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Mergers and Acquisitions in Canada

The scope of access during due diligence has been affected by the federal Personal Information Protection and Electronic Documents Act[[SC 2000, c.5.]] (“PIPEDA”). PIPEDA stipulates that personal information in the control of the corporation (including information pertaining to customers, contractors and business partners) cannot be used or disclosed without the consent of the individual to whom the personal information applies. “Personal information” must be about an identifiable individual.

It is also possible that personal information pertaining to employees cannot be disclosed in certain cases. For example, if one is purchasing a federally-regulated business or employees are located in a province with its own privacy legislation, the employer cannot disclose personal information concerning employees without their consent although, fortunately, the provinces of Alberta and British Columbia have passed specific provisions to allow for disclosures during the sale process. Even in other provinces such as Ontario, which does not have its own private sector privacy legislation, employees’ personal information cannot be disclosed under PIPEDA during a commercial activity, without their consent. The sale of a business may well meet the definition of a commercial activity. As a prudent measure, where a data room is set up for multiple potential bidders, identifiers linked to personal information should be deleted.

Any potential purchasers should be required to sign a comprehensive non-disclosure agreement, which provides that the potential purchaser will destroy or return all personal information disclosed during due diligence if the transaction is not concluded, and will protect the personal information in a manner comparable to that in which it is protected by the seller. Whenever possible, personal information should not have identifiers on it.

British Columbia and Alberta both have similar provincial privacy legislation that sets out a reasonable protocol which allows for disclosure of personal information in the context of an acquisition. It must be borne in mind that the Province of Quebec has had personal information protection legislation in place since 1994. Local legal advice should be obtained if a transaction involves disclosure, use or transfer of personal information in Quebec.

Most provinces also have legislation relating to personal health information. If such information is involved, special consideration must be given to protecting its privacy.

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