C-386
First Session, Thirty-ninth Parliament,
55 Elizabeth II, 2006
HOUSE OF COMMONS OF CANADA
BILL C-386
An Act to amend the Investment Canada Act (foreign investments)
first reading, November 27, 2006
Mr. Cullen (Etobicoke North)
391417
SUMMARY
This enactment amends the Investment Canada Act to provide for the review of foreign investments in Canada that could be contrary to the national interest. This enactment also provides that the Governor in Council may, by order, take any measures that the Governor in Council considers advisable to protect the national interest.
Also available on the Parliament of Canada Web Site at the following address:http://www.parl.gc.ca
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1st Session, 39th Parliament,
55 Elizabeth II, 2006
house of commons of canada
BILL C-386
An Act to amend the Investment Canada Act (foreign investments)
R.S., c. 28 (1st Supp.)
Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:
1. Section 2 of the Investment Canada Act is replaced by the following:
Purposes of Act
2. Recognizing the importance of foreign direct investment and the importance of protecting the national interest, the purposes of this Act are
(a) to encourage investment in Canada by Canadians and non-Canadians that contributes to economic growth and employment opportunities and to provide for the review of significant investments in Canada by non-Canadians in order to ensure that those investments benefit Canada; and
(b) to provide for the review of investments in Canada by non-Canadians that could be
contrary to the national interest.
2. Paragraph (d) of the definition “Canadian” in section 3 of the Act is replaced by the following:
(d) an entity that is Canadian-controlled, as determined under subsection 26(1) or (2) and in respect of which no determination or declaration has been made under subsection 26(2.1), (2.11) or (2.2);
3. (1) The portion of subsection 10(1) of the Act before paragraph (a) is replaced by the following:
Exempt transactions
10. (1) This Act, other than Part IV.1, does not apply in respect of
(2) Subsection 10(2) of the Act is replaced by the following:
Exempt transactions — Part IV.1
(1.1) Part IV.1 does not apply in respect of
(a) the acquisition of control of a Canadian business in connection with the realization of security granted for a loan or other financial assistance and not for any purpose related to the provisions of this Act, if the acquisition is subject to approval under the Bank Act, the Cooperative Credit Associations Act, the Insurance Companies Act or the Trust and Loan Companies Act;
(b) the acquisition of control of a Canadian business by reason of an amalgamation, a merger, a consolidation or a corporate reorganization following which the ultimate direct or indirect control in fact of the Canadian business, through the ownership of voting interests, remains unchanged, if the acquisition is subject to approval under the Bank Act, the Cooperative Credit Associations Act, the Insurance Companies Act or the Trust and Loan Companies Act;
(c) the acquisition of control of a Canadian business carried on by an agent of Her Majesty in right of Canada or a province or by a Crown corporation within the meaning of the Financial Administration Act;
(d) any transaction to which section 522.28 of the Bank Act applies; and
(e) the acquisition of control of a Canadian business by any of the following entities, if the acquisition is subject to approval under the Bank Act, the Cooperative Credit Associations Act, the Insurance Companies Act or the Trust and Loan Companies Act:
(i) an insurance company incorporated in Canada that is a company or a provincial company to which the Insurance Companies Act applies, on the condition that the gross investment revenue of the company from the Canadian business is included in computing the income of the company under subsection 138(9) of the Income Tax Act,
(ii) a non-resident insurance company the insurance of risks in Canada by which has been approved by order of the Superintendent of Financial Institutions under Part XIII of the Insurance Companies Act, on the condition that the gross investment revenue of the company from the Canadian business is included in computing the income of the company under subsection 138(9) of the Income Tax Act and the voting interests of the entity carrying on the Canadian business, or the assets used in carrying on the Canadian business, are vested in trust under that Part, or
(iii) a corporation incorporated in Canada, all the issued voting shares of which, other than the qualifying voting shares of directors, are owned by an insurance company described in subparagraph (i) or (ii) or by a corporation controlled directly or indirectly through the ownership of voting shares by such an insurance company, on the condition that, in the case of an insurance company described in subparagraph (ii), the voting interests of the entity carrying on the Canadian business, or the assets used in carrying on the Canadian business, are vested in trust under Part XIII of the Insurance Companies Act.
If condition not complied with
(2) If any condition referred to in paragraph (1)(d) or (j) or (1.1)(e) is not complied with, the exemption under that paragraph does not apply and the transaction referred to in that paragraph is subject to this Act as if it had never been exempt.
4. The Act is amended by adding the following after section 25:
PART IV.1
REVIEWABLE INVESTMENTS
Application
25.1 This Part applies in respect of an investment by a non-Canadian
(a) to establish a new Canadian business;
(b) to acquire control of a Canadian business in any manner described in subsection 28(1); or
(c) to acquire, in whole or in part, or to establish an entity carrying on all or any part of its operations in Canada if the entity has
(i) a place of operations in Canada,
(ii) an individual or individuals in Canada who are employed or self-employed in connection with the entity’s operations, or
(iii) assets in Canada used in carrying on the entity’s operations.
Notice
25.2 (1) If the Minister has reasonable grounds to believe that an investment by a non-Canadian could be contrary to the national interest, the Minister may send to the non-Canadian a notice that an order for the review of the investment may be made under subsection 25.3(1).
Investment may not be implemented
(2) A non-Canadian that receives the notice shall not implement the investment unless they receive
(a) a notice under paragraph (3)(a) indicating that no order for the review of the investment will be made under subsection 25.3(1);
(b) a notice under paragraph 25.3(6)(b) indicating that no further action will be taken in respect of the investment; or
(c) a copy of an order made under section 25.5 authorizing the investment to be implemented.
Ministerial action
(3) The Minister shall, within the prescribed period, send to the non-Canadian
(a) a notice indicating that no order for the review of the investment will be made under subsection 25.3(1); or
(b) a notice referred to in subsection 25.3(2) indicating that an order for the review of the investment has been made.
Reviewable investment
25.3 (1) An investment is reviewable under this Part if
(a) the value of the assets, calculated in the manner described in section 25.4, is equal to or greater than one billion dollars; or
(b) the Governor in Council, on the recommendation of the Minister, where the Governor in Council considers that the investment could be contrary to the national interest, makes an order for the review of the investment.
Notice
(2) The Minister shall, without delay after the order has been made, send to the non-Canadian making the investment and to any person or entity from whom or which the Canadian business or the entity referred to in paragraph 25.1(c) is being acquired, a notice indicating that an order for the review of the investment has been made and advising them of their right to make representations to the Minister.
Investment may not be implemented
(3) A non-Canadian that receives a notice referred to in subsection (2) shall not implement the investment unless they receive
(a) a notice under paragraph (6)(b) indicating that no further action will be taken in respect of the investment; or
(b) a copy of an order made under section 25.5 authorizing the investment to be implemented.
Representations
(4) If, after receipt of the notice referred to in subsection (2), the non-Canadian or the person or entity advises the Minister that they wish to make representations, the Minister shall afford them a reasonable opportunity to make representations in person or by an agent.
Requirement to provide information
(5) The Minister may require the non-Canadian or other person or entity to provide, within the time and in the manner specified by the Minister, any prescribed information or any other information that the Minister considers necessary for the purposes of the review.
Ministerial action
(6) The Minister shall, within the prescribed period,
(a) refer the investment under review to the Governor in Council, together with a report of the Minister’s findings and recommendations on the review, if
(i) the Minister is satisfied that the investment would be contrary to the national interest, or
(ii) on the basis of the information available, the Minister is not able to determine whether the investment would be contrary to the national interest; or
(b) send to the non-Canadian a notice indicating that no further action will be taken in respect of the investment, if the Minister is satisfied that the investment would not be contrary to the national interest.
Ministerial action
(7) Notwithstanding subsection (6), the Minister shall refer an investment described in paragraph (1)(a) to the Governor in Council, together with a report of the Minister’s findings and recommendations on the review.
Value of assets
25.4 (1) For the purpose of determining the value of an investment referred to in paragraph 25.3(1)(a), where the non-Canadian acquires only assets used in carrying on a Canadian business or only control of an entity carrying on a Canadian business, the value of the assets shall be the aggregate of all assets acquired or of all assets of the entity, as shown in the audited financial statements of the entity carrying on the business for its fiscal year immediately preceding the implementation of the investment.
Value of assets
(2) For the purpose of determining the value of an investment referred to in paragraph 25.3(1)(a), where the non-Canadian acquires, directly or indirectly, control of an entity carrying on a Canadian business and control of one or more other entities in Canada, the value of the assets shall be the aggregate of all assets shown in the audited financial statements consolidated for all the entities for their fiscal year immediately preceding the implementation of the investment.
Value of assets
(3) For the purpose of determining the value of an investment referred to in paragraph 25.3(1)(a), where the non-Canadian acquires, directly or indirectly, control of a corporation incorporated elsewhere than in Canada that controls, directly or indirectly, an entity in Canada carrying on a Canadian business, the value of the assets of all entities, both inside and outside Canada, the control of which is acquired, directly or indirectly, shall be the aggregate of all assets shown in the audited financial statements consolidated for all the entities for their fiscal year immediately preceding the implementation of the investment.
Consolidated financial statements not available
(4) Where consolidated financial statements of the entities referred to in subsection (2) or (3) are not available, the value of the assets for the purposes of paragraph 25.3(1)(a) shall be the aggregate of the assets of all the entities as shown in the audited financial statements for each such entity for its fiscal year immediately preceding the implementation of the investment, excluding
(a) any amount shown to represent an ownership interest in any other entity the control of which is acquired directly or indirectly; and
(b) any amount representing duplication arising from transactions between any entities the control of which is acquired directly or indirectly.
Exception — use of unaudited statement
(5) For the purposes of this section, where an individual or entity does not ordinarily prepare financial statements for audit or where financial statements for the fiscal year of the individual or entity immediately preceding the implementation of the investment have not been audited, unaudited statements may be used.
Where fiscal year of an entity not complete
(6) Where the first fiscal year of an entity has not been completed immediately preceding the implementation of the investment, a reference in this section to fiscal year shall mean the fiscal period that ends immediately preceding the implementation.
Value to be calculated in Canadian dollars
(7) The value of the assets calculated under this section shall be expressed in Canadian dollars.
Power of Governor in Council
25.5 (1) On the referral of an investment under paragraph 25.3(1)(b), the Governor in Council may, by order, within the prescribed period, take any measures in respect of the investment that the Governor in Council considers advisable to protect the national interest, including
(a) directing the non-Canadian not to implement the investment;
(b) authorizing the investment on condition that the non-Canadian
(i) give any undertakings to Her Majesty in right of Canada relating to the investment that the Governor in Council considers necessary in the circumstances, or
(ii) implement the investment on the terms and conditions contained in the order; or
(c) requiring the non-Canadian to divest themself of control of the Canadian business or their investment in the entity.
Notice of order
(2) The Minister shall send a copy of the order to the non-Canadian or person or entity to whom it is directed without delay after it has been made.
Requirement to comply with order
(3) The non-Canadian or other person or entity to whom the order is directed shall comply with the order.
Statutory Instruments Act does not apply
(4) The Statutory Instruments Act does not apply in respect of the order.
Information for monitoring
25.6 A non-Canadian who implements an investment that has been authorized by an order made under section 25.5 shall submit any information in their possession relating to the investment that is required from time to time by the Director in order to permit the Director to determine whether the investment is being carried out in accordance with the order.
Decisions and orders are final
25.7 Decisions of the Minister and orders of the Governor in Council under this Part are final and binding and, except for judicial review under the Federal Courts Act, are not subject to appeal or to review by any court.
5. (1) The portion of subsection 26(1) of the Act before paragraph (a) is replaced by the following:
Rules respecting control of entities
26. (1) Subject to subsections (2.1) to (2.2), for the purposes of this Act,
(2) Subsection 26(2) of the Act is replaced by the following:
Trusts
(2) Subject to subsections (2.1) to (2.2), if it can be established that a trust is not controlled in fact through the ownership of its voting interests, subsection (1) does not apply, and the trust is a Canadian-controlled entity if two-thirds of its trustees are Canadians.
(3) Section 26 of the Act is amended by adding the following after subsection (2.1):
Minister may determine
(2.11) For the purposes of Part IV.1, in the case of an entity that qualifies as a Canadian-controlled entity by virtue of subsection (1) or (2), the Minister may nevertheless determine that the entity is not a Canadian-controlled entity if, after considering any information and evidence submitted by or on behalf of the entity or otherwise made available to the Minister or the Director, the Minister is satisfied that the entity is controlled in fact by one or more non-Canadians.
(4) Subsection 26(2.2) of the English version of the Act is replaced by the following:
Minister may declare
(2.2) If an entity referred to in subsection (2.1) or (2.11) has refused or neglected to provide, within a reasonable time, information that the Minister or the Director has requested and that the Minister considers necessary in order to make a decision under that subsection, the Minister may declare that the entity is not a Canadian-controlled entity.
(5) Subsection 26(2.4) of the English version of the Act is replaced by the following:
Entity to be informed
(2.4) The Minister shall, without delay, inform the entity concerned, in writing, of any determination made under subsection (2.1) or (2.11) or declaration made under subsection (2.2), and of any date specified under subsection (2.3).
(6) Section 26 of the Act is amended by adding the following after subsection (3):
Exception
(3.1) Subsection (3) does not apply to a corporation for the purposes of Part IV.1.
6. (1) The portion of subsection 28(2) of the Act before paragraph (a) is replaced by the following:
Rules and presumptions respecting control of entities
(2) Subject to subsections (4) to (5), for the purposes of this Act,
(2) The portion of subsection 28(3) of the Act before paragraph (a) is replaced by the following:
Rules and presumptions respecting acquisition of control
(3) Subject to subsections (4) to (5), for the purposes of this Act,
(3) Section 28 of the Act is amended by adding the following after subsection (4):
Minister may determine
(4.1) For the purposes of Part IV.1, the Minister may, after considering any information and evidence submitted by or on behalf of an entity or otherwise made available to the Minister or the Director, determine that the entity is or is not controlled by another entity or that there has or has not been an acquisition of control of the entity, if the Minister is satisfied that the entity is or is not controlled in fact by that other entity or that there has or has not in fact been an acquisition of control of that entity, as the case may be.
(4) Subsection 28(5) of the English version of the Act is replaced by the following:
Minister may declare
(5) If an entity referred to in subsection (4) or (4.1) has refused or neglected to provide, within a reasonable time, information that the Minister or the Director has requested and that the Minister considers necessary in order to make a decision under that subsection, the Minister may declare that the entity is or is not controlled by another entity or that there has or has not been an acquisition of control of the entity, as the case may be.
(5) Subsection 28(7) of the English version of the Act is replaced by the following:
Entity to be informed
(7) The Minister shall, without delay, inform the entity concerned, in writing, of any determination made under subsection (4) or (4.1) or declaration made under subsection (5), and of any date specified under subsection (6).
7. (1) Subsection 36(1) of the Act is replaced by the following:
Privileged information
36. (1) Subject to subsections (3) to (4), all information obtained with respect to a Canadian, a non-Canadian, a business or an entity referred to in paragraph 25.1(c) by the Minister or an officer or employee of Her Majesty in the course of the administration or enforcement of this Act is privileged and no one shall knowingly communicate or allow to be communicated any such information or allow anyone to inspect or to have access to any such information.
(2) Section 36 of the Act is amended by adding the following after subsection (3):
Investigative bodies
(3.1) Information that is privileged under subsection (1) may be communicated or disclosed by the Minister to a prescribed investigative body, or an investigative body of a prescribed class, if the communication or disclosure is for the purposes of the administration or enforcement of Part IV.1 and that body’s lawful investigations. The information may also be communicated or disclosed by that body for the purposes of those investigations.
(3) Subparagraph 36(4)(e)(iii) of the Act is replaced by the following:
(iii) any demand sent by the Minister under section 39, other than a demand sent for the purposes of the administration or enforcement of Part IV.1; or
8. (1) Paragraph 39(1)(b) of the Act is replaced by the following:
(b) has implemented an investment the implementation of which is prohibited by section 16, 25, 25.2 or 25.3,
(2) Subsection 39(1) of the Act is amended by adding the following after paragraph 39(1)(d):
(d.1) has failed to divest themself of control of a Canadian business or of their investment in an entity as required by an order made under section 25.5,
(d.2) has failed to comply with an undertaking given to Her Majesty in right of Canada pursuant to an order made under section 25.5,
(d.3) has failed to comply with an order made under section 25.5,
(3) Subsection 39(2) of the Act is replaced by the following:
Ministerial demand
(1.1) If the Minister believes that a person or an entity, contrary to this Act, has failed to comply with an order under subsection 25.5(3) or to submit any information under section 25.6, the Minister may send a demand to the person or entity requiring them immediately or within any period that may be specified in the demand, to cease the contravention, to remedy the default or to show cause why there is no contravention of the Act.
Contents of demand
(2) A demand under subsection (1) or (1.1) shall indicate the nature of the proceedings that may be taken under this Act against the non-Canadian or person or entity to whom it is sent in the event that the non-Canadian or person or entity fails to comply with the demand.
9. (1) Subsection 40(1) of the Act is replaced by the following:
Application for court order
40. (1) If a non-Canadian or any other person or entity fails to comply with a demand under section 39, an application on behalf of the Minister may be made to a superior court for an order under subsection (2) or (2.1).
(2) Paragraph 40(2)(a) of the Act is replaced by the following:
(a) directing the non-Canadian to divest themself of control of the Canadian business, or to divest themself of their investment in the entity, on any terms and conditions that the court deems just and reasonable;
(3) Subsection 40(2) of the Act is amended by adding the following after paragraph (c):
(c.1) directing the non-Canadian to comply with a written undertaking given to Her Majesty in right of Canada pursuant to an order made under section 25.5;
(4) Subsections 40(3) and (4) of the Act are replaced by the following:
Court orders — person or entity
(2.1) If, at the conclusion of the hearing on an application referred to in subsection (1), the superior court decides that the Minister was justified in sending a demand to a person or an entity under section 39 and that the person or entity has failed to comply with it, the court may make any order or orders that, in its opinion, the circumstances require, including, without limiting the generality of the foregoing, an order against the person or entity imposing a penalty not exceeding ten thousand dollars for each day on which the person or entity is in contravention of any provision of this Act.
Penalties recoverable as debts
(3) A penalty imposed by an order made under paragraph (2)(d) or subsection (2.1) is a debt due to Her Majesty in right of Canada and is recoverable as such in a superior court.
Contempt of court
(4) Every one who fails or refuses to comply with an order that is directed to them made by a superior court under subsection (2) or (2.1) may be cited and punished by the court that made the order, as for other contempts of that court.
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