Notification threshold (Competition Act)

Whether a sale needs a federal merger filing is a test, not a guess. Part IX of the Competition Act asks whether the deal is big enough to be notifiable. A buyer or seller of a larger SME, or a business owned by a larger group, should know how the test is built before relying on size alone.

Two size tests

Under section 109, Part IX does not apply to a proposed transaction unless the parties, together with their affiliates, meet a test based on assets in Canada or gross revenues from sales in, from or into Canada. Section 110 adds a separate test on the size of the transaction, by transaction type such as asset acquisitions, share acquisitions, amalgamations and combinations, each subject to the other sections it names; for a share acquisition it also looks at the share of votes the buyer, with its affiliates, would hold. The Act sets the amounts, allows other amounts to be prescribed and leaves the manner of measuring to regulations, so read the current text rather than a summary. The Competition Bureau says these thresholds and other criteria, including certain exceptions to notification, are set out in the Act.

What to check or ask

• Whether the buyer’s group, including affiliates, meets the party-size test
• Which transaction type applies to your deal structure
• Whether an exception applies

The notifiable transaction answer walks through a sale, and pre-merger notification covers the filing itself.