Canada blocks Chinese-owned laser firm from appointing board member over security fears

The Canadian federal government has blocked a board appointment at CorActive High Tech Inc., a Quebec-based laser firm, citing national security concerns. The decision has prompted the company to file an application in Federal Court to quash the government's refusal.

Industry Minister Melanie Joly refused to approve the appointment of Xiaokai “Denver” Zeng to the board of CorActive. Zeng, who has been a U.S. citizen since 2024, currently heads the U.S. subsidiary of Han’s Laser Technology Group, the Chinese company that acquired CorActive in 2017. According to the government, the refusal is based on concerns that the firm's specialty fibre technology could potentially benefit foreign militaries.

Security Undertakings and Investment

The 2017 acquisition of CorActive by Han’s Laser was subject to specific undertakings designed to protect sensitive "specialty fibres" technology. These agreements included mandatory background checks on employees to mitigate security risks. Since the acquisition, Han’s Laser has invested $11 million into the Quebec firm.

CorActive's history includes ties to defense procurement, having held small contracts with the U.S. Department of Defense between 2008 and 2014. In its court application, CorActive argues that Zeng's appointment is essential for the company's business survival and the strategic application of capital, particularly as the firm faces declining sales and the loss of key personnel.

National Security vs. Investment

This dispute underscores the ongoing tension between Canada's desire to attract foreign direct investment and the need to protect high-tech intellectual property. The case is governed by the Investment Canada Act, which grants the federal government the authority to review foreign investments and board appointments if they are deemed a risk to national security.

By blocking Zeng, the government is testing the long-term validity of security undertakings established years after an initial acquisition. The case highlights the scrutiny applied to Chinese ownership of sensitive Canadian technology, especially when that technology has dual-use potential for military applications.

Legal Battle Ahead

In its legal challenge, CorActive asserts that there are no legitimate concerns regarding Mr. Zeng. The company claims that rigorous screening by Canada’s closest security partner—the United States—demonstrates his suitability for the role.

The Federal Court will now determine whether the government's refusal to approve the appointment was justified under the Investment Canada Act or if the decision should be quashed. The outcome will likely set a precedent for how Canada manages the governance of foreign-owned firms in the strategic technology sector.