An investment triggers review under the Investment Canada Act when a non-Canadian acquires control of a Canadian business and the deal value exceeds the applicable review threshold, C$1.452 billion for WTO investors or C$2.179 billion for trade agreement investors in 2026. A separate national security review can apply to any investment, regardless of size.
Foreign investors acquiring Canadian businesses face a regulatory screening process that most deal teams underestimate until they're in the middle of it. The Investment Canada Act (ICA), a federal statute administered by Innovation, Science and Economic Development Canada (ISED), governs when and how that screening happens.
The Act runs two distinct regimes in parallel. The first is the economic benefit review: the government asks whether your investment is likely to produce a "net benefit" to Canada. The second is the national security review: the government asks whether your investment poses a threat to Canada's security. These two regimes have different triggers, different timelines, and different consequences.
This guide covers both: what makes an investment subject to the ICA in the first place, when notification is sufficient versus when formal review is required, how the net benefit test works, and what the national security review means for deals that fall below economic review thresholds.
Does the Investment Canada Act Apply to Your Investment?
Not every foreign acquisition of a Canadian asset falls under the ICA. There are three questions to answer before the threshold analysis even begins.
Who Is a "Non-Canadian"?
The ICA applies to non-Canadians. An individual is a non-Canadian if they are not a Canadian citizen or permanent resident. A corporation, trust, partnership, or joint venture is non-Canadian if it is not ultimately controlled by Canadians, and the word "ultimately" matters here. The Act looks through layers of ownership to find the actual controlling party.
What Is a "Canadian Business"?
The Act applies to acquisitions of control of Canadian businesses. A Canadian business is a business carried on in Canada that has all three of: a place of business in Canada, an individual in Canada employed or self-employed in connection with the business, and assets in Canada used in carrying on the business. This is a conjunctive test, all three elements must be present.
What Counts as "Acquisition of Control"?
Control is the pivot point of the entire ICA framework. The Act provides clear rules:
- Majority voting interest (more than 50%): Always constitutes acquisition of control.
- One-third or more of voting shares: Presumed to be acquisition of control, but the investor can rebut this presumption by demonstrating that they do not control the corporation in fact through that ownership.
- Less than one-third of voting shares: Deemed not to be acquisition of control. Minority stakes below one-third do not trigger the net benefit review.
- Asset acquisitions: Acquiring all or substantially all of the assets used in carrying on a Canadian business also constitutes acquisition of control, even without a share transaction.
The one-third rebuttable presumption is practically important. If a foreign investor takes a 35% stake in a widely held Canadian corporation and can demonstrate that no single shareholder exercises control, they may be able to establish that no acquisition of control has occurred.
What About Establishing a New Business?
Setting up a new Canadian business is not the same as acquiring an existing one. New business establishments require a notification, but they are generally not subject to the net benefit review, with one significant exception: new cultural businesses may be reviewed by Order-in-Council within 21 days of the government receiving a complete notification.
Transactions Exempt from the ICA
Certain transactions are excluded entirely from the ICA's reach, including:
- Internal corporate reorganizations that involve no change of ultimate control
- A lender realizing on security (enforcing collateral rights over a Canadian business)
- Bona fide estate transfers
- Acquisitions subject to review under other Canadian federal legislation, such as the Bank Act
The expansion of an existing business, or the establishment of a related new business in a non-prescribed sector, is also exempt from both notification and review requirements.
Notification vs. Net Benefit Review: Which Applies Under the Investment Canada Act?
Once you've determined the ICA applies, the next question is which track you're on: notification only, or a full application for review.
The Two Tracks
Notification is the lighter requirement. You file a notification with ISED within 30 days after closing the transaction. ISED then has 21 days to confirm whether the investment is reviewable. No government approval is required before closing.
Application for Review is the more demanding path. You must file before closing, and you cannot complete the transaction until the government approves it. The government has 45 days after receiving a complete application to make its determination, though this period is frequently extended by agreement when the review requires more time.
2026 Investment Canada Act Review Thresholds
Whether your deal is notification-only or subject to a full review depends on the deal value relative to applicable thresholds. These thresholds increase annually based on changes in Canada's nominal GDP and are confirmed by the government each year.
For 2026:
| Investor Type | 2026 Threshold | Measurement Basis |
|---|---|---|
| Trade Agreement Investors (non-SOE) | C$2.179 billion | Enterprise value |
| WTO Member Investors (non-SOE, non-trade agreement) | C$1.452 billion | Enterprise value |
| WTO State-Owned Enterprises (SOE) | C$578 million | Book value of assets |
| Non-WTO Investors | C$5 million (direct) / C$50 million (indirect) | Book value of assets |
| Cultural Businesses (any foreign investor) | C$5 million (direct) / C$50 million (indirect) | Book value of assets |
For context, the 2025 thresholds were C$2.079 billion for trade agreement investors, C$1.386 billion for WTO private investors, and C$551 million for WTO SOEs, confirming the upward trend each year.
Trade Agreement Investors are investors controlled from countries that have a free trade agreement with Canada, including CUSMA (Canada-US-Mexico), CPTPP, and CETA parties. These investors receive the highest thresholds.
WTO investors are investors from World Trade Organization member countries that are not parties to Canada's free trade agreements. They receive the intermediate threshold.
State-Owned Enterprises (SOEs) face lower thresholds and enhanced scrutiny regardless of their WTO membership status. An entity is treated as an SOE when it is controlled or influenced by a foreign government. SOEs in oil sands and critical minerals sectors face particularly intensive review.
Non-WTO investors and cultural businesses face the lowest thresholds, C$5 million for direct acquisitions, meaning even modest foreign acquisitions in these categories require pre-closing review.
How Enterprise Value and Book Value Are Calculated
The measurement basis matters because it affects whether a deal is reviewable at all.
Enterprise value (used for WTO and trade agreement private investors) is calculated under the Investment Canada Regulations (sections 3.3–3.5) and varies depending on whether the transaction involves publicly traded shares, non-publicly traded shares, or asset purchases. It accounts for equity value, liabilities, and acquisition premiums.
Book value of assets (used for SOEs and non-WTO investors) is taken from the Canadian target's balance sheet as of the last completed fiscal year before the acquisition.
The distinction is significant: a Canadian business with modest book value assets might still carry a substantial enterprise value based on goodwill, market position, and future earnings, which could push a deal into review territory for WTO investors even when book value alone would not.
What About Indirect Acquisitions?
For WTO investors, indirect acquisitions, acquiring a foreign company that happens to own a Canadian subsidiary, are subject to notification but are not subject to the net benefit review. This exemption does not apply to cultural businesses.
The ICA Net Benefit Test: How the Government Assesses Your Investment
When your deal is subject to a formal review, the government evaluates whether it is "likely to be of net benefit to Canada." This assessment is governed by section 20 of the Investment Canada Act.
The Six Statutory Factors
The Minister does not apply a formula. Instead, he or she weighs all relevant factors and aggregates the results. The Act provides no fixed weights, factors that are less relevant to a particular deal may matter less in that specific review. The six factors are:
1. Effect on Economic Activity in Canada The investment's impact on employment levels, resource processing, utilization of Canadian-made parts, components, and services, and exports from Canada. This is typically the most data-rich factor, investors are expected to provide projections.
2. Degree and Significance of Canadian Participation How involved Canadians will be in owning and operating the business after acquisition. Foreign ownership with Canadian management and Canadian minority shareholders is viewed more favourably than a full foreign takeover with no Canadian involvement at any level.
3. Productivity, Industrial Efficiency, Technological Development, and Innovation Whether the investment brings new technology, improves operational efficiency, advances product development, or affects intellectual property in Canada. Since Bill C-34 amendments (in force September 2024), this factor explicitly includes the effect of the investment on government-funded intellectual property rights and the protection of Canadians' personal information.
4. Effect on Competition in Canada The competitive dynamics within the relevant Canadian industry after the investment. A deal that increases concentration in an already-concentrated market may face greater scrutiny here, even if the net benefit case is strong in other respects.
5. Compatibility with National Industrial, Economic, and Cultural Policies How well the investment aligns with government priorities. This factor now explicitly includes the effect on the protection of personal information about Canadians, a recognition that data-intensive acquisitions carry distinct policy considerations.
6. Contribution to Canada's Ability to Compete in World Markets Whether the investment strengthens Canadian industry's global position. Cross-border integrations that expand export capacity or bring international expertise to a Canadian business can weigh positively here.
How the Net Benefit Assessment Works in Practice
The starting point is a counterfactual: what would happen to this Canadian business without the acquisition? The Minister establishes a baseline and then measures the investment's expected effects, positive and negative, against each of the six factors.
Investors must submit an Application for Review that addresses all relevant factors and provides supporting documentation: financial projections, employment plans, organizational charts, R&D commitments, and evidence of how the Canadian business will operate post-acquisition.
Where the government identifies concerns about specific factors, it will typically negotiate binding undertakings, legally enforceable commitments that the investor must keep after closing. Common undertakings include maintaining employment levels at named facilities, keeping the Canadian headquarters in Canada, committing to specific R&D spending targets, and continuing relationships with Canadian suppliers. Breach of undertakings can result in penalties or divestiture orders.
The 45-day statutory review period is frequently extended by agreement. In recent years, the average duration of a net benefit review has ranged from 69 to 97 days. Complex deals in sensitive sectors can take considerably longer.
Outright rejections are rare. Most investments are approved, either unconditionally or subject to undertakings. Notable exceptions exist, the 2010 preliminary non-benefit determination against BHP Billiton's proposed acquisition of Potash Corporation of Saskatchewan (after which BHP withdrew its offer) is the most prominent Canadian example, but these are the exception rather than the rule.
There are no filing fees under the ICA, which is notable by comparison to some other foreign investment screening regimes.
National Security Review: The Regime With No Dollar Threshold
The net benefit assessment described above applies only when deal value exceeds the relevant threshold. The national security review is different in a fundamental way: it applies to any investment by a non-Canadian, regardless of size, regardless of whether the investor acquires control, and regardless of whether the business is otherwise covered by the ICA at all.
This matters enormously for deals that fall below net benefit thresholds.
What Triggers National Security Scrutiny
Updated guidelines published in March 2025 identify the types of investments that raise national security concerns. The government focuses on investments that may affect:
- Critical infrastructure, including energy systems, water, transportation, and financial infrastructure
- Canada's defence and intelligence capabilities
- Technology listed on Canada's Sensitive Technology List (updated in March 2025 to replace the prior annex)
- The critical minerals supply chain, an area of particular focus given the strategic importance of battery metals, rare earths, and other minerals to Canada's economic security
- The transfer of sensitive technology or knowledge to foreign actors
- Investments creating foreign surveillance risks or enabling foreign state actors to monitor Canadians
- Sensitive personal data of Canadians
- Economic security through integration of a Canadian business with a foreign state's economy
The March 2025 guideline revision formalized economic security as a component of national security, a significant expansion that investors in cross-border transactions should note.
The Timeline Problem for Deals That Don't File
When a notification or application for review is filed, the government has 45 days from receipt to initiate a national security review. Filing starts the clock and provides certainty.
When no filing is made, because the deal is below the net benefit threshold and the investor skips a voluntary notification, the government can initiate a national security review at any time within five years of the investment's implementation. That five-year window represents a substantial and ongoing risk for transactions in sensitive sectors where no filing was made.
Once a national security review is initiated, the parties cannot close (or must unwind if already closed), and the review period can extend to 200 days or more.
Forthcoming Mandatory Pre-Closing Filing Requirements
Amendments to the ICA expected to take effect in 2026 will introduce mandatory pre-closing filing requirements for certain sensitive sector investments, regardless of deal size. The sectors anticipated to be covered include businesses operating in critical minerals, critical infrastructure, advanced technologies, military or defence technologies, and businesses that handle sensitive personal data of Canadians. These amendments will reduce reliance on voluntary filings for national security purposes but will add a new compliance obligation for deals in these sectors.
Practical Implication: Consider Voluntary Filings for Sensitive Sectors
Even if your deal is below the net benefit review threshold, a voluntary notification in sensitive sectors starts the 45-day national security clock and eliminates the five-year exposure. This is generally the prudent course for foreign acquisitions of technology companies, critical infrastructure businesses, data-intensive businesses, and any business with defence or intelligence connections.
Practical Guidance for Foreign Investors Navigating the ICA
Identify Your Investor Classification Early
Whether you are a trade agreement investor, a WTO investor, or a state-owned enterprise determines which threshold applies to your deal. This analysis should happen in early due diligence, not at the time of signing.
Calculate the Correct Value
The measurement basis, enterprise value versus book value of assets, differs by investor type, and the methodology for each is prescribed by the Investment Canada Regulations. Errors in the calculation can lead to incorrect filing decisions with significant consequences. When in doubt, calculate both and file proactively.
Don't Miss Filing Deadlines
Notifications must be filed within 30 days after closing. Applications for Review must be filed before closing, and closing cannot occur until the government approves. Missing deadlines can result in penalties under the ICA.
Prepare Undertakings Proactively
If your deal is above the applicable threshold, expect to enter into binding undertakings. Begin drafting these before the application is filed. Undertakings that are comprehensive and realistic are more persuasive than those that are minimal or aspirational. Investors who demonstrate a clear, credible commitment to Canadian employment, governance, and operations generally have smoother reviews.
Address the National Security Dimension Separately
National security review is a distinct analysis from net benefit. Even a deal that will clearly pass the net benefit test may face national security scrutiny if it involves sensitive technology, critical infrastructure, or data. Treat the two regimes as parallel tracks, not as sequential hurdles.
Engage Experienced M&A Counsel Early
The ICA is not a checklist exercise. The net benefit assessment is qualitative and discretionary. How you frame the investment's benefits, which commitments you offer, how you respond to government requests for information, all of these affect both the outcome and the timeline of a review. Experienced M&A counsel who has navigated ICA reviews is a significant asset in a complex transaction.
Frequently Asked Questions About Investment Canada Act Review
What is the Investment Canada Act?
The Investment Canada Act is a federal statute regulating foreign investment in Canadian businesses. It requires non-Canadians who acquire control of a Canadian business to either notify the government or obtain pre-closing approval. For large deals, the government assesses net benefit to Canada. For any deal of any size, the government can also review the investment on national security grounds.
Who must file under the Investment Canada Act?
Any non-Canadian who acquires control of a Canadian business, or establishes a new Canadian business, must file either a notification or an application for review. The type of filing required depends on the investment value relative to applicable thresholds and the investor's country of origin.
What is the Investment Canada Act review threshold for 2026?
The 2026 thresholds for direct acquisitions are: C$2.179 billion (enterprise value) for trade agreement investors; C$1.452 billion (enterprise value) for WTO investors; C$578 million (book value of assets) for WTO state-owned enterprises; and C$5 million (book value of assets) for non-WTO investors and cultural businesses. Thresholds adjust annually based on nominal GDP growth.
What is the ICA net benefit test?
The ICA net benefit test is the government's assessment of whether a foreign investment is likely to benefit Canada. The Minister weighs six factors under section 20 of the ICA: economic activity impacts, Canadian participation, productivity and innovation, competition, national policy compatibility, and Canada's global competitiveness. Investors must present evidence addressing each factor.
Can the government block a foreign investment under the ICA?
Yes. The government can reject an investment that does not satisfy the net benefit standard or block any investment on national security grounds, including ordering divestiture. In practice, net benefit rejections are rare, most deals are approved with binding undertakings, but the power exists and has been exercised.
Does the Investment Canada Act apply to small investments?
The net benefit review has dollar thresholds, so small WTO acquisitions typically require notification only. The national security review, however, applies to investments of any size, including minority stakes. This makes national security the more significant ICA concern for smaller investments in sensitive sectors like technology or critical infrastructure.
How long does an ICA review take?
The government has 45 days after a complete Application for Review to make its net benefit determination, often extended by agreement. Average net benefit reviews have taken between 69 and 102 days in recent years (per ISED annual reports for 2023-24 and 2024-25). National security reviews can extend to 200 days or more and prohibit closing until complete.
What are undertakings under the Investment Canada Act?
Undertakings are binding commitments the investor makes to the government as a condition of ICA approval. They are legally enforceable, breach can result in substantial penalties or a divestiture order. Common undertakings cover employment levels, Canadian headquarters location, R&D spending, board representation, and operational continuity.
Sources & Official Resources
Federal Statutes Cited
- Investment Canada Act, RSC 1985, c 28 (1st Supp), Full Text
- Investment Canada Act, Section 20, Net Benefit Factors
Official Government Resources
- ISED, Investment Canada Act Thresholds (2026)
- ISED, Updated Guidelines on the National Security Review of Investments (March 2025)
- ISED, Investment Canada Act Frequently Asked Questions
- ISED, Annual Report 2024-2025
- ISED, Annual Report 2023-2024
- Canada.ca, Updated Backgrounder: An Act to amend the Investment Canada Act (Bill C-34)
Contact Hadri Law
If you are acquiring a Canadian business and need to determine whether your investment triggers review under the Investment Canada Act, or if you are preparing an application and navigating the net benefit assessment, Hadri Law's international business law practice can help you through the process.
Nassira El Hadri, founder of Hadri Law and M&A and corporate & commercial lawyer admitted to the Law Society of Ontario, advises foreign investors and domestic corporations on cross-border acquisitions, ICA filings, and complex M&A transactions. Hadri Law is based at First Canadian Place in Toronto's financial district.
Call (437) 974-2374 for a free consultation. We serve clients in English, French, Spanish, and Catalan.
This article provides general information and is not legal advice. Every situation is different. Contact a lawyer to discuss your specific circumstances.
