doing business in canada - Davies Ward Phillips & Vineberg LLP

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THRESHOLDS FOR REVIEW(A)WTO INVESTORSThe ICA includes two sets of review thresholds: (i) the general thresholds and (ii) the higher WTO thresholdsapplicable to acquisitions by or from a "WTO investor".The definition of a "WTO investor" under the ICA is complex. In general, however, an individual is a WTO investorif he or she is a "national" of a country (other than Canada) that is a member of the WTO ("WTO Member") orhas a right of permanent residence in a WTO Member. A corporation or other entity will be a WTO investor if it isa "WTO investor-controlled entity" as defined in the ICA. A widely-held public company will generally be a WTOinvestor for the purposes of the ICA if no person or voting group controls the public company and at least twothirdsof the members of its board of directors are any combination of WTO investors and Canadians or if it canbe established that a majority of the voting shares of the public company is owned by WTO investors.(B)REVIEW THRESHOLDS FOR WTO INVESTORSA direct acquisition by a WTO investor is reviewable only when the value of the assets of the entity carrying onthe Canadian business and all other entities in Canada, the control of which is being acquired, is equal to orgreater than the threshold for review for WTO Investors.That threshold is currently $299 million in book value of assets. However, pursuant to amendments enacted onMarch 12, 2009, and to come into effect on a date to be determined by the federal Cabinet, that threshold willchange such that review will be required if the "enterprise value" (to be defined by forthcoming regulations) ofthe assets of the Canadian business is equal to or greater than (a) $600 million, in the case of investments madeduring the first two years after the thresholds come into force; (b) $800 million, in the case of investments madeduring the third and fourth years after the thresholds come into force; and (c) $1 billion, in the case ofinvestments made between the fifth year after the thresholds come into force and December 31 of the sixth yearafter the thresholds come into force. This threshold will thereafter be adjusted on an annual basis.Indirect acquisitions of most Canadian businesses by or from a WTO investor are not reviewable (regardless ofthe value of the assets), but will still be notifiable under the ICA.(C)BUSINESSES EXCLUDED FROM WTO REVIEW THRESHOLDSThe higher WTO investor thresholds do not apply to the acquisition of control of a Canadian business that is acultural business.A "cultural business" includes a business that carries on any of the following activities: (i) publication,distribution or sale of books, magazines, periodicals or newspapers in print or machine readable form, otherthan the sole activity of printing or typesetting of books, magazines, periodicals or newspapers; (ii) production,distribution, sale or exhibition of film or video recordings; (iii) production, distribution, sale or exhibition of audioor video music recordings; (iv) publication, distribution or sale of music in print or machine readable form; or (v)any radio communication in which the transmissions are intended for direct reception by the general public, anyradio, television and cable television broadcasting undertakings and any satellite programming and broadcastnetwork services.There is no de minimis exception to the determination of whether a business carries on a cultural business. Abusiness will be considered a cultural business even if its cultural activities represent only a small part of itsoverall operations.42 Foreign Investment
(D)GENERAL REVIEW THRESHOLDSThe following investments in Canadian businesses, other than those which qualify for the WTO review thresholdsdescribed above, are subject to review by the Minister:• a direct acquisition of a Canadian business with assets of $5 million or more;• an indirect acquisition of a Canadian business with assets of $50 million or more; and• an indirect acquisition of a Canadian business with assets of $5 million or more, if the assets of theCanadian business represent more than 50% of all the assets acquired in the international transaction.In certain circumstances, acquisitions may be subject to review under the ICA regardless of the value of theassets involved where the business activity in question is "related to Canada's cultural heritage or nationalidentity". Such business activities include a business that carries on any of the cultural activities describedabove, other than the radio, television or other broadcasting activities therein described.Again, there is no de minimis exception to the determination of whether a business carries on any such culturalactivities. A corporation primarily engaged in some other type of business which also, for example, distributessome books or magazines for sale may be considered to be a business related to Canada's cultural heritage,even if such distribution and sales represent only a small part of that corporation's activities.In addition, "anti-avoidance" provisions in the ICA permit the Minister to deem an entity which carries on orproposes to carry on any of the above-noted cultural activities to be a "non-Canadian" on the basis that theentity is controlled in fact (possibly through means other than the ownership of voting shares) by one or morenon-Canadians. The Minister may also deem a transaction to be an acquisition of control where one of theentities involved carries on or proposes to carry on any cultural business. The Minister has the discretion tomake such a determination retroactive.THE REVIEW CRITERION - "NET BENEFIT TO CANADA"If an acquisition is subject to review, the Minister must be satisfied that the proposed acquisition is likely to be of"net benefit to Canada". The ICA requires the Minister to take into account certain factors, including (i) theeffect of the acquisition on the level and nature of economic activity in Canada (including employment inCanada); (ii) the degree and significance of participation by Canadians in the Canadian business in particular andin the relevant industry in general; (iii) the effect of the investment on productivity, industrial efficiency,technological development, product innovation and product variety in Canada; (iv) the effect of the investmenton competition in the relevant industry or industries in Canada; (v) the compatibility of the investment withCanadian industrial, economic and cultural policies, taking into account the policy objectives of affectedprovinces; and (vi) the effect of the investment on Canada's ability to compete in world markets. The IRD andCanadian Heritage have released specific policies with respect to the application of these criteria to varioussectors, including the book publishing, film and uranium industries in Canada.ICA guidelines issued in December 2007 state that where the acquiror is a foreign "state-owned enterprise", the"net benefit to Canada" review will focus particularly on whether the acquiror adheres to Canadian standards ofcorporate governance and whether the Canadian business will continue to operate on a commercial basis.In order to establish "net benefit" under these criteria, the Minister may require undertakings from the acquiror.Typical undertakings relate to maintaining certain employment levels in Canada, guaranteeing participation ofCanadians as directors and in management, processing resource products in Canada, making capitalexpenditures or investing in research and development in Canada, and transferring technology to Canada.However, NAFTA imposes certain restrictions on the types of undertakings that the Minister may require fromForeign Investment 43
Page 1 and 2: DOING BUSINESSIN CANADAYOUR COMPLET
Page 3 and 4: ONTENTSTABLE OF CONTENTSINTRODUCTIO
Page 5 and 6: IntroductionPOLITICAL AND CONSTITUT
Page 7 and 8: 5RealEstateIndustrial and Intellect
Page 9 and 10: accordance with directions from the
Page 11 and 12: TITLE INSURANCE, TITLE OPINIONS AND
Page 13 and 14: 11EnvironmentalLawIndustrial and In
Page 15 and 16: commercial activities, or carrying
Page 17 and 18: The federal government currently re
Page 19 and 20: 17Types ofBusiness OrganizationIndu
Page 21 and 22: provincial law cannot do so as of r
Page 23 and 24: partnership, limited partners’ li
Page 25 and 26: parties. In Québec, joint venturer
Page 27 and 28: 25Financing aBusiness OperationIndu
Page 29 and 30: The Civil Code of Québec provides
Page 31 and 32: 29CorporateGovernanceIndustrial and
Page 33 and 34: Instrument 58-101. The practices re
Page 35 and 36: 33CompetitionLawIndustrial and Inte
Page 37 and 38: BID-RIGGINGBid rigging is any agree
Page 39 and 40: anticompetitive agreements among co
Page 41 and 42: 39ForeignInvestmentIndustrial and I
Page 43: apply for Canadian citizenship. (Pe
Page 47 and 48: there be an "acquisition of control
Page 49 and 50: Industrial and Intellectual Propert
Page 51 and 52: to perform or cause them to be perf
Page 53 and 54: Registration grants an exclusive ri
Page 55 and 56: PIPEDA applies in all provinces of
Page 57 and 58: Employment LawCanadian employment l
Page 59 and 60: displacement, laying-off, suspensio
Page 61 and 62: easonable cause to believe that the
Page 63 and 64: 63Retirement Plans, EmployeeBenefit
Page 65 and 66: • funding;• eligibility;• pen
Page 67 and 68: 67Temporary Entry andPermanent Resi
Page 69 and 70: INTERNATIONAL AGREEMENTSIn recent y
Page 71 and 72: immigrant in another class, he or s
Page 73 and 74: 73Bankruptcy andInsolvency Proceedi
Page 75 and 76: BANKRUPTCYBankruptcy results in the
Page 77 and 78: INTERNATIONAL BANKRUPTCYASSETS LOCA
Page 79 and 80: Tax ConsiderationsThis chapter prov
Page 81 and 82: TAX REPORTINGAnnual Tax ReturnsCana
Page 83 and 84: Québec has legislation that limits
Page 85 and 86: Amendments, SIFTs and their unithol
Page 87 and 88: Conversely, where a Canadian reside
Page 89 and 90: A person, whether resident in Canad
Page 91 and 92: APPENDIX I: CANADA’S IN FORCE TAX
Page 93: TORONTODAVIES WARD PHILLIPS & VINEB

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