Does buying a partnership interest trigger Competition Act notification?

Notification under the Competition Act is a federal filing made before closing, and it is not limited to share deals. The Competition Bureau says the duty arises for transactions of a specified type that exceed certain thresholds and are not exempt. The purchase of an interest in a business carried on outside a corporation, which is where a partnership sits, is one of the specified types.

The extra test for a partnership interest

For shares, the Act looks at voting control. For a partnership interest, section 110(6) first checks the business’s assets in Canada or its revenues from Canadian sales, then asks what the buyer would hold afterwards. The buyer and its affiliates must end up entitled to more than a stated share of the profits or of the assets on dissolution, or a higher stated share if they already held that much. A small stake in a large partnership may never reach the filing stage.

Size tests and exemptions

Part IX does not apply unless the parties, with their affiliates, exceed a size threshold based on assets in Canada or revenues from sales in, from or into Canada. A separate amount applies to the business being acquired. The Act sets starting figures and provides for later adjustment, so confirm current amounts with the Bureau. Some transactions are exempt, such as interests acquired by gift or inheritance and deals among affiliates.

If a filing is required, or is not

A notifiable deal is notified before closing, and a waiting period runs once the Bureau has a complete notification, so the closing date has to allow for it. Staying below the thresholds ends the filing duty, not the Bureau’s interest: it says it may investigate mergers that are not subject to mandatory notification and can challenge a merger for a period after closing. Ask a lawyer to run the tests before you sign.