Written By Adam Kalbfleisch and Alysha Pannu
The Competition Bureau announced that the 2022 size of transaction pre-merger notification threshold under the Competition Act will remain at its 2021 level of C$93 million. Acquisitions may be subject to mandatory pre-notification where the aggregate value of the target firm's assets in Canada, or the gross revenues from sales in or from Canada generated from those assets, exceeds the size of transaction threshold. The size of parties threshold (C$400 million) must also be met for a mandatory notification to be acquired. Further, certain other non-financial thresholds may apply depending on the structure of the deal.
The size of transaction threshold under the Competition Act is adjusted each year by the federal government based on a formula that considers changes in Canada's nominal GDP. In a press release, the Minister of Innovation, Science and Industry stated that the decision to keep the transaction-size threshold at its current level is a reflection of the growth of the Canadian economy over the last year and the ongoing pressures the economy continues to face including rising inflation.
Innovation, Science and Economic Development Canada also recently announced that certain review thresholds for investments by non-Canadians under the Investment Canada Act (the ICA) will increase, effective later this month. Like the Competition Act threshold, the federal government adjusts these thresholds annually based on changes in nominal GDP.
The 2022 threshold for World Trade Organization (WTO) investors that are not state-owned enterprises increased to C$1.141 billion (from C$1.043 billion in 2021) for direct investments involving Canadian non-cultural businesses, based on the enterprise value of the Canadian business’ assets. Private sector investors from the United States, Australia, Chile, Colombia, the European Union, the United Kingdom, Honduras, Japan, Mexico, New Zealand, Panama, Peru, Singapore, South Korea and Vietnam benefit from a higher "trade-agreement" investor threshold, which increased to C$1.711 billion (from C$1.565 billion in 2021), based on the same enterprise value calculation. The 2022 threshold for WTO investors that are state-owned enterprises increased to C$454 million based on the book value of the Canadian business' assets, up from C$415 million in 2021.
The thresholds for review for direct and indirect investments by non-WTO investors (C$5 million and C$50 million, respectively) and for direct and indirect investments in Canadian cultural businesses (C$5 million and C$50 million, respectively) remain the same.