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Canada tightens foreign investment rules
Government concerned about offshore corporate raids, especially on companies such as Suncor, Canadian Natural Resources, Cenovus Gary Park for Petroleum News
The Canadian government has taken steps to fend off any offshore corporate raids on companies weakened by the COVID-19 pandemic.
Without identifying what sectors might be targeted, the intervention comes at a time when concerns are building around the largest Canadian-controlled oil companies, such as Suncor Energy, Canadian Natural Resources and Cenovus Energy.
In the process, Canada is following other countries in tightening scrutiny of any foreign takeovers by ensuring that “in-bound investment does not introduce new risks to Canada’s economy or national security, including the health and safety of Canadians.”
The result is another wall around companies that are already protected by rules that have been in place for several years to block takeovers of the largest energy companies by foreign state-owned or state-connected entities.
The new controls will now apply to all “controlling or non-controlling” investments, no matter what the value of targeted Canadian companies that are involved in public health or the supply or critical goods and services.
A government statement said the new policy will be in force until the “economy recovers from the effects of the COVID-19 pandemic.”
Limitations elsewhere Countries such as Australia, Germany, Spain and France have already taken steps to limit or bolster scrutiny of takeovers by foreign investors.
Economic Development Minister Navdeep Bains said in the statement that enhanced security is vital to place a buffer between economically weakened companies and “opportunistic investors.”
His office would not say whether Bains has identified foreign entities poised to take advantage of the drastically reduced market valuations of companies.
But the move to safeguard key sectors was endorsed by the Canadian Chamber of Commerce which said “naive thinking will leave us ill prepared for future pandemics.”
However, the chamber also cautioned that foreign capital is needed for Canada’s economy, adding that tightening the investment rules could have a “chilling effect.”
It urged the government to be more transparent about the changes and identify which sectors will be subject to broader scrutiny.
Jim Balsille, chairman of the Council of Canadian Innovators, said the policy has not been properly considered and “confuses foreign direct investment with foreign portfolio investment” and ignores the “breadth of strategic assets required to protect Canadians’ interests.”
The announcement came only one day after Prime Minister Justin Trudeau released C$1.2 billion to aid start-ups and small businesses that are desperate for cash and came under strong criticism for being so slow in implementing the measures.
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