Update on Bill C-34 – An Act to Amend the Investment Canada Act

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In our December 15, 2022 publication, Protecting Canada's National and Economic Security Interests: Bill C-34, which you can access here, we highlighted three of the most significant proposed amendments to the Investment Canada Act ("ICA") from Bill C-34: An Act to amend the Investment Canada Act ("Bill C-34"), namely:

(1) new mandatory pre-implementation filing requirements for certain investments engaged in yet to be prescribed business activities;

(2) significantly increased Ministerial authority to (i) extend the timeline for national security review, (ii) impose interim conditions, and (iii) accept undertakings as a condition of permitting the foreign investment to proceed; and

(3) stronger penalties for non-compliance.

Bill C-34's first and second readings in the House of Commons were completed on December 7, 2022 and April 17, 2023, respectively. On September 28, 2023, the Standing Committee on Industry and Technology completed its review and proposed a number of noteworthy additions to Bill C-34, including:

  • requiring investments by state owned enterprises (SOEs) that are not trade agreement investors to submit their investments to acquire control of, or establish, a Canadian business to a net benefits review;
  • including, as factors for consideration in a net benefits review, matters related to intellectual property funded by the government and the use and protection of personal information about Canadians; and
  • clarifying that acquisitions of assets of a Canadian business or assets of a business that has operations in Canada are subject to national security review.

Net Benefits Review of Investments by Certain SOEs

Acquisitions of control of a Canadian business are subject to notification unless they exceed certain value thresholds, in which case, they are subject to a net benefits review and may not be implemented without the approval of the Minister, or if already implemented, may be subject to a divestment order.  If the investment is subject to notification rather than review, the investment can be implemented immediately, with the notification to follow within 30 days.

Under the revised provisions of Bill C-34, the Director, on the recommendation and order of the Governor in Council, will have the right, within 45 days or receiving a completed notification, to send an SOE (unless it is a trade agreement investor)[1] a notice for review of the investment.  SOE investors that are subject to these provisions will be advised to submit their notifications at least 45 days in advance of closing to ensure they do not receive a notice for review of their investment following closing.  Closing conditions for transactions involving SOE investors that are not trade agreement investors should expressly contemplate the possibility of extending the closing date should the SOE investor receive a notice of review prior to closing.

Expanded Factors for Consideration in a Net Benefits Review

Section 20 of the ICA provides a list of factors to be taken into account by the Minister in connection with the Minister's net benefits review of the proposed investment. The amended Bill C-34 expands these factors to include:

  • the effect of the investment on any rights relating to intellectual property, whose development has been funded, in whole or in part, by the Government of Canada; and
  • the effect of the investment on the use and protection of personal information about Canadians.

These provisions will give the Minister express authority to consider whether any intellectual property funded by Canada will become owned by a national from a country that does not have the same or similar level of protection for intellectual property rights as Canada, or whose legislation or practices do not provide the same protections for the use and protection or personal information as Canada. Such investors may be required to provide undertakings that specifically address these protections.

National Security Review

Investments in Assets of a Canadian business or a Business with Operations in Canada

The National Security Review of Investments Regulations were amended on August 2, 2022 to permit foreign investors to voluntarily submit a non-controlling or minority interest investment (a "Non-Controlling Investment") in a Canadian investment to an initial 45-day national security review, to allow the Canadian government to initiate a national security review of a Non-Controlling Investment for up to 5 years after its date of implementation and to prescribe the information required to be provided to commence a national security review of a Non-Controlling Investment.

Bill C-34 has been amended to make it clear that a Non-Controlling Investment includes an investment in assets of a Canadian business. New Section 25(1)(b.1) relates specifically to any investment by an SOE to acquire any of the assets of a Canadian business while new Section 12(2) clarifies that the acquisition, in whole or in part, or the establishment of an entity carrying on operations in Canada, includes an investment to acquire the Canadian assets of that entity. Notably, neither of these types of investment require an acquisition of control of a Canadian business (whether by way of the acquisition of its assets or otherwise). Accordingly, parties to a proposed investment in assets of a Canadian business involving an SOE investor or that involve assets deemed to be of a national security interest (as set out in the Guidelines on the National Security Review of Investments, as discussed in our bulletin here) will also be advised to voluntarily submit a notification of their investment at least 45 days in advance of closing.

Offenses Related to Corruption

The amendments also address national security concerns relating to corruption. Bill C-34 has been amended to expressly provide that the fact that a foreign investor has previously been convicted of an offense involving an act of corruption (whether inside of or outside of Canada), by itself, constitutes reasonable ground to believe that the investment could be injurious to national security.


As noted in the 2022-2023 Annual Report for the Investment Canada Act, "Fiscal Year 2022-23 … saw an increase in the number of extended national security review for the second year in a row. This upward trend aligns with Canadian continuing efforts to protect the economy from investments that threaten national security in a time of shifting geopolitical realities and rapid innovation."

While Bill C-34 has yet to go through third reading at the House of Commons and remains to be reviewed by the Senate, the proposed changes are in line with changes that are being made by other countries around the world with investment regimes that are similar to Canada's. Distrust of the commercial bona fides of countries outside of existing allies and trading partners and an increased desire to protect our national security in an increasingly fragmented world, are fueling these changes. The Minister is given a fair amount of discretion to apply the ICA in a manner that takes into consideration the economic and geopolitical environment of the time.  This flexibility is designed to provide the Minister with the tools he or she needs to protect Canada's national security, but in so doing, does add an element of uncertainty for foreign investors during times of geopolitical and economic change.



[1] SOEs that are controlled by nationals from trade agreement countries are "trade agreement investors" that are not subject to these provisions. Trade agreement investors are investors controlled by nationals from countries that Canada has a specified trade agreement and which include the trade treaties referred to in the Canada-European Union Comprehensive Economic and Trade Agreement Implementation Act (currently Austria, Croatia, Czechia, Denmark, Estonia, Finland, Germany, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Romania, Slovakia, Spain, and Sweden), the Canada-UK Trade Continuity Agreement, Canada-Childe Free Trade Agreement Implementation Act; Canada-Peru Free Trade Agreement Implementation Act, the Canada-Columbia Free Trade Agreement Implementation Act, the Canada-Panama Economic Growth and Prosperity Act, the Canada-Korea Economic Growth and Prosperity Act, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership  or TPP (currently Singapore, Mexico, U.S., Australia, Japan, New Zealand, Chile, Peru, Vietnam, Malaysia and Brunei) and the Canada-United States-Mexico Agreement Implementation Act.  Notably, Russia and China are not trade agreement countries.


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