Canada: Canadian Securities Regulators Propose Significant Changes To The Rights Offering Regime

Last Updated: December 15 2014
Article by William S. Osler, Sandra Malcolm and Donald J.M. Sullivan

The Canadian Securities Administrators, or CSA, have published for comment proposed rule changes which would create a streamlined prospectus exemption for rights offerings conducted by reporting issuers other than investment funds (the Proposed Exemption). The Proposed Exemption is intended to benefit reporting issuers by removing the current regulatory review process, which will reduce the time and associated costs of conducting a rights offering.


Under the current rights offering regime in Canada, reporting issuers who wish to conduct a prospectus-exempt rights offering must use the prospectus exemption (the Current Exemption) available under section 2.1 of National Instrument 45-106 Prospectus and Registration Exemptions. Under the Current Exemption, a rights offering circular must also be filed and reviewed by the applicable securities commission and the reporting issuer may not issue more than 25 percent of its securities in any 12-month period. Research conducted by the CSA over the past year found that the Current Exemption is used only by a few reporting issuers as the overall time period to conduct a prospectus-exempt rights offering is much longer than offerings for other prospectus exemptions. The CSA also found that the 25-percent limit restricts the ability of reporting issuers with small market capitalization to raise sufficient funds to make a rights offering worthwhile.

Proposed Exemption

Notice: In order to use the Proposed Exemption, issuers will have to file and send to security holders a notice prior to the commencement of the exercise period of the rights. The notice will contain basic disclosure about the offering and inform security holders on how to access the rights offering circular electronically.

Circular: Concurrently with the filing and sending of the notice, issuers will be required to prepare and file a rights offering circular which will be in a question and answer format. The circular will contain information about the rights offering, the use of funds available and the financial condition of the issuer. Issuers will be required to certify that the circular contains no misrepresentations.

No Review of Notice or Circular: Under the Proposed Exemption the CSA will no longer review the notice or the circular prior to use by the issuer. However, for a period of two years from the adoption of the Proposed Exemption, the CSA intends to conduct reviews of circulars, in most cases on a post-distribution basis, to understand how issuers are using the Proposed Exemption and to ensure that issuers are complying with the conditions of the Proposed Exemption.

Increased Dilution Limit: The CSA proposes to raise the dilution limit from 25 percent to 100 percent. An issuer would therefore be able to issue up to 100 percent of its outstanding securities in any 12-month period.

Pricing: For reporting issuers that are listed on a stock exchange, the CSA proposes that the subscription price for a security issuable on exercise of a right must be lower than the market price at the time of filing the notice, which is intended to encourage more participation from retail security holders. For reporting issuers not listed on a marketplace, the subscription price for a security issuable on exercise of a right must be lower than fair value at the time of filing of the notice.

Closing News Release: Under the Proposed Exemption, an issuer must file a closing news release which contains prescribed information regarding the rights offering, such as the gross proceeds of the rights offering and amounts of securities distributed under each of the basic subscription privilege, plus details of any additional subscription privilege and stand-by commitment.

Investor Protections

The CSA proposes that an issuer must make the basic subscription privilege available on a pro rata basis to each security holder of the class of securities to be distributed on exercise of the rights. In addition, statutory civil liability for secondary market disclosure provisions apply to the acquisition of securities under the Proposed Exemption, which would provide investors relying on the circular with rights of action in respect of a misrepresentation in an issuer's continuous disclosure, including the circular.

No Exemption for Non-Reporting Issuers

As part of the proposed amendments, the CSA proposes to repeal the Current Exemption under section 2.1 of National Instrument 45-106 in addition to National Instrument 45-101 Rights Offerings and its related companion policy. As a result, there would no longer be a prospectus exemption for rights offerings by non-reporting issuers. Non-reporting issuers rarely use the rights offering exemption and the CSA believes that there is insufficient disclosure of the non-reporting issuer and its business in a rights offering circular for an investor to make an informed investment decision and to justify a prospectus exemption.

Stand-by Commitment

The CSA proposes to introduce a prospectus exemption for securities issued to a stand-by guarantor as part of a distribution under the Proposed Exemption, where the stand-by guarantor acquires the securities as principal. If the stand-by guarantor is a security holder of the issuer as at the date of the notice and is not a registered dealer, the securities acquired pursuant to the exemption would generally not be subject to a hold period on resale. If the stand-by guarantor is not a security holder of the issuer as at the date of the notice or is a registered dealer, the securities acquired pursuant to the exemption would be subject to a four-month hold period.

Next Steps

The CSA's comment period closes on February 25, 2015, and Bennett Jones LLP would be pleased to assist clients in submitting their comments on the Proposed Exemption.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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.

William S. Osler
In association with
Related Video
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.