Anonymised, illustrative composite. Eight months after closing and well into integration, a Governor in Council order under Investment Canada Act s.25.4 required the buyer to divest control of a business it had already made its own — the terminal remedy in Part IV.1, reaching a deal everyone believed was long since finished.
At a glance
A foreign buyer completed its acquisition of a New Brunswick processor of rare-earth materials used in magnet manufacturing. The deal had cleared an earlier, narrower government inquiry without an order being made, and the buyer proceeded to integrate the business over the following months — consolidating back-office systems, renegotiating supply agreements under its own group terms, and folding the target's workforce into its broader North American operating structure. Eight months after closing, a new government review — opened on facts that had changed since the original clearance, including a shift in the target's customer concentration toward defence-adjacent buyers — resulted in a Governor in Council order directing the buyer to divest control.
The buyer's first reaction was that a completed, integrated acquisition should be different in kind from a pending one — that whatever remedies existed for a deal still in progress could not reach a transaction that had already closed and been folded into the buyer's own operations for the better part of a year. The Act does not draw that line.
The target had annual revenue of $54,000,000 at closing and had grown to $61,000,000 under the buyer's ownership by the time the order issued. Unwinding eight months of ERP and supply-chain integration was independently estimated at $4,200,000 in direct separation costs, before any consideration of what a forced-sale process does to achievable value.
Read the unit. Section 25.4(1) engages “on the referral of an investment under paragraph 25.3(6)(a) or subsection 25.3(7)”, and once it engages the Governor in Council “may, by order, within the prescribed period, take any measures in respect of the investment that he or she considers advisable to protect national security”, including “(a) directing the non-Canadian not to implement the investment; (b) authorizing the non-Canadian to make the investment on the terms and conditions contained in the order; or (c) requiring the non-Canadian to divest themselves of control of the Canadian business or of their investment in the entity”. Nothing in that list, or in the section as a whole, is worded as available only before implementation. Paragraph (a) plainly presupposes a deal not yet implemented; paragraph (c) — divestiture of control already acquired — presupposes the opposite. The remedy is built for exactly the situation this file describes.
Once the order issues, it is not a negotiating position. Section 25.4(3) states plainly that “the non-Canadian or other person or entity to which the order is directed shall comply with the order”. No conditional language, no discretion for the recipient. And like the interim-conditions order addressed elsewhere in this cluster, the order itself does not go through the ordinary channel: s.25.4(4) disapplies the Statutory Instruments Act to it as well.
The buyer ran a structured sale process under a divestiture timeline set by the order, ultimately selling the business to a Canadian-controlled purchaser at a price below what an unconstrained sale process would likely have achieved — the forced timeline and the narrowed universe of eligible buyers both worked against value. The buyer's own integration spend over the intervening eight months was, in substance, a sunk cost with no offsetting return.
Non-compliance was never seriously on the table once counsel confirmed the order's scope, because failing to comply with a s.25.4 order is itself a distinct enforcement ground under s.39(1)(d.2) — a Ministerial demand can issue against a non-Canadian who “has failed to comply with an order made under section 25.3 or 25.4”, layered on top of whatever consequence non-compliance with the underlying divestiture order carried on its own.
The tell was treating an earlier, uneventful government inquiry as a permanent clearance rather than a snapshot. National security review under Part IV.1 is not exhausted by one clean pass — a later shift in the target's customer base or operations can put a completed, integrated investment back in scope, and s.25.4's remedies reach it there just as fully as they would have reached it before closing.
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