Mergers and acquisitions in Canada: laws you need to know

Read about the different federal laws which affect the completion and conduct of mergers and acquisitions in Canada
Mergers and acquisitions in Canada: laws you need to know

Mergers & acquisitions in Canada provide a lot of business opportunities for growth and expansion. For these to be successful and legal under the eyes of the government, corporations involved – no matter the size – must know Canada’s laws and regulations affecting mergers and acquisitions.

What are the laws on mergers and acquisitions in Canada?

There are three main laws that cover mergers and acquisitions in Canada: Competition Act, Investment Canada Act, and Canada Business Corporations Act.

1. Competition Act

The Competition Act regulates corporate transactions to maintain healthy competition among businesses in Canada. For this purpose, the Act also covers mergers and acquisitions in Canada.

The Act safeguards against mergers or acquisitions used as an anti-competition strategy or used to create monopolies or cartels. These are against the law.

Notifiable and Non-Notifiable Transactions (Part IX)

Mergers & acquisitions in Canada can be reviewed by the Commissioner of Competition.

When these mergers and acquisitions reach certain thresholds, they fall under notifiable transactions. Corporations involved in a notifiable merger or acquisition must file a pre-closing notification or a pre-merger notification with the Competition Bureau.

These thresholds are:

  • Transaction‑size threshold: C$93 million for 2023 (reviewed yearly by the Minister of Innovation, Science and Industry)
  • Party-size threshold: C$400 million (not adjusted annually)
  • Shareholding threshold: when the acquiring person/s gets more than 35% voting interest of a private corporation or more than 20% voting interest of a public corporation

There are certain exceptions to this rule, such as when the merger or acquisition falls under a non-notifiable transaction. This means that the financial thresholds mentioned above were not reached. This may still be reviewed by the Commissioner or the Bureau before it is completed or within 1 year of its closing.

Review of the Competition Bureau

When mergers and acquisitions in Canada are reviewed by the Bureau, its decision may be any of the following:

1. if the merger or acquisition results in a substantial prevention or lessening of competition in Canada’s markets, the Bureau may:

  • negotiate the terms of the transaction with the parties,
  • request for a divestiture, or
  • challenge the merger or acquisition before the Competition Tribunal

2. when there’s no finding of such adverse effects, the Bureau will issue an Advance Ruling Certificate or a No-Action Letter, which will allow the completion of the merger or the acquisition

When the merger is challenged by the Bureau before the Tribunal, and the Tribunal finds that the merger (or the proposed merger) prevents or lessens competition (or will likely prevent or lessen competition), the Tribunal may order (Section 92):

  • for the merger not to proceed;
  • to dissolve the merger (in case of a completed merger);
  • to dispose of the assets or shares; or
  • any other acts as directed by the Tribunal.

Read about a recent case of a merger in Canada that was contested by the Competition Bureau:  

To learn more about this case or how the Competition Bureau may challenge mergers and acquisitions in Canada, consult with a lawyer in your province. For corporations in Toronto or Ottawa, contact a Lexpert-ranked lawyer for mergers and acquisitions in Ontario.

2. Investment Canada Act

The Investment Canada Act (ICA) governs the review of foreign investments made to Canadian businesses.

Notifiable Investments (Part III)

As for mergers and acquisitions in Canada, ICA’s provisions on pre-closing notification applies when a foreign investor acquires a Canadian business (Section 11(b)). A notification must be sent to the Director of Investments prior to the closing of the investment or 30 days after its closing.

Reviewable Investments (Part IV)

Financial thresholds are also set by ICA. Here, a foreign investment deal will not be closed until the relevant Minister has proceeded with their review of the said investment.

The review will be conducted by the:

  • Minister of Canadian Heritage: for foreign investments to cultural businesses; or
  • Minister of Innovation, Science and Economic Development: for foreign investments to non-cultural businesses

As of 2023, the financial thresholds are as follows:

1. Direct acquisitions of control by private sector investors of non-cultural Canadian businesses:

  • from countries that have a free trade agreement with Canada – C$1.931 billion
  • from WTO countries which don’t have a free trade agreement with Canada – C$1.287 billion

Indirect acquisitions by these investors are not subject to review.

2. Direct acquisitions of control by state owned enterprise (SOE) investors from WTO countries of a non-cultural Canadian business – C$512 million

3. Acquisitions of control of cultural Canadian businesses (whether investors are from WTO countries or not):

  • direct acquisitions – C$5 million
  • indirect acquisitions – C$50 million

Discover the all-time largest acquisitions in Canadian history in this article.

National security review (Part IV.1)

The Minister of Innovation, Science and Industry may also order a review when a foreign investment could be harmful to Canada’s national security. The Minister shall send a notice to the prospective investor and complete the review within 45 days.

After the 45-day review, the Minister will either:

  • refer the investment review to the Governor in Council if the Minister finds that the investment is harmful to Canada’s national security; or
  • send a notice to the foreign investor that no further action will be taken if the Minister is not satisfied that the investment could be harmful to Canada’s national security

Foreign investors may also voluntarily file for a notification to trigger the 45-day review by the Minister. This, however, is not required.

Even if foreign investments have been completed and have not been flagged for review in the past, it may still be reviewed on national security grounds by the Minister for up to 5 years.

3. Canada Business Corporations Act

Mergers and acquisitions in Canada that take the form of an amalgamation fall under the Canada Business Corporations Act (CBCA).

Corporate amalgamations must be approved by Corporations Canada and the provincial and territorial governments that have jurisdiction over the amalgamation.

When two or more corporations (the predecessor corporations) amalgamate, it is required that the predecessor corporations exist under the same corporate statute. This requirement will also apply to the newly formed successor corporation.

Who regulates mergers and acquisitions in Canada?

Regulating and implementing laws on mergers and acquisitions in Canada fall under the responsibility of the Commissioner of Competition. The Minister of Innovation, Science and Economic Development may also regulate mergers and acquisitions in Canada if these involve foreign investors.

Interested to learn more about laws on mergers and acquisitions in Canada? Consult with Lexpert-ranked lawyers for mergers & acquisitions in Canada.