Investment Canada Act

The Investment Canada Act (ICA) provides for the review of acquisitions or establishments of Canadian businesses by non-Canadians. The ICA establishes two review frameworks: net benefit reviews (NBRs) and national security reviews (NSRs).

Net Benefit Reviews: A direct acquisition of control of a Canadian business by a non-Canadian investor that exceeds specified financial thresholds requires prior approval under the ICA on the basis that the investment is likely to be of net benefit to Canada. A net benefit assessment considers, among other things, the impact of the transaction on Canada’s economy, productivity, efficiency, technological development, innovation, competitiveness and industrial policies. It also considers the impact on Canadian participation in the acquired business. The financial thresholds for a reviewable transaction (outside the cultural sector) are high. For most private-sector investors, the threshold is at least C$1.452 billion in enterprise value of the Canadian business (C$2.179 billion for investors from countries with which Canada has specified trade agreements). Accordingly, net benefit reviews are relatively rare, with the Minister conducting only ten such reviews in the last reported year.

That said, the government has issued a policy statement to the effect that transactions involving important Canadian mining companies engaged in significant critical minerals operations that are subject to an NBR will be found to be of net benefit in only the most exceptional circumstances.

National Security Reviews: The ICA also allows the Canadian government to review a much broader range of foreign investments on national security grounds, such as acquisitions of minority interests in Canadian businesses or entities with assets in Canada. If an NSR is commenced in respect of a proposed transaction, the ICA prohibits completion of the transaction while the NSR is underway. It can take up to 200 days or longer for the government to complete an NSR and reach a final decision on whether to block the transaction, allow it to proceed or allow it to proceed subject to commitments by the foreign investor.

Following recent amendments to the ICA, the Minister may unilaterally impose interim conditions to address national security concerns during the NSR process. For example, the Minister may issue “hold separate,” orders even after implementation of an investment, or limit an investor’s access to sensitive intellectual property and data of a Canadian business pending the outcome of a review.

Pending regulations expected to be implemented by the end of the year will create categories of investments (including minority stakes) that will require pre-closing notification to provide the government with an opportunity to conduct an NSR before closing. Foreign investors who are contemplating an investment in the sectors that are more likely to trigger this requirement (including, for example, critical minerals, AI, quantum computing and businesses handling sensitive personal data) will need to plan for this development.

In recent years, the increasing scope of NSRs has added uncertainty for some foreign investors and effectively reduced the pool of investors in certain sectors. Notably, a 2022 policy states that investments by foreign state-owned enterprises (SOEs) in a Canadian business operating in a critical minerals sector will support a finding that the investment could be injurious to Canada’s national security. Pursuant to that policy, the Canadian government blocked or unwound at least six investments by Chinese SOEs in the critical minerals sector.

Further, a 2025 policy update expressly added “economic security” as a relevant factor for national security assessments under the ICA in light of an “increasingly geopolitically fractured world” where “Canada is facing more frequent threats to its national security through economic means.”

Canada conducted 30 NSRs in the last reported year. Six of those cases resulted in the investor abandoning the transaction or being subjected to a divestiture order, while undertakings were required to clear the NSR in six other cases.

Importantly for prospective investors, some recent developments may signal a greater flexibility and pragmatism in ICA reviews:

The Teck Resources/Anglo American merger received NBR clearance within about three months of announcing the merger, notwithstanding that it involved an acquisition of a major Canadian company in the critical minerals sector. Historically, average review times have ranged from about 70 to 100 days, with some high-profile transactions taking much longer.
Earlier this year, the government announced a new strategic partnership with China with a view to accelerating Chinese investment opportunities in Canada. The Minister of Energy also publicly commented that the government is open to more investment by China in the oil sands sector. While national security reviews are likely to remain rigorous and important, especially for Chinese state investments, there may be relatively greater potential for ICA clearance of Chinese minority investment alongside other investors, including the new Canada Strong Fund.
While the BCA expressly provides that ICA approval cannot be bundled and accelerated along with other federal approvals in a BCA process, both NBR and NSR timelines and outcomes are within the control of the federal cabinet and ministers. It therefore seems likely that the government would aim to complete any required ICA reviews within the BCA timeline for other federal approvals and, more generally, may seek to conduct ICA reviews on timelines and in a manner that do not unnecessarily deter investment in Canada. For example, the government may be relatively more amenable to allowing investments to proceed with commitments rather than blocking the investment or requiring divestiture or cessation of operations. As an illustration, the government recently permitted TikTok to continue to operate in Canada, notwithstanding a 2024 decision to order the wind-up of TikTok’s Canadian operations.

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