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Wednesday, September 22, 2010

Canada's foreign investment Act_some gems

While reading up on the BHP-Potash proposed deal, I noticed that some concern existed about whether this deal would meet the "net benefit" criteria of the Investment Canada Act. While going through that Act on the official website(http://www.ic.gc.ca/eic/site/ica-lic.nsf/eng/home), I noticed some interesting aspects as compared to Indian regulation. It is similar to the Indian FDI guidelines(www.dipp.nic.in)
  • The Act is confined to investment by non-Canadians
  • Cultural industries as defined under the act(media sector) are given a distinct status and need approval from that Ministry. Given the rise of media conglomerates, such a provision may reek of cultural protectionism but can go a long way towards preserving independent media
  • Investments are evaluated against a 6 point checklist covering employment, competition, global competitiveness, control by Canadians
  • Sensitive sectors are few namely media, transportation, uranium, banking etc
  • The form itself is interesting because it
    • Seeks the business rationale for the transaction(no LBO's here!!)
    • Allows a space for investor to explain why it cannot answer a question about itself(instead of rejecting the form outright) 
  • Update: The transaction of BHP-Potash was called off as the Canadian Minister did not grant approval. For transactions with no economic rationale for the acquiree, the Canadian Act is a potent tool to refuse consent. 

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