Anonymised, illustrative composite. Every dollar test was cleared on the first purchase. The deal was not notifiable anyway, because the Competition Act's share test is conjunctive with the size test — and two later top-ups each crossed a different line in the same subsection.
At a glance
A private-equity fund set out to build a controlling position in a privately-held specialty-insurance brokerage. It bought in three tranches over five years: a first purchase of 34.6% of the voting shares from a group of retiring founder-shareholders; a second purchase two years later that took its cumulative position to 41%; and a third purchase, three years after that, that took it to 55%.
On the first tranche, the deal team ran the size-of-transaction test and found it cleared easily — the brokerage's Canadian assets were well past any plausible threshold figure. Read on its own, that looked like a notifiable deal. It was not, because the share test in Part IX has two limbs joined by “and”, not one, and missing the percentage limb by a fraction of a point took the whole transaction out of Part IX regardless of the size limb. The harder question came later: which of the two remaining tranches, if either, had to be notified, and against which percentage line.
The brokerage's Canadian assets stood at $210,000,000 throughout, comfortably past the size-of-transaction figure at every stage. The first tranche, 34.6% of the voting shares, was priced at $53,000,000. The second tranche, two years later, was a further 6.4%, for $11,800,000, taking the cumulative position to 41%. The third tranche, three years after that, was a further 14%, for $29,500,000, taking the cumulative position to 55%.
Section 110(3) of the Competition Act applies to a proposed acquisition of voting shares “(a) if… the aggregate value of the assets in Canada… that are owned by the corporation… would exceed the amount…; and (b) if, as a result of the proposed acquisition… the person or persons acquiring the shares… would own voting shares of the corporation that in the aggregate carry more than the following percentages…”. Both conditions have to be met. Clearing (a) by a wide margin does nothing if (b) is not also met.
Paragraph (b) then sets three different percentages: “(i) 20%, if any of the corporation's voting shares are publicly traded, (ii) 35%, if none of the corporation's voting shares are publicly traded, or (iii) 50%, if the person or persons already own more than the percentage set out in subparagraph (i) or (ii)… before the proposed acquisition”. The brokerage has no publicly traded shares, so every tranche here is tested against either (ii) or (iii) — never (i).
Tranche one. Before it, the fund owned nothing, which does not exceed 35%, so (ii) applies: 35%. After it, 34.6% does not exceed 35%. Paragraph (b) fails, s.110(3) does not apply, and nothing needed to be filed.
Tranche two. Before it, the fund owned 34.6%, which still does not exceed 35%, so (ii) applies again: 35%. After it, the cumulative position is 41%, which does exceed 35%. Paragraph (b) is satisfied, (a) is independently met on the brokerage's asset base, and the second tranche was notifiable on its own.
Tranche three. Before it, the fund owned 41%, which does exceed the 35% figure in subparagraph (ii). That is exactly the condition subparagraph (iii) is written for, and the applicable percentage moves to 50%. After the third tranche, the cumulative position is 55%, which exceeds 50%. Paragraph (b) is satisfied a second time, on a different percentage, and the third tranche was independently notifiable too.
The fund notified the second tranche and the third tranche, each under Competition Act s.114(1)(a), and closed each after its own s.123 waiting period ran. The first tranche closed, correctly, without any filing at all — there had never been an obligation to make one.
Filing on the first tranche would have been unforced over-compliance: a filing fee and a 30-day wait on a transaction the Act did not require notifying. Treating the second and third tranches as covered by a single filing at the second tranche, on the theory that the fund had already “done its Competition Act filing” on this target, would have been a straightforward failure to notify the third tranche — a transaction that independently cleared both limbs of s.110(3) on its own facts.
The tell is treating the notification question as something a target gets asked once. It does not. Every acquisition is tested against the ownership position that existed immediately before it, and the applicable percentage line moves as that position moves — from 35% to 50% the moment a buyer's holdings pass 35%. A staged strategy toward eventual control can file at more than one step, on more than one percentage, for the same target and the same buyer.
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