Dany Assaf comments on ongoing concerns with federal policy on foreign investment

Bill C-60 introduces more uncertainty on foreign takeovers

May 22, 2013

Dany Assaf was sought for comment by the Financial Post on the federal government’s recent amendments to the Investment Canada Act, which, according to Dany, have not necessarily allayed concerns that the Act has fostered an unclear and potentially more restrictive image of the investment climate in Canada to foreign investors. Read an excerpt of the article below.

For the better part of last year, the business community fretted over what the federal government would ultimately do to clarify or modernize the way it reviews takeovers of large Canadian companies by foreign state-owned enterprises or SOEs.

The rules ultimately emerged on Dec. 7, and they came with their own share of uncertainty. For example, what, pray tell, are the famed "exceptional circumstances" that might lead Ottawa to overrule the new ban on foreign SOE control investments in the oil sands?

Yet there was some solid information in the new package. The legal definition for equity control remained clear. Acquiring something less than a 33.3% stake in a company or JV was deemed not to be a control transaction for the purposes of the Investment Canada Act. That’s a certain, transparent dividing line.

That was before April 29. Now the federal government has unveiled Bill C-60, the enabling legislation that is supposed to amend the Investment Canada Act in ways that enshrine those December policies into law. And there’s one very big surprise. The government has erased that nice, clear dividing line and replaced it with a much looser standard that focuses on de facto control.

The proposed amendments give the Minister discretion to review transactions if he or she is concerned the SOE has engineered a deal in a way that grants the foreign investor more actual control than the legal equity participation might suggest.

"This does make things potentially more murkier because there is no clear line on what may or may not be an acquisition of control," says Dany Assaf of Torys LLP.

Click here for the full article.

For more on this and other issues around Canada’s foreign investment policy, Dany Assaf and Rory A. McGillis have written a comprehensive study on the subject, “Foreign Direct Investment and the National Interest: A Way Forward”, available here.

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