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1、State-Owned Enterprises and the Investment Canada Act,October 27, 2013,Jerome Beaugrand-Champagne China Representative Heenan Blaikie,State-Owned Enterprises and the Investment Canada Act,2,“Whoever is first in the field and awaits the coming of the enemy, will be fresh for the fight; whoever is sec
2、ond in the field and has to hasten to battle will arrive exhausted.” Sun Tzu,The Investment Canada Act (ICA),The Government of Canada has tightened the review process vis-vis SOEs, pursuant to Bill C-60:New provisions now in force: Expanding the definition of SOE Allowing the Minister to designate C
3、anadian investors as non-Canadian where there may be some foreign government influence Declaring an acquisition of control in fact where Minister is satisfied that the entity is controlled in fact by an SOEProvisions that will come into force when a date is established by order of the Governor in Co
4、uncil Creating a lower review threshold for SOE investors versus non-SOE investors Extending the review timelines for investments where there is a national security concern,3,The Investment Canada Act (ICA),Purpose:Governs the acquisition of control of Canadian businesses by non-Canadians Subjects i
5、nvestments to Government review Prescribes the legal responsibilities of non-Canadians investing in Canada,4,Investment Review Process under ICA,Current thresholds triggering review For WTO member investors: $344 million Proposed acquisitions exceeding 33.3% Net benefit to Canada assessment Effect o
6、n economic activity in Canada Effect on competition within the industry Compatibility of investment with national policies Degree of participation by Canadians in the business 45 day review Can extend 30 days Can extend further if investor agrees If not approved Investor can make additional represen
7、tations and undertakings to demonstrate “net benefit”,5,Amendments to the ICA: June, 2013,Expanded definition of SOE (in force)“Any entity that is controlled or influenced, directly or indirectly, by a government or agency of a foreign state”“An individual who is acting under the direction of a gove
8、rnment or agency or who is acting under the influence, directly or indirectly, of a government or agency”Proposed investors found to be SOEs will be subject to greater scrutiny,6,Amendments to the ICA: June, 2013,Minister may deem an otherwise “Canadian” business as “non-Canadian” (in force)This wou
9、ld subject the “non-Canadian” investor to review under the ICA Minister may consider “any information and evidence” before him This power may be exercised retroactively,7,Amendments to the ICA: June, 2013,“Acquisition of control in fact” test (in force)The Minister may deem a proposed investment an
10、“acquisition of control in fact,” if the Minister is satisfied the investor is controlled by an SOE, even where the “acquisition of control” threshold is not met Thus, an otherwise non-reviewable transaction will be reviewable Minister can consider “any information and evidence” before him This powe
11、r may be exercised retroactively,8,Amendments to the ICA: June, 2013,Review threshold (will come into force on a date to be set by order of the Governor in Council)Will gradually increase to $1 billion enterprise value for non-SOE investments over six years Will remain at $344 million asset value fo
12、r SOEs Consequence is that SOE investments will be subject to review at a much lower threshold than non-SOEs The Government can review any proposed investments on national security grounds,9,Amendments to the ICA: June, 2013,Extension of time for national security reviews (will come into force on a
13、date to be set by order of the Governor in Council)Government announced it will amend ICA to give greater flexibility Currently, Minister has 130 days No guidance regarding changes, but policy indicates extensions will only be used in exceptional circumstances,10,Implications and Options for Chinese
14、 SOEs,Greater power for Government to deem foreign investors as SOEsSOEs will be subject to lower review threshold Pursuant to the December 2012 Statement, the “Minister of Industry will find the acquisition of control of a Canadian oil sands business by a foreign SOE to be of net benefit to Canada
15、on an exceptional basis only.”,11,Implications and Options for Chinese SOEs,Greater uncertainty associate with the review processInvestors need greater guidance on what will constitute an SOE to know which review threshold will be engaged and where new restrictive reviews will be applied i.e. where
16、an investment can be deemed an acquisition of control in fact,12,Implications and Options for Chinese SOEs,“You can ensure the safety of your defence if you only hold positions that cannot be attacked.” - Sun Tzu,13,HEENAN BLAIKIES CHINA GROUP,Heenan Blaikies China Group consists of lawyers with in-depth knowledge and extensive experience in China market. Members of the Group devote their expertise to assisting clients with their business and investment needs in various sectors, including: construction, immigration, mining, oil and gas, high tech, real estate, and renewable energy.,
