Bill C-34: Changes To Foreign Investment Laws Will Impact the Technology Industry

Aird Berlis | Sairam Sanathkumar and Saumia Ganeshamoorthy | Feb 10, 2023

Image: Unsplash/Matthew Henry

Bill C-34 – National Security Review of Investments Modernization Act, tabled in the House of Commons by the Minister of Innovation, Science and Industry, on December 7, 2022 (the “Bill”).

• The Bill makes significant amendments to the national security review regime under the  Investment Canada Act(“ICA”), the federal legislation that provides for the federal government’s review of foreign investments in Canada on criteria that include “net benefit” to the economy.
  • The last significant amendment to the ICA was in 2009, when the review thresholds for the acquisition of control of a Canadian business were progressively increased.
• The Bill is “country agnostic,” as Minister François-Philippe Champagne called it, even as he readily admits it is the result of changing geopolitical realities (read: security threats from China and Russia by way of cyberattacks, transfer or acquisition of Canadian intellectual property, etc.).
• Proposed key amendments to to the bill:
  • Requirement to notify certain investments prior to their implementation in prescribed business sectors
  • New powers for the Minister of Innovation, Science and Industry (“Minister”)
  • Increased penalties for non-compliance with the ICA
  • New rules for the protection of information during the course of judicial review

See:  Fintech Cybersecurity Best Practices

• Impact to tech industry:  There are already concerns that the Bill could stifle foreign capital for technology startups and discourage innovators from setting up shop in Canada. The Bill aligns Canada’s national security review process with similar regulatory beef-ups in Australia, United Kingdom and the United States for similar reasons.
  • With the new requirement to notify certain investments prior to implementation, the worry that the timelines for closing transactions can be further stretched is not without merit. The average time taken for national security reviews currently is 133 days with the possibility to extend. Companies, particularly technology startups that are looking at expedited capital inflows, should plan for these contingencies of time.

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