2018-19 Annual Report on the Administration of the Investment Canada Act at the Department of Canadian Heritage

This publication is available upon request in alternative formats.

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List of figures

List of acronyms and abbreviations

The Act
Investment Canada Act
ISED
Innovation, Science and Economic Development Canada

Introduction

The Director of Investments at the Department of Canadian Heritage is pleased to present to the Minister of Canadian Heritage the annual report on the administration of the Investment Canada Act (the Act) for fiscal year April 1, 2018 to March 31, 2019.

Section 38.1 of the Act requires the Director of Investments to submit a report on the administration of the Act – other than for the national security provision in part IV.1 – to the Minister each fiscal year. The Report is then made available to the public by the Minister.

The Investment Canada Act

The Act has been in force since 1985. The purpose of the Act is to provide for the review of significant investments in Canada by non-Canadians in a manner that encourages investment, economic growth and employment opportunities in Canada. Since 2009, the Act also provides for the review of investments in Canada by non-Canadians that could be injurious to national security.

Dual responsibility for the Act

The Act is co-administered by the Minister of Canadian Heritage and the Minister of Innovation, Science and Economic Development Canada (ISED). The Minister of Canadian Heritage is responsible for assessing investments in Canada’s cultural sector, while the Minister of ISED is responsible for assessing investments in all other sectors of the economy. The Minister of ISED is also responsible, in consultation with the Minister of Public Safety, for the review of investments that may be injurious to Canada’s national security.

Given the shared responsibility for the Act, there is a Director of Investments at both the Department of Canadian Heritage and at ISED to advise and to assist each Minister in the administration of the Act.

At the Department of Canadian Heritage, day-to-day administrative duties related to the Act, including the assessment of investors’ submissions, the formulation of recommendations and the monitoring of the performance of investments, are the responsibility of the Cultural Sector Investment Review unit that is part of the International Trade Branch, Cultural Affairs Sector.

What is the cultural sector?

The Act applies to non-Canadians establishing new businesses in Canada or acquiring existing Canadian businesses. Cultural business activities that fall within the purview of the Minister of Canadian Heritage include:

Filing requirements and review thresholds

Under the Act, a non-Canadian establishing or acquiring control of a Canadian business must either notify the Government of his/her investment or undergo a thorough review by the Minister. The type of process required depends on the financial value of the Canadian business.

The Act contains provisions unique to the cultural sector, notably, lower financial thresholds for review compared to other sectors of the economy and the ability to review the establishment of new cultural businesses.

Notifications and discretionary reviews

All investments by non-Canadians in the cultural sector that are lower value acquisitions (with Canadian assets valued at less than $5 million and indirect acquisitions of Canadian cultural businesses where the value of the Canadian assets is less than $50 million) and establishments of new businesses are subject to notification under the Act. This involves submitting a form to the Department that provides basic information about the planned investment such as the type of business activities carried on by the investor and the Canadian business. Many foreign investments in Canada’s cultural sector are subject only to notification.

In 2018-19, there were 13 notifications submitted to the Department of Canadian Heritage. The average assessment time for a notification was 16 days.

Figure 1. Number of notifications over the past five years
Figure 1: Number of notifications over the past five years – text version
Year Number of notifications
2014-15 11
2015-16 22
2016-17 16
2017-18 17
2018-19 13

The Governor in Council may, in the case of such investments, order a review through an order in council, on the advice of the Minister of Canadian Heritage, if it believes it is in the public interest to do so and the investment is related to Canada’s cultural heritage or national identity.

The Minister of Canadian Heritage has recommended the use of this discretionary power sparingly – of 492 notifications received since 1999, reviews were ordered in 66 cases (approximately 13 percent).

In 2018-19, there was no discretionary review completed by the Minister of Canadian Heritage.

When a proposed investment is reviewed, whether it is automatic or discretionary, an investor is required to submit an application containing detailed commercial information, including its plans for the Canadian business to be acquired or established. These plans describe the investor’s proposed strategies regarding such areas as management, employment, capital expenditures, innovation and possible expansion. Of particular note in the cultural sector are proposals related to the development of Canadian creators and the promotion and accessibility of Canadian cultural products.

It should be noted that the Act contains strict confidentiality provisions that are designed to protect this sensitive commercial and business information. This protection covers the vast majority of the material associated with the review of an investment.

Automatic reviews

Certain investments in the cultural sector are the subject of automatic review under the Act and must be approved by the Minister for the investment to proceed. These include direct acquisitions of a Canadian cultural business with Canadian assets valued at $5 million or more and indirect acquisitions of Canadian cultural businesses where the value of the Canadian assets is $50 million or more. An indirect acquisition occurs when a Canadian subsidiary is acquired as a result of the purchase of a parent company located outside of Canada.

In 2018-19, five (5) investments were subject to automatic review by the Department of Canadian Heritage. The average assessment time for applications for review was 63 days.

Figure 2. Number of automatic reviews over the past five years
Figure 2: Number of automatic reviews over the past five years – text version
Year Number of automatic reviews
2014-15 3
2015-16 6
2016-17 9
2017-18 9
2018-19 5

Since 1999, when the Minister of Canadian Heritage assumed responsibility for the administration of the Act for the cultural sector, the Department has completed 175 reviews. Of the 175 investments reviewed by the Department, 95 were direct acquisitions, 49 were indirect acquisitions and 31 were establishments of new businesses.

Figure 3. Reviews of the past five years
Figure 3: Reviews of the past five years – text version
2014-15 2015-16 2016-17 2017-18 2018-19
Establishments 5 10 6 9 6
Indirect acquisitions 3 5 4 6 5
Direct acquisitions 7 13 15 11 7

Net benefit to Canada

When an application to review of an investment is undertaken, the Act (section 20) sets out specific provisions to guide the Minister in the decision as to whether a given investment is likely to be of net benefit to Canada. The six (6) factors weighed in assessing net benefit are:

Under section 21 of the Act, the Minister can also take into account any legally binding commitments offered by investors to demonstrate how the investment will benefit Canadians. Investor may commit to a wide range of undertakings during a review; for example to create jobs across Canada, to support research and artist development programs, or to promote Canadian cultural products.

Each undertaking is tailored, through discussions between the Department and the investor, to reflect the commercial circumstances of the businesses involved in the proposed investment. The investor’s commitments usually relate to specific business activities or practices aimed at providing economic and other benefits to Canada, the cultural sector, and to Canadian artists and consumers. Investors may offer, for example, to create internship programs for Canadian cultural workers and support educational institutions and training programs for the next generation of Canadian creators.

As previously mentioned, detailed information about investments is protected under the confidentiality provisions of the Act and cannot be shared with third parties without the investor’s agreement. However, a list of completed reviews and notifications of investments in the cultural sector is posted on the Canadian Heritage web site. Decisions made in fiscal year 2018-2019 can be found at Cultural Sector Investment Review - Decisions and notifications of cultural sector investments (non-Canadians in Canada).

Treatment of de minimis investment files

In 2008, the Competition Policy Review Panel recommended that the Minister of Canadian Heritage establish a de minimis exemption for the acquisitions of businesses involved in ancillary cultural business activities.

In 2015, the authority to issue decisions for de minimis cases was delegated to the Director of Investments. The delegation applies when total revenues per cultural business activity are less than $2.5 million, and such activities represent less than 5% of the Canadian business’ total revenues.

In May 2018, an expedited approach was adopted which:

Investment Canada Act filings by region, 2014-19

In 2018-19, the United States was the number one source of investments with nine (9) investments accounting for 50 percent of the total number of investments. Investors from the European Union followed with six (6) investments representing 33 percent, and Asia with three (3) investments representing 17 percent of the total number of investments.

Figure 4. Cases by region over the past five years
Figure 4: Investment Canada Act filings by region, 2014-19 – text version
Region 2014-15 2015-16 2016-17 2017-18 2018-19
United States 8 11 13 14 9
European Union 3 10 8 6 6
Asia 3 7 4 6 3

Investment Canada Act filings by industry, 2014-19

For 2018-19, there were 18 investment cases assessed. Twelve (12) were in the film and video industry, three (3) were in the Canadian publishing industry and three (3) were active in more than one of these industries.

Figure 5. Cases by industry over the past five years
Figure 5: Investment Canada Act filings by industry, 2014-19 – text version
Industry 2014-15 2015-16 2016-17 2017-18 2018-19
Publishing 3 9 6 5 3
Film and video 7 15 12 15 13
Music 1 -- 2 2 --
Two or more industries 3 4 5 4 2

Ensuring compliance

For those investments that are approved, the Act authorizes the Minister to monitor the performance of an investor and to take appropriate action to ensure that commitments are met. In most cases, the Department evaluates performance through an annual report submitted by the investor.

In 2018-19, the Cultural Sector Investment Review unit of the Department of Canadian Heritage monitored 12 previously approved investments. Three (3) of these investments involved Canadian publishing businesses, six (6) were in the film industry and three (3) investments involved businesses that were active in the music industry.

Opinions

The Minister is also responsible for issuing interpretive opinions under the Act. These opinions are often related to the definition of a cultural business and the applicability of the Act to specific investment proposals. Investors may also request a ministerial opinion on the Canadian status of a particular business, that is, whether the business would be considered Canadian or non-Canadian for the purposes of the Act and its requirements.

In 2018-19, the Minister of Canadian Heritage issued two (2) opinions under the Investment Canada Act.

The Cultural Sector Investment Review unit at the Department of Canadian Heritage also provides information on a regular basis to potential investors and members of the public related to the application of the Act.

For more information relating to foreign investment in Canada’s cultural sector, please contact:

Department of Canadian Heritage
Cultural Sector Investment Review
216-25 Eddy Street, 7th Floor
Gatineau, Quebec K1A 0M5

Email:
pch.csir-eisc.pch@canada.ca
Telephone:
819-994-5569
Toll-free:
1-866-811-0055
TTY (Toll-Free):
1-888-997-3123

©Her Majesty the Queen in Right of Canada, 2020.
Catalogue No.: CH41-45E-PDF
ISSN: 2563-5107

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