Canadian Securities Administrators Finalize Terms of New Rights Offering Regime

Posted by David Kandestin, Associate.

On September 24, 2015, the CSA announced their final amendments to implement a streamlined prospectus exemption for rights offerings by reporting issuers. These amendments intend to address concerns that issuers infrequently used the current prospectus-exempt rights offering regime to raise capital because it is slow and expensive.

The amendments create a prospectus exemption that is available only to reporting issuers, but not investment funds. The exemption removes the requirement for regulatory review of the rights offering circular, replacing it with alternative investor protections including the addition of statutory secondary market civil liability. Therefore, investors under the rights offering will have a right of action if there is a misrepresentation in the rights offering circular or other part of the issuer’s continuous disclosure record.

Other key elements include:

  • a new notice that reporting issuers must file on SEDAR and send to security holders that explains how to access the rights offering circular electronically;
  • a new rights offering circular in a Q&A format that is intended to be easier for issuers to prepare and more straightforward for investors to understand; and
  • a dilution limit of 100%, instead of the current 25%.

If all necessary government approvals are obtained, these amendments will come into force on December 8, 2015. Further details from the CSA can be found here, and the text of the amendments can be found here.