Most advice about foreign buyers of Canadian businesses is advice about numbers: is the deal big enough to be reviewed? That question belongs to one half of the Investment Canada Act. The other half — Part IV.1, national security — contains no number at all, and it can reach a transaction nobody thought the Act applied to.
Key takeaways
SECTION 01 OF 09
Section 2, marginal note Purpose of Act, has two objects: review of “significant investments in Canada by non-Canadians in a manner that encourages investment, economic growth and employment opportunities in Canada” and of investments “that could be injurious to national security.”
The first is Part IV, where an investment is reviewable only if the prescribed value of the assets or entity crosses a limit — section 14 is built from the repeated phrase “where the limits set out in subsection (3) apply”. Those thresholds belong to net-benefit review under section 14.
The second is Part IV.1, Review of Investments — Injurious to National Security. No dollar figure appears in it. ISED states the consequence in its 2024–25 annual report: “All foreign investments regardless of value are subject to national security review”.
SECTION 02 OF 09
Section 25.1, marginal note Application, applies the Part to an investment “implemented or proposed” by a non-Canadian “(a) to establish a new Canadian business; (b) to acquire control of a Canadian business in any manner described in subsection 28(1); or (c) to acquire, in whole or in part… an entity carrying on… its operations in Canada”.
Four words in paragraph (c) do the work: in whole or in part. Control under subsection 28(1) — a majority of the voting interests, or a third or more of a corporation’s voting shares without rebutting control in fact — is paragraph (b). Paragraph (c) catches a stake nowhere near it.
Nor is the target large by definition. “Canadian business” in section 3 means a business carried on in Canada with a place of business, someone employed in connection with it, and assets here used in carrying it on. ISED’s Guidelines put the scope as “acquisitions of control of a Canadian business of any dollar value”.
SECTION 03 OF 09
Section 10 carves out a list: dealers buying shares in the ordinary course, qualifying venture capital, an acquisition on realisation of loan security, one to facilitate financing where the buyer divests within two years, a reorganisation leaving ultimate control in fact unchanged, an involuntary acquisition on death.
Read the opening words before relying on any of them: “This Act, other than Part IV.1, does not apply in respect of” those transactions. A foreign lender who takes a Canadian business through a receivership is outside Parts III and IV and inside Part IV.1.
Filing holds the same trap. A non-Canadian acquiring control must notify under sections 11 and 12, and the Director issues a receipt. Subsection 13(3) says an investment covered by it “is not reviewable under Part IV”. Part IV, not the Act.
SECTION 04 OF 09
Subsection 25.3(1), marginal note Order — further review: “If the Minister, after consultation with the Minister of Public Safety and Emergency Preparedness, considers that an investment could be injurious to national security, the Minister shall make an order… for the further review of the investment.”
Two features decide how the regime behaves. The test is could be injurious, not would be; the higher standard appears in paragraph 25.3(6)(a), where the Minister must be “satisfied that the investment would be injurious” before referring it upward. And the verb is shall.
An order is usually preceded by a warning. Subsection 25.2(1) lets the Minister, on “reasonable grounds to believe that an investment by a non-Canadian could be injurious to national security”, send notice that an order “may be made”. That step is optional.
SECTION 05 OF 09
Parliament left the phrase open — no definition in section 3, none in Part IV.1. What exists is the Guidelines, ministerial policy issued under section 38 rather than law, listing factors that “may be taken into account”: defence, transfer of sensitive technology, critical goods and services, critical minerals, critical infrastructure, espionage, and sensitive personal data.
The list is expressly non-exhaustive and closes its own gap: investments lacking any of those characteristics “may nevertheless present national security concerns”. One line matters more when the diligence is on the buyer — state-owned investors and those “subject to direction from foreign governments” draw enhanced scrutiny “regardless of the value of the investment”.
The published outcomes are less exotic than the headlines. ISED’s table of investments subject to 25.3 orders in 2024–25 spans metal ore mining, electric power generation, motor vehicle parts and wholesalers, and computer systems design — and its type column lists new establishments and a minority investment beside acquisitions of control.
SECTION 06 OF 09
It stops it. Subsection 25.2(2) provides that a non-Canadian who has not implemented a proposed investment when the notice arrives “shall not implement the investment” until a clearance or completion notice arrives, or an order under section 25.4 authorises it. Subsection 25.3(3) repeats the standstill after a review order.
Since 2024 the Minister can freeze conduct mid-review: subsection 25.3(1.1) requires interim conditions where necessary “for the purpose of preventing injury to national security that could arise during that review”. Subsection 25.3(1.2) exempts such orders from the Statutory Instruments Act, so they are not published.
The Canadian seller is not a bystander. Subsection 25.3(2) requires notice to the non-Canadian and to “any person or entity from which the Canadian business… is being acquired”, advising of “their right to make representations and to submit undertakings”. Section 25.12 lets the Minister compel information from that seller.
SECTION 07 OF 09
The periods sit in the National Security Review of Investments Regulations. For a notified investment the Minister has 45 days from the certified date of the receipt to send a 25.2(1) notice, then 45 to make the order; action under 25.3(6) is due 45 days later, extendable by 45 more, and the Governor in Council then has 20 days.
On paper, a few months. In practice the parties agree to extensions: ISED reports that in 2024–25 “the average length of an extended review was 155 days”, across 30 investments subject to extended review out of 1,138 filings.
The number that should change behaviour is the one for investments nobody filed. For an investment described in paragraph 25.1(c) the regulations end the window at the earlier of 45 days after the required information is received and “5 years after the day on which the investment is implemented”.
SECTION 08 OF 09
Subsection 25.3(6) gives the Minister three outcomes: a completion notice if satisfied the investment would not be injurious; one on the strength of undertakings, needing the Public Safety Minister’s concurrence; or referral to the Governor in Council — which also happens where the Minister “is not able to determine” whether it would be.
On referral, subsection 25.4(1) lets the Governor in Council “take any measures… advisable to protect national security”, including “directing the non-Canadian not to implement the investment” or “requiring the non-Canadian to divest themselves of control of the Canadian business or of their investment in the entity”.
These get used. ISED’s national security decisions record the ordered wind-up of TikTok Technology Canada, Inc. in November 2024, of Hikvision Canada, Inc. in June 2025, and in May 2024 the dissolution of Bluvec Technologies Inc. and Pegauni Technology Inc. Section 25.6 makes such decisions “final and binding”, reviewable only under the Federal Courts Act.
SECTION 09 OF 09
The penalties run against the buyer. Section 39 lets the Minister demand that a non-Canadian who implemented an investment prohibited by section 25.2 or 25.3 cease or show cause; section 40 then allows a court application for divestiture and a penalty “not exceeding ten thousand dollars for each day”. Amendments not yet in force raise that to $25,000 a day.
What lands on the seller is timing. Treadstone Law’s guidance on regulatory approval as a closing condition notes that good agreements “build in an outside date and a mechanism for extending it”; its note on missing that date adds that doing so “shift[s] real power to whichever party holds the termination right”, and its piece on a consent that never comes shows why a hard condition and a reasonable-efforts covenant differ.
Its answer on approvals a non-resident buyer needs states the ordinary case honestly — “size is usually what determines the difference” — but that is net-benefit review under section 14, and it does not separately identify Part IV.1. The firm supplies the other half in its note on Competition Act clearance: “National security review sits on top of all of it and has no monetary threshold at all.” So the question to put to a foreign buyer is not how large the deal is. It is who controls them, and what the business holds.
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