Investment Canada Act (ICA)

Canada remains one of the world’s most attractive destinations for foreign investment. Its stable economy, skilled workforce, and strong legal framework draw investors from across the globe. To ensure that these investments benefit the country’s economy and protect national interests, Canada regulates foreign investment through the Investment Canada Act (ICA).

This legislation is essential reading for foreign investors, corporations expanding into Canada, and Canadian businesses entering cross-border partnerships.

Purpose of the Investment Canada Act

The Investment Canada Act governs how non-Canadian investors can establish or acquire businesses in Canada. Its two main purposes are:

1. Promoting beneficial investment that contributes to economic growth, innovation, and employment.

2. Protecting national security by ensuring that foreign investments do not threaten Canada’s sovereignty or key industries.

In essence, the ICA strikes a balance between welcoming capital inflows and safeguarding national interests.

Who Is Considered a Non-Canadian?

A “non-Canadian” includes:

• Individuals who are not Canadian citizens or permanent residents.

• Corporations or entities not controlled by Canadians.
  When a non-Canadian acquires control of a Canadian business or establishes a new one, the transaction may be subject to review or notification under the ICA.

When Does the Act Apply?

The ICA applies when:

• A non-Canadian starts a new business in Canada.

• A non-Canadian acquires control of an existing Canadian business.

• A transaction raises national security concerns, regardless of its size.

Depending on the transaction’s nature and value, it may require either a notification or a pre-closing review.

Notification vs. Review

There are two key categories of filings under the ICA:

• Notification: Most smaller investments only require notification after closing. This is mainly a record-keeping step that ensures transparency.

• Review: Large or sensitive transactions must undergo a full “net benefit to Canada” review before closing. The government assesses whether the investment will positively impact the economy, employment, productivity, and technological advancement.

The “Net Benefit to Canada” Test

For transactions subject to review, the Minister of Innovation, Science and Industry evaluates whether the proposed investment is likely to be of net benefit to Canada.
The review considers factors such as:

• Job creation and retention in Canada.

• Participation of Canadians in management or ownership.

• Technology transfer and innovation.

• Impact on competition and regional development.

• Compatibility with national industrial and cultural policies.

National Security Review

Even if a transaction does not meet financial thresholds, it can still be reviewed under national security provisions. This allows the federal government to block or condition any investment deemed injurious to Canada’s security.
Examples include investments in sectors such as:

• Telecommunications

• Artificial intelligence

• Critical minerals

• Energy and infrastructure

• Data security and defense technology

Common Misconceptions

1. “My investment is small, so the ICA doesn’t apply.”
False. Even minor investments can be reviewed if they raise security concerns.

2. “The process is just a formality.”
Incorrect. The government can block, delay, or impose conditions on a deal if it does not meet the required standards.

3. “Canadian businesses don’t need to worry.”
Not true. If your company is being acquired or partnering with a foreign investor, understanding ICA timelines and requirements is crucial to avoid deal delays.

Why This Matters in 2025 and Beyond

The Canadian government has strengthened its investment screening policies, particularly in technology, natural resources, and strategic sectors. With global economic shifts and supply-chain pressures, regulators are increasingly focused on economic security as well as national security.

Foreign investors should therefore plan ahead, conduct regulatory due diligence early, and build ICA timelines into their transaction schedule.

How Hadri Law Can Help

At Hadri Law, we guide both Canadian and international clients through the complexities of the Investment Canada Act. Our services include:

• Assessing whether the ICA applies to your transaction.

• Preparing and filing ICA notifications or review applications.

• Advising on deal structuring to minimize regulatory delays.

• Coordinating with government authorities and ensuring compliance with any post-approval conditions.

We help investors navigate regulatory hurdles confidently and ensure that their investment strategy aligns with Canadian law and policy objectives.

Conclusion

The Investment Canada Act plays a central role in shaping how foreign investments enter and operate in Canada. It ensures that while Canada remains open for business, investments continue to serve the nation’s economic and security interests.

Whether you are a foreign investor planning to acquire a Canadian business or a Canadian company considering international partnerships, legal guidance is key to a smooth and compliant process.

At Hadri Law, we combine business insight with legal expertise to help clients successfully invest and grow in Canada.