Regulation of foreign investment

The Canadian government is anxious to foster a business climate that is receptive to investment from outside the country. At the same time, it is determined to monitor the level of new foreign investment in Canada and to screen a limited number of larger investments as well as investments in certain sectors such as cultural businesses. When such screening occurs, government officials will consider the plans for the Canadian business, to determine whether the investment is likely to be of net benefit to Canada. The screening process may also involve meetings with government officials, as well the requirement to provide undertakings.  The government also has the power to screen investments of all sizes for impacts on national security. The Investment Canada Act provides the statutory framework for the monitoring and review processes.  While it remains rare for Canada’s government to block foreign investments, it has exercised that power in a number of cases in recent history.

The general provisions of the Investment Canada Act apply to the establishment of new Canadian businesses and the acquisition of control of existing Canadian businesses (the triggering events) by non-Canadians. The Investment Canada Act also has a national security review process, as discussed below.

For the purposes of the Investment Canada Act, a “non-Canadian” is an individual, government, government agency or entity that is not Canadian. An individual is “Canadian” under the Investment Canada Act if he or she is a Canadian citizen or a permanent resident of Canada who has not been ordinarily resident for more than one year after he or she first became eligible to apply for Canadian citizenship. The determination of whether a corporation is “Canadian” under the Investment Canada Act can be more complex and requires a determination of whether the individual or individuals who ultimately control the corporation are “Canadians”.

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