Investment Canada Act
Canadian law governing foreign acquisition of Canadian businesses; gating Red Cat's Quaze Technologies deal.
Last refreshed: 10 May 2026
Timeline for Investment Canada Act
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Drones: Industry & Defence- What is Canada's Investment Canada Act?
- The Investment Canada Act is Canada's law governing foreign acquisitions of Canadian businesses. Foreign buyers must notify authorities and, for sensitive sectors, seek approval to confirm net benefit to Canada or to address national security concerns. It is administered by Innovation, Science and Economic Development Canada.
- Why does the Investment Canada Act apply to Red Cat's Quaze deal?
- Quaze Technologies develops wireless-power transfer technology for drones, a dual-use application with military relevance. The ICA requires foreign acquirers to seek approval for Canadian businesses in sensitive sectors. Red Cat anticipated clearance in May 2026, suggesting it had submitted the required undertakings.Source: Red Cat Holdings Q1 2026 earnings release
- Can the Canadian government block a foreign company from buying a Canadian tech firm?
- Yes. The Investment Canada Act allows the government to block acquisitions, impose binding undertakings, or require divestiture when a transaction poses national security concerns or fails a net-benefit test. Defence-related and critical technology sectors receive enhanced scrutiny under amendments progressively strengthened since 2009.
Background
The Investment Canada Act (ICA) is Canada's primary legislation governing the acquisition of Canadian businesses by foreign investors. Administered by Innovation, Science and Economic Development Canada (ISED), it requires foreign investors to notify authorities when acquiring Canadian businesses above defined asset thresholds, and to seek approval when the transaction may affect Canada's national security or when it does not provide a net benefit to Canada.
The ICA's national security review provisions have been progressively strengthened since 2009, with defence, aerospace, and critical technology sectors subject to enhanced scrutiny. Acquisitions in sensitive dual-use technology areas can be subjected to ministerial review and blocked, forced divestiture, or approved with binding undertakings.
In May 2026, the ICA gated Red Cat Holdings' planned acquisition of Quaze Technologies, a Canadian wireless-power company, for approximately $25 million in stock . Red Cat anticipated clearance within May 2026, suggesting the company had submitted required undertakings and expected a straightforward net-benefit finding for a Canadian technology company being acquired by a US-listed, Blue UAS-designated drone manufacturer. Wireless-power technology for military drones falls within the ICA's dual-use sensitivity threshold.