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- Merger Control Regime
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2. Nature of merger control regime
2.1 Mandatory or voluntary
2.1.1 Is filing mandatory or voluntary?
2.2 Suspensory effect
2.2.1 Must completion of the transaction await clearance by the relevant authorities?
1. What type of transactions are caught by the merger control regime?
1.1.1 Type of transactions that are caught by the merger control rules?
The following transactions are caught by the merger control rules:
b) acquisitions of assets;
c) acquisition of more than 20% of the voting shares of a public company (more than 50% if the acquirer already owns 20% or more) or more than 35% of the voting shares of a private company (more than 50% if the acquirer already owns 35% or more);
d) acquisition of an interest in an unincorporated combination of two or more persons to carry on business if it results in the acquirer being entitled to more than 35% (more than 50% if it already is entitled to 35% or more) of the profits of the combination or of its assets on dissolution.
e) formation of unincorporated combinations.
2. Establishing jurisdiction for notification of mergers
2.1 Merging parties/undertakings concerned
2.1.1 Which undertakings are considered parties to the merger ("undertakings concerned") in the various types of transactions identified under Section 1.1.1 and 1.2.1.
The undertakings concerned are the parties together with their affiliates. For corporations, affiliates are defined as entities being in a relationship of control to one another or under common control, i.e. usually more than 50% ownership. For unincorporated entities, affiliates are defined as entities being entitled to more than 50% of the profits or assets in a dissolution.
In share acquisitions, the undertakings concerned are the acquirer and the target, including affiliates, and the seller if the seller holds more than 50% of the shares in the target.
In acquisitions of an interest in a combination, the undertakings concerned are the acquirer(s) and the combination whose interest is to be acquired, and the seller if the seller holds more than 50% of the interests in the combination.
2.3 General thresholds
Merger control filing is required when:
Size of parties test
- The combined assets or turnover in Canada of the undertakings concerned exceeded CAD 400,000,000 in the last financial year; and
Size of transaction test
- For share acquisitions and mergers, the asset value or turnover of the target (or the merging entities in the case of mergers) exceeded CAD 96,000,000 in Canada in the last financial year; or
- For asset acquisitions, the book value of the assets acquired, or the turnover generated by the assets acquired, exceeded CAD 96,000,000 in Canada in the last financial year.
Regardless of size, even if the transaction is not notifiable, all mergers and acquisitions of control over, or a significant interest in the whole or a part of, a business that has sufficient local nexus is subject to investigation and review by the Canadian Commissioner of Competition for up to one year after closing.
2.4 Other national thresholds for ex ante merger control (e.g. sector-specific rules)
2.5 Foreign-to-foreign mergers
2.5.1 Do any exemptions, special thresholds etc. apply to foreign-to-foreign mergers, i.e. where none of the undertakings concerned is domiciled in the jurisdiction?
The transaction must have local nexus, i.e. involve an ‘operating business’ in Canada (i.e. either of the undertakings concerned must have employees within Canada as opposed to merely a passive investment vehicle - but, in the view of the Competition Commissioner’s, such employees may be those of an agent or a contractor).
An acquisition of control by foreign nationals must be notified as a formality to the Investment Review Division of the Department of Innovation, Science and Economic Development.
Transactions that have an element of national security may be reviewed regardless of size.
3. Calculation and allocation of turnover, asset value, transaction value etc.
3.1 Relevant turnover
3.1.1 How is turnover defined (e.g. is income from other sources than "ordinary activities to be included, and how are rebates, taxes, internal turnover etc. treated)?
For the size of parties test, the turnover to be taken into account is the gross revenues from domestic sales plus exports and imports.
For the size of transaction test, the turnover to be taken into account is the gross revenues from domestic sales plus exports.
3.3 Relevant undertakings for the calculation of turnover
3.3.1 The "undertakings concerned", i.e. which parties?
See Section 2.1.1 above.
3.3.2 The undertakings whose turnover is taken into account?
For the size of parties test, the turnover to be taken into account is that of the undertakings concerned.
For the size of transaction test, the turnover to be taken into account is that of the target or the target assets, as the case may be.
3.3.3 Shall the turnover of the existing seller be included in the target's group turnover?
The seller’s turnover is included in the target’s group turnover if it holds more than 50% of the shares in the target company or the interests in the target combination.
and last updated on 21-04-2020 by
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