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Foreword

Advancements in technology and changing market conditions have led to greater internationalization of the corporate world. Canada’s growing and competitive economy, with its natural resources, skilled labour force and high quality of life, offers attractive investment opportunities to business leaders abroad. Foreign firms gain access to the Canadian economy in primarily three ways–by establishing branches or new business, through direct investment in Canadian corporations or through mergers and acquisitions of Canadian firms. More than ever, information on the trans-national aspects of the economy is important to understanding this new economic era. That is the purpose of this report.

The Corporations Returns Act (CRA) is a key instrument for measuring foreign control. The CRA is administered by Statistics Canada under the authority of the Minister of Industry. The purpose of the Act is to collect financial and ownership information on corporations conducting business in Canada, and to use this information to evaluate the extent and effect of non-resident control of the Canadian corporate economy.

According to the Act, corporations conducting business in Canada whose assets for the reporting period exceed $10 million, or whose gross revenue from business conducted in Canada exceeds $15 million, are required to provide financial and ownership information to Statistics Canada. Corporations under these limits, but having long-term debt or equity owing directly or indirectly to non-residents over a book value of $200,000, are also required to provide this information. In all, approximately 40,000 corporations met these criteria for reference year 2005.

The notion of control in this report encompasses both “direct” and “effective” control. Direct control is exercised by a person, group or corporation if they hold, directly or indirectly, more than 50% of the voting equity of a corporation. Effective control of the corporation implies control through methods other than ownership of the majority voting equity of the corporation, such as when more than 50% of the directors of a corporation are also directors of another corporation. Statistics Canada considers a corporation as foreign controlled when either “direct” or “effective” control is held by a person, group or corporation not resident in Canada.

As of the reference year 1999, financial statistics used in this report are compiled on the basis of the North American Industry Classification System (NAICS).  NAICS was developed by the statistical agencies of Canada, Mexico and the United States to provide a consistent framework for the collection, analysis and dissemination of industrial statistics across the three countries.

The Corporations Returns Act requires that an annual report be submitted to Parliament summarizing the extent to which foreign control is prevalent in Canada. This is the report for reference year 2005.

Cynthia Baumgarten
Director, Industrial Organization and Finance Division