Dec 7 Canada announced new foreign investment
guidelines on Friday to clarify the criteria the government will
use in deciding whether to approve foreign takeover proposals,
particularly those made by state-owned enterprises, or SOEs.
Prime Minister Stephen Harper unveiled the new policy
framework at the same time as the government announced its
decision to approve the purchase of two domestic energy
producers by state-owned Chinese and Malaysian companies.
Here are some key points of the new foreign investment
* The government's reviews of SOE investments will take into
account the degree of control or influence a SOE would exert on
the Canadian business; the degree of control or influence a SOE
would exert on the industry in which the Canadian business
operates and the extent to which the foreign government would
exercise control or influence over the SOE acquiring the
* The threshold for review of SOE bids will remain at C$330
million ($333.79 million) while the threshold for private
transactions will rise to C$1 billion over four years.
* Investments by foreign SOEs to acquire control of a
Canadian oil sands businesses will only be approved on an
* Outside the oil sands, where due to a high concentration
of ownership a small number of SOE takeovers could undermine the
private sector orientation of an industry, the government will
act to protect Canadian interests.
* Proposed acquisitions of minority stakes in Canadian
businesses by foreign SOEs will continue to be welcome, and
subject to the same scrutiny as private investments.
* The definition of an SOE will be changed to include not
only entities that are owned by foreign governments but entities
that are "influenced directly or indirectly" by a foreign
*The industry minister will have the power to extend the
timeline for national security reviews if needed.
PREVIOUS SOE INVESTMENT GUIDELINES:
*The government issued guidelines in 2007 under the
Investment Canada Act for investments by foreign SOEs. They
broadly seek to ensure the acquired business operates with a
commercial orientation, not in the strategic interest of a
* The minister examines the corporate governance and
reporting structure of the SOE investor, including whether it
complies with Canadian standards of transparency and disclosure,
has independent members of the board of directors, independent
audit committees and equitable treatment of shareholders.
*The minister studies the extent to which the foreign
investor is owned or controlled by a state.
*The minister assesses whether the business to be acquired
will continue to have the ability to operate on a commercial
- where to export
- where to process
- participation of Canadians in its operations in Canada and
- support of innovation, research and development
- appropriate level of capital spending to maintain a
globally competitive position
*The investor is encouraged to submit specific undertakings
in support of the bid such as appointing Canadians to board of
directors, employment of Canadians in senior management
positions and the listing of shares on a Canadian stock
*The previous guidelines do not mention specific industries
or assets that are considered more sensitive than others.
($1 = 0.9887 Canadian dollars)
(Reporting by Louise Egan; Editing by Bob Burgdorfer)