TerraLex Guide to Foreign Direct Investment - NEW

In Canada, FDI is regulated nationally. Specifically, the Investment Canada Act (ICA) is a federal statute that governs FDI throughout Canada. It establishes two types of FDI reviews:

(i) Net Benefit Reviews: acquisitions of control by non-Canadians of Canadian businesses that exceed certain (relatively large) financial thresholds are reviewed by the Canadian government to ensure that the investments are of “net benefit” to Canada. A “non-Canadian” refers to any investor who is ultimately controlled by one or more persons who do not meet the definition of being “Canadian”.

Lower financial thresholds for net benefit review apply to investments in Canadian businesses that have “cultural” business activities (including, book publishing, film, music, etc.) and to investments made by non-Canadians who are ultimately controlled from countries who are not members of the World Trade Organization. As well, certain investments by non-Canadians can also be subject to optional net benefit reviews that can be ordered by the Canadian government on a discretionary basis. In most cases, transactions subject to net benefit reviews may not be completed without receiving the relevant approval in advance.

(ii) National Security Reviews: an ICA national security review can apply to any investment by a non-Canadian to acquire control of a Canadian business, to establish a Canadian business, or to invest in an entity with operations in Canada that has either a place of operations in Canada, assets in Canada or at least one person engaged in activities in Canada related to its operations. Any such investment can be reviewed by the Canadian government to ensure that the investment is not injurious to Canada’s national security.

In most cases, net benefit reviews must be completed pre-closing. In contrast, at the time of this writing, investors generally have the option of triggering a potential national security review prior to closing or can wait until after closing thus facing the possibility of review and potential challenges post-closing. However, amendments to the ICA that are not yet in force and will not be in force until summer 2026, at the earliest, will require certain investments to be notified pre-closing to permit the Canadian government with the opportunity to review such investments on national security grounds prior to closing.

The primary governmental department responsible for administering and enforcing the ICA is the Foreign Investment Review and Economic Security branch (FIRES) of the federal department of Innovation, Science and Economic Development Canada (ISED). For investments in Canadian cultural businesses, the Cultural Sector Investment Review branch (CSIR) of the Department of Canadian Heritage is responsible for considering and reviewing such investments. However, to the extent that there are Canadian cultural business investments that raise national security concerns, FIRES takes the lead role in considering any national security implications of such investments and coordinating any such national security reviews.

In considering the national security implications of proposed investments, FIRES will coordinate with Public Safety Canada and may coordinate with Canadian national security investigative bodies, including most commonly the Canadian Security Intelligence Service (CSIS), Communications Security Establishment Canada (CSE), the Royal Canadian Mounted Police (RCMP) and Canada’s Department of National Defence (DND). With the applicable Minister’s approval, national security investigations can also be coordinated with foreign governments and agencies.

The ultimate governmental decision-maker for non-cultural investments is the Minister of Innovation, Science and Industry (the “Industry Minister”). For cultural investments, it is the Minister of Canadian Identity and Culture (the “Heritage Minister”) who has ultimate decision-making power.

FIRES and CSIR can both be approached on an informal basis. Parties can engage with these agencies informally to discuss filing determinations, thresholds, review timing and national security sensitivities.

Net Benefit Reviews

FDI net benefit reviews are triggered when a “non-Canadian” (that is, an investor that is ultimately controlled by one or more non-Canadians) proposes to acquire “control” — directly or indirectly for certain investments — of an existing Canadian business, and such investment exceeds the stipulated financial thresholds.

Under the ICA, an acquisition of control occurs if a non Canadian acquires all or substantially all of the assets used in carrying on a Canadian business. In share deals involving a corporation, acquiring more than 50% of the voting shares of a target corporation is deemed to be an acquisition of control, and acquiring one third or more of the voting shares of a target corporation creates a rebuttable presumption of that control has been acquired. For Canadian businesses that operate as partnerships, trusts, and through other unincorporated entities, acquiring an interest that entitles the acquirer to either more than 50% of the profits of entity or more than 50% of the assets of the entity on dissolution, is considered an acquisition of control.

Control can be acquired directly or indirectly. Indirect control of a Canadian business refers to directly or indirectly acquiring the shares of a corporation incorporated outside of Canada that controls, directly or indirectly, one or more entities in Canada carrying on a Canadian business.

Direct acquisitions of control where the enterprise value or the book value of the Canadian business exceeds prescribed monetary thresholds are subject to pre-closing government approval and require an application for review. Except for certain cultural transactions, all other acquisitions of control and establishments of new Canadian businesses are subject only to a mandatory post-closing notification.

• For direct acquisitions of control of Canadian businesses by investors ultimately controlled by a World Trade Organization (“WTO investors”) member country or from WTO investors, review is required if the enterprise value of the target Canadian businesses exceeds C$1.386 billion. This threshold is updated annually in line with inflation. Enterprise value is calculated by taking the acquisition value of the investment, adding the target’s non-operating liabilities, and subtracting the target’s cash and cash equivalents. The methods of determining each of these components differs based on whether the investment is an asset or share deal and, if a share deal, based on whether the target company is private or public. Indirect acquisitions of control by WTO investors are not subject to net benefit review.

• For direct acquisitions of control of Canadian businesses by investors ultimately controlled in certain countries that have preferred trade agreements with Canada (currently Australia, Brunei, Chile, Colombia, EU member countries, Honduras, Japan, Mexico, New Zealand, Panama, Peru, Singapore, South Korea, the United Kingdom, the United States and Vietnam) (trade agreement investors), review is required if the enterprise value of the target Canadian business exceeds C$2.079 billion. This threshold is updated annually in line with inflation. As all trade agreement investors are currently also WTO investors, indirect acquisitions of control by trade agreement investors are not subject to net benefit review.

• For direct acquisitions of control of Canadian businesses by WTO investors that are state-owned or state-influenced enterprises, review is required if the target business has total assets in Canada exceeding C$551 million. This threshold is updated annually in line with inflation. Asset values are generally calculated using the target’s most recent fiscal year end statements. Indirect acquisitions of control by WTO state-owned or state-influenced investors are not subject to net benefit review.

• For (a) investments by investors ultimately controlled from non-WTO member countries and (b) investments in Canadian “cultural businesses”, the threshold is C$5 million in target asset value for direct investments and C$50 million in target asset value for indirect transactions. However, the indirect threshold is reduced to C$5 million if the asset value of the Canadian business represents more than 50% of the worldwide assets of all entities which control is being acquired.

For investments in cultural businesses, the Heritage Minister may look beyond simple share ownership and determine whether an entity is controlled in fact by a Canadian or non-Canadian, and whether control in fact is being acquired in a particular transaction.

Additionally, amendments to the ICA that have not yet entered into force will permit discretionary net benefit reviews to be ordered for any below-threshold investments requiring notification, where the investor is a state-owned or state-influenced enterprise which is from a country that does not have a preferred trade agreements with Canada.

National Security Reviews

National security reviews can apply to investments by non-Canadian in virtually any Canadian business or entity with Canadian operations, when the Canadian government deems that the investment pose a risk to national security. Specifically, the ICA’s national security review regime can apply to a non-Canadian who (a) directly or indirectly acquires control of a Canadian business, (b) establishes a new Canadian business, or (c) directly invests in an entity with operations in Canada that has either assets in Canada, a place of operations in Canada, or one or more persons in Canada employed in connection with its operations. There are no minimum financial thresholds that are required to trigger a review.

Investments by non-Canadian to establish or to acquire control of Canadian businesses require filings to be made with FIRES or CSIR, either in the form of applications for net benefit review or in the form of administrative notifications (for those investments below the thresholds or exempt from the net benefit review). Currently, non-controlling minority investments by non-Canadians and investments by non-Canadians in entities with Canadian operations that are not Canadian businesses do not trigger a filing requirement, though non-Canadians have the option of submitting voluntary filings. Forthcoming amendments to the ICA, expected to enter into force in summer 2026 at the earliest, will introduce mandatory pre-closing notification filings for certain minority investments, and certain investments into entities with Canadian operations, where the target businesses engage in activities in to-be-prescribed business sectors and minimum control rights are being acquired by the non-Canadian investor. These sectors are not yet known, but are expected to include sensitive technologies, critical minerals and critical infrastructure, amongst others.

The submission of a complete filing under the ICA (whether mandatory or voluntary) triggers a 45-day period during which the government can initiate the national security review regime. Even without a filing, if the government learns of an investment where no filing has been made, the government can initiate the national security review regime at its discretion. For investments that require a mandatory filing and for investments where voluntary filings have been submitted, once the 45-day period post-filing elapses, the government is no longer able to review the investment on national security grounds under the ICA. However, if an investor is required to make an ICA filing but never does so, there is no time limit on when the government can initiate a national security review. For investments that do not require a mandatory filing, and where no voluntary filing has been made, the government has up to five years post-closing to initiate the national security regime.

As previewed above, forthcoming amendments to the ICA that will take effect in the summer of 2026 at the earliest will require non-Canadian investors to make pre-closing notifications for certain investments in prescribed business sectors. These prescribed business sectors have not yet been identified in draft regulations; however, it can be expected that they will cover certain priority areas of concern for the federal government, including investments in critical minerals, sensitive technologies and critical infrastructure.
The new pre-closing filing requirement will apply if a non-Canadian acquires direct or indirect control of a Canadian business engaged in a prescribed business activity.

As well, for minority investments in Canadian businesses and investments in entities with Canadian operations but which are not Canadian businesses, a pre-closing filing will be required if the non-Canadian investor (i) gains access to or can direct the use of material non-public technical information or material assets and (ii) has the power to appoint or nominate any person who is involved in directing the business or affairs of the entity or obtains prescribed special rights with respect to the entity. The terms “material assets”, “material non-public technical information” and “prescribed special rights” have not yet been defined.

Net Benefit Reviews

The substantive test for a net benefit review is whether the investment is of “net-benefit to Canada”. In assessing a transaction, FIRES and CSIR will consider the effect of the investment on six statutorily defined factors:

• economic activity, including employment, resource processing, services and exports from Canada;
• degree and significance of participation by Canadians in the business or industry;
• the effect on productivity, industrial efficiency, innovation and product variety in Canada;
• competition;
• compatibility with Canadian industrial, economic and cultural policies; and
• Canada’s ability to compete in world markets.

The applicable Minister must be satisfied that the investment is likely to be of “net benefit” to Canada. Net benefit approval is virtually always conditional on the investor agreeing to legally binding undertakings that demonstrate that the investment will be of “net benefit”.

For reviews of “cultural businesses”, the compatibility of the investment with Canada’s cultural policies will often be a central factor being considered by CSIR. There are additional considerations during the net benefit review process for cultural businesses. For instance, there are specific policies and restrictions relating to foreign investments in Canadian publishing and film businesses. Often cultural-focused undertakings are often required. These commitments may extend to the creation, production, distribution, marketing, and preservation of Canadian cultural products in Canada across traditional and new media platforms. These commitments may also include providing philanthropic or in-kind gifts for cultural training institutions.

National Security Reviews

For national security reviews, the substantive test is whether the investment “would be injurious to national security”. This is a discretionary standard informed by government guidelines and policy statements. The Minister typically considers the impact of the investment on defence capabilities, sensitive technologies, supply of critical goods and services, critical minerals, critical infrastructure, economic security, access to sensitive personal data. There is no exhaustive statutory definition of injurious to national security.

Under the ICA, all investments by non-Canadians to acquire control of a Canadian business or to establish a new Canadian business have either a notification requirement or a net benefit review application requirement. A notification can be filed at any time up to 30 days after closing (or establishment of a new business).

If an application for review is required, it typically must be filed pre-closing. However, the applicable Minister can conduct a post-closing net benefit review in certain cases; this applies to certain below threshold investments in cultural sectors. Additionally, once passed amendments come into force (likely in 2026), below threshold investments by state-owned enterprises (“SOEs”) who are not trade agreement investors can also be subject to a post-closing net benefit review. No filing is required for the government to begin a national security review.

Net Benefit Review Timelines

The initial statutory review period begins 45 days from the filing of a complete Application for Review. The Minister may – and virtually always does - unilaterally extend this review period by 30 days, taking the total review period to 75 days. Following these 75 days, further extensions are permitted with investor consent.

However, if the national security review periods are engaged, the net benefit review timelines are paused while the national security process runs its course.

National Security Review Timelines

The timeline for the government to initiate a national security review depends on whether a mandatory ICA filing, or voluntary notification is filed:

• For investments requiring a mandatory ICA notification or application for review, the national security review process must be initiated within 45 days after filing. (In cases where a mandatory filing was required but not submitted, a national security review can be initiated at any point in time pre- or post-closing, as the 45-day period never starts to run.)

• For investments not requiring a mandatory ICA filing, if a voluntary notification is filed, the national security review process must be initiated within 45 days after filing.

• For investments not requiring a mandatory ICA filing, if a voluntary notification is not filed, the national security review process can be initiated up to five years after closing.

A full-scale national security review under the ICA involves the following typical phases:

• Pre-filing: the investor often approaches FIRES informally to discuss the proposed investment – although no such informal approach is mandated.

• ICA filing is made (Day 0)

• Phase 1 (45 days): the Minister has 45 days to determine whether a proposed investment could be injurious to Canada’s national security, or to extend the review period.

• Minister extends the initial review period (Day 45).

• Phase 2 (45 days): the Minister has 45 additional days to determine whether a proposed investment could be injurious to Canada’s national security.

• Minister orders a further review (Day 90).

• Phase 3 (45 days): FIRES and its partners in government, such as Public Safety Canada and Canada’s security and intelligence agencies, conduct a full-scale national security review to determine if the investment would be injurious to Canada’s national security. The national security regulations to the ICA include a long list of agencies and types of agencies that FIRES is permitted to coordinate with on national security reviews, but the most common ones are Public Safety Canada, CSIS, the CSE, the RCMP and the DND.

• Minister extends the period for further review (Day 135).

• Phase 4 (45 days): FIRES and its partners continue to assess whether the investment would be injurious to Canada’s national security.

• Further extensions of Phase 4 are available on consent (Day 180+).

• At the end of Phase 4 (including after any further consented to extensions), the Minister can either (i) conclude that the investment is not injurious to national security and permit the investment to proceed; (ii) conclude that, because of binding undertakings provided by the investor, the investment is not injurious to national security and can proceed; or (iii) conclude that the investment is injurious to Canada’s national security or fail to come to a conclusion, in which case the review moves to Phase 5.

• Phase 5, if needed (20 days): Canada’s Cabinet has 20 days to either reject a proposed investment, authorize the investment on specific terms and conditions, or require a completed investment to be divested.

There is no filing fee for an ICA notification or for an ICA application for review.

Both ICA notifications and applications for review will involve providing information regarding the investor entity, the transaction, and the target. The investor entity is the affiliate of the non-Canadian who is most directly involved in the transaction (for example, the entity that is directly acquiring shares or the entity directly acquiring the assets of a Canadian business).

Both ICA notifications and applications for review generally require information regarding:

• the investor’s identity, officers, directors and ultimate ownership/control (including state ownership or influence);

• transaction structure, consideration, financing sources;

• target business description, operations in Canada, employees and locations;

• certain financial information about the value of the investment and the size of the target business.

Additionally, an application for review requires forward looking plans for the Canadian business, including projections for employment, capital expenditure, Canadian management participation and responsibilities, research and development in Canada, production in Canada and exports, and other relevant information. In nearly all cases, except those involving very small cultural businesses, where applications for review are required, the investor must agree to binding undertakings to the Minister confirming its commitment to key elements of these plans. Undertakings typically apply for three to five years post closing.

The obligation to file a notification or an application for review under the ICA is the responsibility on the non-Canadian controlled investor. The vendor has no filing obligation; however, the vendor’s cooperation is often important in assisting the investor to gather the required information.

Currently, the consequences for failing to file a required post-closing ICA notification are relatively limited. The Minister may issue a demand requiring the investor to submit the notification forthwith or to provide an explanation as to why the filing obligation does not apply. Failing to adequately address such a demand can result in monetary penalties of $10,000 per day for each day of the contravention, but that does not apply until after a demand has been issued and not addressed. Amendments to the ICA not yet in force will increase this penalty to $25,000 per day or any higher prescribed amount for mandatory notifications that can be filed post-closing. In addition, failure to comply with the notification requirement may result in an adverse inference being drawn against the investor in any future Canadian court proceedings. Importantly, if a notification is not filed, the statutory 45-day period during which the government may initiate a national security review does not begin to run. As a result, in cases where a filing was required but never submitted, the investment remains perpetually at risk of being called in for a national security review, even years after closing.

Where a pre-closing application for review (for a net benefit review) is required and not filed, a similar process applies, in which the Minister can send a demand to the investor requiring that the investor cease the contravention and remedy the default. As it may be impossible to remedy the default without unwinding the transaction, the investor is also at risk of the Minister seeking additional, more serious penalties. This could include Minister seeking and obtaining court orders to compel compliance, including orders requiring divestiture of the investment. The investor may also be subject to administrative monetary penalties of up to C$10,000 per day for non-compliance. As above, amendments to the ICA not yet in force will increase this penalty to $25,000 per day or any higher prescribed amount.

Amendments to the ICA, which are not yet in force but are expected to come into effect no earlier than summer 2026, will introduce significant new penalties for failing to comply with pre-closing filing obligations for investments in “prescribed business sectors”. Under these amendments, investors who fail to make a required pre-closing filing may be subject to a penalty of up to C$500,000 or any higher to-be-prescribed amount.

Depending on whether a standard ICA notification is required, whether a pre-closing application for net benefit review is required, or whether the national security regime has been formally engaged, there are differing obligations to suspend a transaction.

Standard ICA Notification

A standard notifiable transaction can be filed up until 30 days post-closing. As such, there is no general standstill provision preventing closing.

Net Benefit Review

Except for the limited circumstances in which the government can order discretionary net benefit reviews, and except for net benefit reviews that are required as a result of a non-Canadian investor indirectly acquiring a Canadian cultural business or a non-WTO investor indirectly acquiring a Canadian business (in which cases, the applications for review can be submitted up to 30 days post-closing), once an application for review has been filed, the investor cannot complete the proposed investment until after the applicable Minister has made a positive determination that the investment will be of “net benefit” to Canada.

Breaches can trigger court enforceable orders and penalties. Failure to suspend the transaction pending approval can result in result in a combination of court ordered remedies, mandatory undertakings/conditions, ongoing daily penalties of up to C$10,000 per contravention, and in serious cases, a prohibition on the investment / divestiture orders. As mentioned above, amendments to the ICA not yet in force will increase the quantum of these penalties.

National Security Review

If the national security review process has been engaged by a Ministerial notice or order and the non-Canadian has not yet implemented the proposed investment, the investor is not permitted to implement the investment until it is approved.

Once the new pre-closing filing amendments come into force, most investments in “prescribed business” sectors in Canada will be prohibited from closing until the review timelines lapse or final review decisions have been made.

Failure to suspend the transaction pending approval can result in result in a combination of court ordered remedies, mandatory undertakings/conditions, ongoing daily penalties of up to C$10,000 per contravention (which will be increased to $25,000 or a higher prescribed amount post certain amendments to the ICA entering into force), and in serious cases, a prohibition on the investment.

Net Benefit Review

In most cases, the government cannot review below-threshold investments under the net benefit review standard. However, there is one current exception and one future exception:

• Below-threshold acquisitions of Canadian cultural businesses can be reviewed to confirm they are of net benefit to Canada.

• Once certain amendments come into force, the Minister will have the authority to review any notifiable investments by state-owned or state-influenced enterprises that are not from a trade agreement country under the net benefit review standard, regardless of whether the investment meets the thresholds.

National Security Review

FIRES has broad authority to review transactions that do not require a mandatory filing. Any direct or indirect acquisition by a non-Canadian of a Canadian business, and any direct minority investments in entities with operations in Canada, and at least one of assets, employees, or a location in Canada, is sufficient to enable the government to review the investment on national security grounds. There is some uncertainty as to whether indirect investments in entities that do not meet the ICA’s definition of being a “Canadian business”, but that do have operations in Canada, are caught by the ICA’s national security regime.

For investments where no mandatory filing was required, where the investor elected not to submit voluntary filings, the government has five years from the date that the investment is implemented to commence a national security review.

Net Benefit Review

During a net benefit review, the authorities can approve, approve with binding conditions / undertakings, or refuse the investment (a relatively rare occurrence). If a transaction has already been implemented, the Minister may also seek a court order for unwinding/divestitures.

National Security Review

Following a national security review, the Minister may take measures with respect to an investment that it considers advisable to protect Canada’s national security, either following consultation with the Minister of Public Safety or in concurrence with the Minister of Public Safety. The Minister’s potential orders include:

• notifying the non-Canadian investor that no further action will be taken;

• authorizing an investment on condition that the investor (i) provides written undertakings or (ii) implements an investment on terms and conditions ordered by the Minister; or

• if satisfied that the investment would be injurious to national security or if the investor is unable to determine whether the investment would be injurious to national security, the Minister will refer the investment to Cabinet for a final decision.

• Cabinet can direct the non-Canadian not to proceed with the investment, require the non-Canadian to divest control of the Canadian business or investments in an entity, or authorize the non-Canadian to make the investment under specified terms and conditions.

Yes, net benefit and national security approvals can be conditional on the investor adhering to certain binding commitments, known as undertakings.

Net Benefit Review

Undertakings often include commitments to maintain a certain level of employment in Canada; ensure significant Canadian participation in management; retain the head office in Canada with specified functions; fulfil capital expenditure and R&D plans; and continue charitable and community commitments. Transaction and industry specific undertakings are also common.

For investments involving large Canadian businesses which attract greater public and political attention, investors may be required to provide additional undertakings relating to, among other things, the environment and sustainability, stock exchange listings, security of supply for Canadians.

Non‑compliance can lead to amended/strengthened undertakings, court enforcement for compliance, administrative penalties up to C$10,000 per day, per contravention, and, if non-compliance is persistent or material, divestiture. The C$10,000 penalty per day will be increased to C$25,000 per day once certain amendments to the ICA enter into force. The C$10,000 penalty per day will be increased to C$25,000 per day once certain amendments to the ICA enter into force.

National Security Review

In national security reviews, undertakings (all at the company’s expense) may include: obtaining prior approval for locations to avoid proximity to sensitive sites; implementing corporate security protocols (including cybersecurity controls and site access procedures); permitting government compliance inspections; appointing a security cleared compliance officer; facilitating third party compliance audits on request; requiring attestations from employees with access to sensitive information; notifying existing customers of the new ownership; providing advance notice of prospective employees who will access sensitive technology or information; performing certain servicing and support activities in Canada; and excluding sensitive assets or business lines from the transaction perimeter.

Non‑compliance can lead to amended/strengthened undertakings, court enforcement for compliance, administrative penalties up to C$10,000 per day, per contravention, and, if persistent or material, divestiture.

Decisions and orders of the Cabinet and of the Minister are final and binding but can be subject to judicial review at the Federal Court on administrative law grounds.

Mandatory Notifications

For non‑reviewable transactions, submit an ICA notification within 30 days of closing and receive a certification letter confirming completion of net benefit obligations.

Voluntary Notifications

A voluntary pre‑closing filing starts the national security clock and reduces post‑closing call‑in risk. Filing a voluntary pre-closing notification, allows for a non-Canadian investor to trigger the 45-day review period to commence a national security review in advance of closing.

Net Benefit Reviews

For net benefit reviews, applications for review are generally filed pre‑closing. The initial review period is up to 45 days from certification of completeness, extendable (and almost always extended) by 30 days; further extensions are by investor consent (often to finalize undertakings). For these reviews, approval is required before closing.

FIRES and CSIR will almost always issue information requests. These do not stop the statutory clocks, but in practice, can lead to the Minister to asking parties to agree to further time extensions to finalize undertakings / conditions.

National Security Reviews

The national security process can be initiated by the Industry Minister at any point once an investment comes to the Minister’s attention, up to 45 calendar days after FIRES or CSIR receive a complete application for review or ICA notification (or five years after closing for non-notifiable deals with no voluntary filing). The Minister can commence a review if the Minister believes that an investment could be injurious to national security.

As noted above, a national security review typically follows this timeline: The national security review process generally begins with the investor approaching FIRES informally, although this is not required. The timeline is formally commenced by the ICA filing. The Minister then has 45 days to assess whether the investment could harm national security (Phase 1), with the option to extend the review by a further 45 days (Phase 2), followed by an in-depth review (Phase 3) and another option to extend the review by 45 days (or longer on consent) (Phase 4). At the end of these phases, the Minister may approve the investment, approve it with undertakings, or refer it to Cabinet if concerns remain. If referred, Cabinet has 20 days to decide whether to block, conditionally approve, or require divestment of the investment.

Starting at Phase 3, The Minister, in consultation with the Minister of Public Safety, may impose interim conditions during the review to mitigate risks of national security injury occurring during the review period, such as preventing access to or transfer of assets or intellectual property before the review is complete. Following the completion of the full national security review, interim conditions may be converted into formal undertakings, included as part of Cabinet orders, or removed.

Also beginning at the start of Phase 3, the investor receives a statement of the government's national security concerns and is given an opportunity to demonstrate why the transaction will not harm national security. The Industry Minister may require legally binding undertakings as a condition for approval.

Information obtained by the government under the ICA is confidential and cannot be disclosed except in limited circumstances (that is, investor consent, legal proceedings, information-sharing with prescribed authorities – including investigative bodies and foreign governments). In addition to the restrictions on disclosure of information obtained under the ICA, the confidentiality provisions prohibit disclosure of the fact that a particular investment may or may not be under review, unless specific authorization is obtained from ISED officials.

Nonetheless, ISED and CSIR publishes certain limited information regarding net benefit approvals and ICA notifications for acquisitions of control and new business establishment, which is made available on the FIRES and CSIR websites. Disclosures typically include the investor name and country of origin, the name and location of the Canadian business, a brief description of the Canadian business’ business activities and the investment type (that is, acquisition of control or new business establishment).

However, if a national security review results in a final Ministerial or Cabinet order, the Minister may disclose that an order was made, the identities of the parties, and the outcome (blocked, authorized with or without conditions, or divestiture). The Minister may also disclose other information contained in the order if doing so would not prejudice the non Canadian or the Canadian business. FIRES’ current policy, which began in November 2022, is to disclose national security final decisions on its website. FIRES has publicly stated that it will continue to announce the outcomes of such orders going forward in order to ensure transparency and strengthen the investment review regime.

Bill C-34, which passed on March 22, 2024 (and whose provisions have been coming into force over time), expanded the Minister's disclosure powers, enabling the Minister to: (1) report to the National Security and Intelligence Committee of Parliamentarians and the National Security and Intelligence Review Agency on investments proceeding with undertakings or subject to federal Cabinet orders for national security, including party and order specifics; (2) share information collected during ICA administration or enforcement with foreign governments or agencies for national security reviews of foreign investments; and (3) publicly disclose investor identity and business details when announcing federal Cabinet orders for national security. Additionally, the ICA's annual report now includes specifics on the Minister’s duties and powers under national security provisions.

Beyond the ICA, investors should consider:

• Canadian Competition Act: Certain large transactions trigger advance notice requirements under the Competition Act. Pre-merger notification filings are required when the merger exceeds specific financial thresholds relating to the parties' assets and revenues in Canada.

Sectoral approvals for foreign investments may be required in:

• Financial services – Bank Act: Foreign banks and any entities associated with foreign banks must generally obtain regulatory approval from either the Office of the Superintendent of Financial Institutions or the Minister of Finance to conduct business activity in Canada, including in respect of a physical presence in Canada

• Financial services – Insurance Companies Act: There are restrictions on foreign investments in insurance companies. Under the Insurance Companies Act, no non-Canadian may own and control more than 10% of the shares of a Canadian-owned life insurance company; provincial legislation also places restrictions on foreign investment in the insurance industry.

• Canada Transportation Act – transportation undertakings: The Canada Transportation Act requires that the Minister of Transport assess whether a proposed transaction involving a federal transportation undertaking that exceeds Competition Act notification thresholds is in the public interest as it relates to national transportation.

• Canada Transportation Act – Airlines: the Canada Transportation Act contains a number of foreign investment restrictions associated with investments in Canadian air carriers by non-Canadian citizens, with no more than 49% of voting interests permitted to be owned by non-Canadians. Foreign investments in air carriers trigger a review to ensure that the air carrier remains “controlled in fact” by Canadians.

• Telecoms/Broadcasting: There are several foreign investment restrictions in telecommunications, radiocommunications, and broadcasting.The federal Telecommunications Act restricts foreign ownership and control to 20% of the voting shares of a telecommunication’s common carrier. The federal Broadcasting Act provides that broadcasting licences may not be issued to non-Canadians or to companies that are effectively owned or controlled, directly or indirectly, by non-Canadians.

• In certain sector, additional approvals under provincial legislation may be required.