Foreign ownership of companies of Canada pertains to the majority-ownership of Canadian-based assets (including businesses and subsidiaries) by non-Canadian individuals or companies, as well as to companies that are effectively owned or controlled, directly or indirectly, by non-Canadians. "Non-Canadian," for all intents and purposes, refers to entities based outside Canada and to those who are not Canadian citizens or qualified permanent residents.[1]
Foreign ownership (or 'foreign affiliates') of Canadian companies has long been a controversial political issue in Canada. Concerns regarding the issue generally regard ownership of previously 'Canadian' assets by foreign entities, though the exact definition of 'foreign-owned' is subject of debate.[citation needed]
Foreign majority-owned affiliates contribute significantly to the economy of Canada. In 2016, foreign affiliates accounted for 14% of Canada's gross domestic product and employed 12% of workers.[2]
Overview
Historically, foreign ownership was a political issue in Canada in the late 1960s and early 1970s, when it was believed by some that U.S. investment had reached new heights (though its levels had actually remained stable for decades), and then in the 1980s, during debates over the Free Trade Agreement.[citation needed]
However, the situation has changed; since in the interim period, Canada itself became a major investor and owner of foreign corporations. Since the 1980s, Canada's levels of investment and ownership in foreign companies have been larger than foreign investment and ownership in Canada. In some smaller countries, such as Montenegro, Canadian investment is sizable enough to make up a major portion of the economy. In Northern Ireland, for example, Canada is the largest foreign investor. By becoming foreign owners themselves, Canadians have become far less politically concerned about investment within Canada.[citation needed]
Something to note is that Canada's largest companies by value, and largest employers, tend to be foreign-owned in a way that is more typical of a developing nation than a G8 member. The best example is the automotive sector, one of Canada's most important industries. It is dominated by American, German, and Japanese automotive giants. Although this situation is not unique to Canada in the global context, it is unique among G8 nations, and many other relatively small nations also have national automotive companies.[citation needed]
In 2004, foreign-controlled corporations accounted for 21.9% of assets held in Canada, and 30.0% of operating revenues yet comprised less than 1% (approx. 8,000) of the total 1.3 million corporations in Canada. Assets of foreign-controlled corporations rose 8.3% to $1.1 trillion in 2004, while those of Canadian-controlled corporations rose 8.9% to $3.9 trillion. All in all, foreign-controlled profits soared to a record $68 billion that year, up 21.7% from 2003. Also that year, foreign-controlled corporations operating revenues in Canada averaged $96 million, compared with less than $2 million for their Canadian-controlled counterparts.
In 2006, 34 Canadian companies were purchased by foreign interests worth $62 billion, nearly 4% of Canada's market value.
Statistics
In 2016, foreign affiliates accounted for 14% of Canada's gross domestic product and employed 12% of workers. That year, foreign affiliates in the manufacturing sector accounted for 41% of the value added of foreign multinationals operating in Canada, an increase from 38% in 2010.[2]
Value added by foreign majority-owned organizations, by sector[3]
Canada's largest automotive manufacturer. General Motors is its indirect parent; it is Canadian-owned according to Ontario Superior Court documents.[citation needed] This also includes CAMI Automotive, an assembly plant wholly-owned by GM Canada.
Gulf Canada had formerly been part of U.S.-based Gulf Oil, later becoming independent. It was then purchased by Conoco in a deal worth $6.7 billion in 2002.[5]
Nexen Inc. was one of two Canadian oil and gas companies that the Harper government controversially approved the sale of to foreign state-owned enterprises in 2012; though it stated that future takeovers by SOEs would face new rules, especially in the energy sector. Nexen became a wholly-owned subsidiary of CNOOC on 25 February 2013.
PetroKazakhstan is a Calgary-based company exploring in Central Asia. It was purchased by the China National Petroleum Corporation in 2005, and transferred to its subsidiary PetroChina.
Progress Energy Resources was one of two Canadian oil and gas companies that the Harper government controversially approved the sale of to foreign state-owned enterprises in 2012; though it stated that future takeovers by SOEs would face new rules, especially in the energy sector.
Stelco was Canada's last major independent steel producer. It was taken over by United States Steel in August 2007, before being acquired by Bedrock in 2016.
FortisBC (formerly BC Gas, a public utility company) — Then known as Terasen Inc., it was sold to American-owned energy giant Kinder Morgan for $6.9 billion. The deal was approved in 2005 by the B.C. Utilities Commission despite 8,000 letters of protest. Terasen was subsequently sold to Newfoundland-based Fortis Inc. in 2007.
Tangerine Bank (formerly ING Bank of Canada) — formed by the purchase of several small Canadian companies by the Dutch ING Group. It has been owned since 2012 by Scotiabank (formally the Bank of Nova Scotia).
Addax was one of 9 Canadian Fortune 2000 oil and gas companies in 2009. It was acquired by Sinopec for C$8.27 billion in June 2009 and approved by the Chinese government on August 12 that year.
Canadian Pacific Hotels was the owner of many of Canada's most historic hotel properties (operating under the name Fairmont Hotels and Resorts since 1999). It was sold to California-based Colony Capital, LLC and Saudi Arabia-based Kingdom Holding Company for $3.9 billion, in January 2006.
Eaton's was, at one time, Canada's largest retailer, with a history going back to 1869. It was purchased by Sears in 1999 and closed in 2000.[citation needed]
In 1999, JDS Fitel announced a $8.9-billion merger with Uniphase to form JDS Uniphase. Company headquarters moved from Ottawa to San Jose.[citation needed]
Moore Wallace sold to R.R. Donnelley and Sons for $4.9 billion. In February 2004, R.R. Donnelley merged with Moore Wallace, keeping the name R.R. Donnelley as the name of the combined company.
Noranda purchased by mining company Xstrata in 2006. It had earlier been a target of state-owned China Metals Corp., but had backed out in 2005 amid public concern in Canada of Chinese state control of such a major company.[citation needed]
A business undertaking is considered to be 'Canadian' if it is Canadian-controlled, which generally mean:[1]
if one Canadian, or two or more Canadian members of a voting group, owns a majority of the voting interests of an entity, the entity is Canadian-controlled.
if one non-Canadian, or two or more non-Canadian members of a voting group, owns a majority of the voting interests of an entity, the entity is not Canadian-controlled.
In regards to public companies, which are not controlled through the ownership of voting shares, the corporation is considered to be Canadian-controlled if at least two-thirds of the board of directors is Canadian.[1]
Foreign corporations often incorporate branches or special-purpose subsidiaries within Canada in order to facilitate business and control their investments.[11] Business profits earned in Canada by such a branch will be subject to regular federal and provincial corporate Income Taxes. An additional Federal Branch Tax is also applied on profits not reinvested in Canada. A tax treaty may provide for a reduced rate or exemption threshold for the Federal Branch Tax.[11]
Various federal and provincial statutes place additional restrictions on foreign ownership in specific industries. Federal acts include:[12]
Bank Act — provides that no person may own and control more than 10% of the shares of a Schedule I bank.
Broadcasting Act — bans broadcasting licenses from being issued to non-Canadians or to companies that are effectively owned or controlled, directly or indirectly, by non-Canadians.
Insurance Companies Act — provides that no person may own and control more than 10% of the shares of a Canadian-owned life insurance company. (Manitoba legislation also places restrictions on foreign investment in the insurance industry.)
The New Brunswick Business Corporations Act, the Nova Scotia Companies Act, the Quebec Business Corporations Act, and the British Columbia Business Corporations Act make no stipulations that resident Canadians be directors.[13]New Brunswick provides that Extra Provincial Corporations need only have an "attorney for service" resident in that province.[14]
Unlimited liability corporations can exist in Alberta, British Columbia, or Nova Scotia.[13] This form is particularly convenient where the parties are well-established and in no danger of insolvency. Alberta requires the derisory fee of CA$100 to establish this form.[13] In most other provinces, the legislation is significantly more restrictive.
^"Gulf Canada Resources Limited". Canadian Corporate Reports: McGill Digital Archive. McGill Library. 2005. Archived from the original on 22 October 2023. Retrieved 21 May 2024.