New Zealand: Rights Issues - Practical Considerations For New Zealand Listed Issuers

This guide answers ten key questions commonly raised by listed companies who are seeking to raise capital from their existing shareholders.

Due to the tightening of debt markets and increased costs of traditional bank facilities, more and more companies have been turning to equity capital markets and their shareholders to satisfy their financing and capital requirements.

Historically, listed companies have preferred conducting institutional placements over traditional rights issues for this purpose, mainly as a traditional rights issue takes much longer to complete than a placement and requires significant work to be carried out in preparing a prospectus.

However, as part of efforts to manage the impact of current market conditions and build confidence in New Zealand's financial markets, proposed relaxation in the timetable and disclosure requirements for rights issues may result in even more NZX listed companies undertaking rights issues to satisfy their funding requirements.

  1. Are we eligible to conduct a rights issue?

    Any NZSX listed Issuer can offer a rights issue to its equity security holders.
  2. Is shareholder approval required?

    Shareholder approval will generally not be required to conduct a rights issue if the offer is renounceable (ie the rights can be traded) and made to everyone who holds equity securities in the issue class, proportionately to their existing holdings. However, a non-renounceable rights issue will usually require shareholder approval.
  3. Do we have to prepare a prospectus?

    Ordinarily an Issuer must prepare a short-form prospectus and an investment statement in compliance with the Securities Regulations 1983.

    A short-form prospectus has fewer disclosure requirements than a standard prospectus for an offer of equity securities. This is because, as existing shareholders of the Issuer, prospective investors in a rights issue already hold information about that Issuer.

    NZX or Dual Listed Issuers (with NZX as their home exchange) can use the new trans-Tasman Mutual Recognition Scheme to extend a New Zealand offer to Australian shareholders with minimal additional disclosure obligations. In reverse, Overseas or Dual Listed Issuers (with ASX as their home exchange) can use the Scheme to extend an Australian offer to New Zealand shareholders.

    The proposed introduction of a 'simplified disclosure prospectus' under the Securities Disclosure and Financial Advisers Amendment Bill (Bill) will further streamline the disclosure process. Under the Bill, listed Issuers will be able to offer securities to the public using a simplified disclosure prospectus rather than a prospectus and investment statement. Investors will be referred to information previously disclosed by an Issuer under its continuous disclosure obligations and given information specific to the proposed issue of securities.

    The Ministry of Economic Development is seeking submissions by 27 May 2009 on regulations prescribing the content of the simplified disclosure prospectus.

    Click here for more information.
  4. Is there a prescribed timetable for a rights issue?

    Rights issues must comply with the timetable set out in the NZSX Listing Rules unless a waiver is obtained from NZX. The standard rights issue timetable lasts for a minimum of 30 business days after announcement.

    In contrast, Australian listed Issuers can use a number of accelerated rights issue structures. This gives Overseas and Dual Listed Issuers (with ASX as their home exchange) the opportunity to combine an accelerated Australian structure with the Trans-Tasman Mutual Recognition Scheme to raise funds more quickly from New Zealand investors.

    Accelerated rights issue structures include:
  • An Accelerated Non-Renounceable Entitlement Offer, under which an offer is made and shares are issued to institutional shareholders within a short period and any shortfall is placed with institutional investors via a bookbuild following which the retail offer takes place in accordance with the usual ASX rights issue timetable
  • A RAPIDS® issue (a Renounceable Accelerated Priority Issue with Dual Bookbuild Structure), under which the institutional portion of the offer takes place first on an accelerated timetable again followed by a retail offer on the usual ASX rights issue timetable. After each portion of the offer, a bookbuild is conducted with respect to renounced entitlements under the institutional and retail offers respectively and the net proceeds are paid to the shareholders who renounced their entitlements.
    It is worth noting that certain NZX and ASX waivers and ASIC modifications may be required in order to complete an accelerated offer.
  1. Should our rights issue be renounceable?
    As mentioned, a rights issue can be renounceable or non-renounceable. If a shareholder does not take up their rights in a non-renounceable issue, they will simply lapse. Under a renounceable rights issue, a shareholder who does not take up their entitlement can renounce their rights and sell them.
    Although non-renounceable issues are common, an Issuer may prefer that those shareholders who do not want to, or are not in a position to, subscribe for additional shares under the offer realise some value for their rights.
  2. Can we offer different terms to different shareholders?
    Generally the terms of an offer, including the price and entitlement, must be the same for all shareholders in the relevant class. There are exceptions under the NZSX Listing Rules which permit an Issuer to make a disproportionate offer in limited circumstances (such as to avoid the creation of less than minimum holdings).
  3. Do we have to extend the NZX listed offer to shareholders in other jurisdictions?
    A rights issue will usually be offered pro-rata to every person who holds equity securities in the relevant class. However, an Issuer may restrict an offer to shareholders with a registered address in New Zealand if they think that it is unreasonable to offer securities or interests to shareholders resident in other jurisdictions (non-residents) given the number of such shareholders and the cost of complying with relevant foreign laws.
    Depending on the composition of its share register, it is common for Issuers to limit an offer to shareholders with a registered address in Australia or New Zealand.
    If the offer is to be restricted, the Issuer must advise the non-residents that they will not be included in the rights issue. Further, if the rights issue is renounceable, the Issuer must appoint a nominee to sell rights which would otherwise have been offered to non-residents with any net proceeds being sent to the non-resident holders.
  4. Should the rights issue be underwritten?
    There is no legal requirement for a rights issue to be underwritten. However this is desirable where an Issuer needs to raise funds for a specific purpose and requires certainty. Underwriters and sub-underwriters can include financial institutions, stockbrokers, major shareholders of the Issuer or other related or unrelated parties.
    As a primary objective of having an issue underwritten is to achieve certainty that all funds sought will be raised, Issuers should pay careful attention to conditionality and termination rights of the underwriters particularly around areas such as market falls and material adverse change.
    In the current economic environment we may see underwriters imposing greater conditionality, covenants and termination provisions and potentially higher underwriting commissions to compensate for the greater risk exposure. Underwriters may also be unwilling to provide an underwriting commitment without a major shareholder's agreement to take up their entitlement and/or sub-underwrite a portion of the shortfall.
  5. Will the rights issue use up my 20% placement capacity?
    Equity securities issued under a rights issue do not use up an Issuer's 20% (increased from 15%) placement capacity under NZSX Listing Rule 7.3.5.
  6. What happens if my major shareholder goes over the takeover threshold by acquiring shares under the rights issue?
    If a significant shareholder takes up their entitlement but some other shareholders do not, there is a possibility their percentage voting power will increase beyond the 20% takeover threshold. This puts the shareholder at risk of contravening takeover laws. However, if their acquisition of shares under the rights issue is not a bid for control of the Issuer it will be exempted from the operation of the Takeovers Code, provided that the following conditions are satisfied:
  • The offer is made to everyone who holds securities in the issue class, proportionately to their existing holdings
  • The shareholder, within six months of allotment, reduces the percentage of securities they hold in the Issuer to the percentage they held immediately prior to the rights issue
  • The shareholder does not exercise any of those excess voting rights before they reduce their shareholding
  • Acquisitions by an underwriter or sub-underwriter to a rights issue over the 20% threshold are subject to a similar exemption.

Phillips Fox has changed its name to DLA Phillips Fox because the firm entered into an exclusive alliance with DLA Piper, one of the largest legal services organisations in the world. We will retain our offices in every major commercial centre in Australia and New Zealand, with no operational change to your relationship with the firm. DLA Phillips Fox can now take your business one step further − by connecting you to a global network of legal experience, talent and knowledge.

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.