s. As such, one case that had been previously reported under is now being reported under Administrative Practices Both internal administrative and external practices around the provisions in Part IV.
Increased transparency in the administration of Part IV. Under the Act, the Government has the authority to review a broad scope of investments, including those for which filings are not required under sections 12 or 17 of the Act, and the authority to intervene in those investments ex-post.
Increasingly, Canadian businesses, investors and their advisors are voluntarily engaging with the Investment Review Division in advance of less-than-control investments when the prospective investment may present factors set out in the Guidelines on the National Security Review of Investments.
In other cases, where the Minister has become aware of such investments through environmental scanning or public information sources, further information has been required from the parties under section