The Canadian government will hold public consultations with the country’s federal pension funds to consider eliminating the current 30% limit for holding voting shares of an individual company.
The recommendation was included in the Canadian government’s 2015 budget plan, introduced Tuesday. It recommended that removing the ban could “reduce red tape and improve the investment climate in Canada.”
While the current limits officially apply to federally registered plans — those whose participants are in several provinces, “they have been adopted by most Canadian provinces, so that any amendments to those regulations would apply automatically to pension plan investors in those provinces that have adopted the federal regulations unless they specifically exempt themselves from them,” said Anna Zalewski, an associate with law firm Osler, Hoskin & Harcourt. She added that Quebec has its own pension investment legislation separate from federal law.
Ms. Zalewski said the rationale for the rule was to support passive investment. “However, as investment practices have become more sophisticated, particularly in infrastructure and private equity, the rule has led to inefficiencies,” she said. “Many players in the Canadian pension industry have been advocating for the removal of the rule or the introduction of exemptions to it.”
Deborah Allan, spokeswoman for the C$154.4 billion ($126 billion) Ontario Teachers’ Pension Plan, Toronto, said OTPP is a provincial plan and officials there are awaiting further information from the Ottawa government concerning whether the recommendation would apply to them.