Transfers and Non-Canadian Ownership of Atlantic Canadian Fishing Licences
Commercial fishing is a vital piece of the Atlantic Canadian economy and is highly regulated to ensure that the fisheries remain a sustainable Canadian resource. Federal regulations include restrictions on transferring licences, foreign ownership and corporate changes of control.
The Minister of Fisheries, Oceans and the Canadian Coast Guard (the “Minister”) has delegated the administration of the fisheries to the Department of Fisheries and Oceans Canada (“DFO”). DFO has developed policies to guide the administration of fishing licences under the Fisheries Act (the “Act”). These policies outline directions and restrictions designed to control fishing and to promote viable and profitable fishing enterprises by distributing fishing opportunities and benefits across regions; controlling the concentration of licences; supporting the retention of employment opportunities in smaller coastal communities; and controlling the overall number of enterprises engaged in the limited entry inshore fishing sector.
Foreign Ownership and Transactional Considerations
Foreign entities seeking to enter the Atlantic Canadian midshore and offshore fisheries may face a roadblock in Section 7 of the Maritimes Region Commercial Fisheries Policy (the “Policy”). Although the Policy does not bind the Minister in the same way as a statute or regulation, the Policy requires that midshore and offshore fishing licences must be issued to Canadian citizens, permanent residents, or a company incorporated under Canadian law with at least 51% Canadian ownership. While DFO has not provided an explicit definition of what constitutes Canadian ownership of an incorporated company, the Canadian ownership requirement contained in the Policy clearly poses potential issues for non-Canadian purchasers of Canadian companies presently holding midshore and offshore licences.
Non-Canadian purchasers or new entrants to the Canadian market must therefore carefully consider corporate and operational structures designed to comply with the requirements of the Policy. Among other options, participants should consider joint ventures with Canadian-controlled entities or First Nations communities, create leasing or sublicensing structures or structure their operations such that the non-Canadian entity holds assets which are not subject to Canadian control requirements, such as downstream processing and distribution assets, while the Canadian partner holds the licences.
Transfers of Licences and Change of Control Consents
In addition to Canadian ownership requirements, many transactions will trigger further notification and consent requirements in connection with midshore and offshore licences.
Under the current federal licensing scheme, commercial fishing licences are non-transferable. However, the Minister has prescribed certain conditions under which certain licences may be issued in replacement of a licence that is concurrently relinquished upon application to DFO. These conditions are set out in DFO policy and contain terms that may be applicable only to certain geographic areas or specify certain categories of licence that may not be reissued.
Similar conditions exist for corporate changes of control. Companies that have commercial fishing licences must notify the Minister (or DFO on the Minister’s behalf) for any change in the registered ownership of its shares resulting in a different person being either: (1) the registered owner of the largest number of shares of the company; or (2) a change that results in any one person being the registered owner of more than 50% of its shares. A company is required to notify the Minister in writing within 15 days after the date of the change of control. In addition, when there is a change in the controlling interest of a company that holds a licence, Ministerial approval is required for the renewal of the licence upon its expiry.
In addition to dealing with matters relating to federal fishing licences, buyers and sellers should consider the impact of other provincial and federal licensing regimes. These include requirements relating to transfers or deemed transfers of provincial processing and buying licences, environmental approvals, aquaculture licences or Canadian Food Inspection Agency permits and licences. Parties seeking input on the structure of their transactions are invited to contact the authors of this article for further information.
Please reach out to our legal team for further information in respect of federal and provincial licence requirements, including the restrictions on foreign ownership and licence transfer.
This article was written with contributions from Kyle Peck and Drew Ritchie, articled clerks at Cox & Palmer.