In the film distribution sector, foreign takeovers of Canadian owned and controlled distribution businesses are not permitted. Foreign investments to establish new distribution businesses in Canada are only allowed to importation and distribution activities related to proprietary products (the importer owns world rights or is a major investor). Indirect and direct takeovers of foreign distribution businesses operating in Canada are allowed only if the investor undertakes to reinvest a portion of its Canadian earnings in accordance with national and cultural policies. Hence, essentially the film distribution sector is closed to FDI, except for greenfield investment for the importation and distribution activities of proprietary products and acquisition of existing foreign distribution businesses operating in Canada.
"The Investment Canada Act requires that foreign investments in the production, distribution and exhibition sector of the film and video industries be compatible with national cultural policies.
As part of the measures to support an indigenous Canadian distribution industry, the government has also announced new Investment Canada policy on foreign investment in the Canadian film distribution sector:
- takeovers of Canadian owned and controlled distribution businesses will not be allowed;
- investments to establish new distribution businesses in Canada will only be allowed to importation and distribution activities related to proprietary products (the importer owns world rights or is a major investor);
- indirect and direct takeovers of foreign distribution businesses operating in Canada will be allowed only if the investor undertakes to reinvest a portion of its Canadian earnings in accordance with national and cultural policies;
- all applications to Investment Canada made after February 13, 1987 will be subject to the new policy.[...]" (Government of Canada, Investment Canada policy on foreign investment in the Canadian film distribution sector, last modified on 2017-06-08)
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"Reviewable investments
14 (1) The following investments by non-Canadians are reviewable under this Part:
(a) an investment to acquire control of a Canadian business in any manner described in paragraph 28(1)(a), (b) or (c), where the limits set out in subsection (3) apply;
(b) an investment to acquire control of a Canadian business in the manner described in subparagraph 28(1)(d)(i), where the limits set out in subsection (3) apply;
(c) an investment to acquire control of a Canadian business in the manner described in subparagraph 28(1)(d)(ii), where the circumstances described in subsection (2) and the limits set out in subsection (3) apply; and
(d) an investment to acquire control of a Canadian business in the manner described in subparagraph 28(1)(d)(ii), where the circumstances described in subsection (2) do not apply and the limits set out in subsection (4) apply.
Circumstances
(2) The circumstances referred to in paragraphs (1)(c) and (d) are that the value, calculated in the manner prescribed, of the assets of the entity carrying on the Canadian business, and of all other entities in Canada, the control of which is acquired, directly or indirectly, amounts to more than fifty per cent of the value, calculated in the manner prescribed, of the assets of all entities the control of which is acquired, directly or indirectly, in the transaction of which the acquisition of control of the Canadian business forms a part.
Limits
(3) An investment described in paragraph (1)(a), (b) or (c) is reviewable under this Part where the value, calculated in the manner prescribed, of
(a) the assets acquired, in the case where control of a Canadian business is acquired in the manner described in paragraph 28(1)(c), or
(b) the assets of the entity carrying on the Canadian business, and of all other entities in Canada, the control of which is acquired, directly or indirectly, in the case where control of a Canadian business is acquired in the manner described in paragraph 28(1)(a), (b) or (d),
is five million dollars or more.
Limits
(4) An investment described in paragraph (1)(d) is reviewable under this Part where the value, calculated in the manner prescribed, of the assets of the entity carrying on the Canadian business, and of all other entities in Canada, the control of which is acquired, directly or indirectly, is fifty million dollars or more.
Limits for WTO investors
14.1 (1) Despite the limits set out in subsection 14(3), but subject to subsection (1.1), an investment described in paragraph 14(1)(a) or (b) by a WTO investor or — if the Canadian business that is the subject of the investment is, immediately prior to the implementation of the investment, controlled by a WTO investor — by a non-Canadian, other than a WTO investor, is reviewable under section 14 only if the enterprise value, calculated in the manner prescribed, of the assets described in paragraph 14(3)(a) or (b), as the case may be, is equal to or greater than,
(a) to (c) [Repealed, 2017, c. 20, s. 192]
(d) for an investment implemented at any time in the period that begins on the day on which this paragraph comes into force and that ends on December 31 of the following year, $1,000,000,000; and
(e) for an investment implemented at any time in the year that begins after the period referred to in paragraph (d), or in any subsequent year, the amount determined under subsection (2).
[...]
Investments not reviewable
(4) Despite paragraphs 14(1)(c) and (d), an investment described in either paragraph that is implemented after this subsection comes into force is not reviewable under section 14 if it is made by
(a) a WTO investor; or
(b) a non-Canadian, other than a WTO investor, if the Canadian business that is the subject of the investment is, immediately prior to the implementation of the investment, controlled by a WTO investor.
[...]
Exception
(5) This section does not apply in respect of an investment to acquire control of a Canadian business that is a cultural business.
Definitions
(6) In this section and section 14.2,
[...]
cultural business means a Canadian business that carries on any of the following activities, namely,
(a) the publication, distribution or sale of books, magazines, periodicals or newspapers in print or machine readable form, other than the sole activity of printing or typesetting of books, magazines, periodicals or newspapers,
(b) the production, distribution, sale or exhibition of film or video recordings,
(c) the production, distribution, sale or exhibition of audio or video music recordings,
(d) the publication, distribution or sale of music in print or machine readable form, or
(e) radio communication in which the transmissions are intended for direct reception by the general public, any radio, television and cable television broadcasting undertakings and any satellite programming and broadcast network services; (entreprise culturelle)
[...]
Factors
20 For the purposes of section 21, the factors to be taken into account, where relevant, are
(a) the effect of the investment on the level and nature of economic activity in Canada, including, without limiting the generality of the foregoing, the effect on employment, on resource processing, on the utilization of parts, components and services produced in Canada and on exports from Canada;
(b) the degree and significance of participation by Canadians in the Canadian business or new Canadian business and in any industry or industries in Canada of which the Canadian business or new Canadian business forms or would form a part;
(c) the effect of the investment on productivity, industrial efficiency, technological development, product innovation and product variety in Canada;
(d) the effect of the investment on competition within any industry or industries in Canada;
(e) the compatibility of the investment with national industrial, economic and cultural policies, taking into consideration industrial, economic and cultural policy objectives enunciated by the government or legislature of any province likely to be significantly affected by the investment; and
(f) the contribution of the investment to Canada’s ability to compete in world markets.
Net benefit
21 (1) Subject to subsections (2) to (8) and sections 22 and 23, the Minister shall, within 45 days after the certified date referred to in subsection 18(1), send a notice to the applicant that the Minister, having taken into account any information, undertakings and representations referred to the Minister by the Director under section 19 and the relevant factors set out in section 20, is satisfied that the investment is likely to be of net benefit to Canada.[...]" (Investment Canada Act (R.S.C., 1985, c. 28 (1st Supp.)), last amended on 2021-04-01, Sections 14, 14.1, 20 and 21)
Government of Canada, Investment Canada policy on foreign investment in the Canadian film distribution sector, last modified on 2017-06-08
Investment Canada Act (R.S.C., 1985, c. 28 (1st Supp.)), last amended on 2021-04-01, Sections 14, 14.1, 20 and 21
[<a href="https://www.canada.ca/en/canadian-heritage/services/film-video-policies/investment-canadian-film-distribution.html">Policy</a>],[<a href="https://laws-lois.justice.gc.ca/eng/acts/I-21.8/index.html">Act</a>]