When does a business sale become a notifiable transaction?

A business sale is not automatically a matter for the Competition Bureau. The Bureau says the Notifiable Transactions provisions in Part IX of the Competition Act apply when a transaction is of a specified type, exceeds certain thresholds and is not subject to any exemption. All three have to be met, and if they are, the parties must notify the Commissioner of Competition before the transaction is completed.

The deal has to be a listed type

Section 110 lists what Part IX covers. For a purchase of assets, it covers acquiring assets of an operating business, defined as a business undertaking in Canada to which employees ordinarily report for work. For a share deal, it covers voting shares of a corporation that carries on, or controls an entity that carries on, an operating business, but only if the buyer and its affiliates would end up above a stated percentage of the votes. Amalgamations and combinations outside a corporation are covered on their own terms.

The size tests

Under section 109, Part IX does not apply unless the parties, together with their affiliates, have assets in Canada or gross revenues from sales in, from or into Canada above an amount the Act sets. A second test looks at the business being acquired, by its assets in Canada or the revenues they generate. Because affiliates are counted, a buyer that belongs to a large group is measured with that group. The transaction-size amount is adjusted each year under subsection 110(8), so read the current figures from the Bureau.

Exemptions and the waiting period

Some transactions are exempt, including one among parties that are all affiliates of each other, and a creditor’s acquisition on foreclosure or default under a credit transaction entered into in good faith in the ordinary course of business. If a deal is notifiable, section 123 bars completion until 30 days after the Commissioner receives the required information, or 30 days after receiving additional information requested within that first period, unless the Commissioner notifies the parties before then that the Commissioner does not, at that time, intend to apply under section 92. On the Commissioner’s application, where a person completed a transaction early or without the required notice, and without good and sufficient cause that the person must prove, section 123.1 lets a court, for a completed transaction, order a party to dissolve the merger or dispose of assets or shares, or order a monetary penalty for each day of non-compliance with the waiting period.

Under the thresholds is not the end

Staying below the thresholds ends the duty to notify, not the Bureau’s interest. It says it may investigate mergers that are not subject to mandatory notification, and may challenge one for up to three years after closing when there was no notification or advance ruling certificate request. Section 113.1 also applies the notification rules to the substance of a transaction designed to avoid them.