Canada: Streamlined Rights Offering Regime Proposed By Canadian Securities Regulators

Last Updated: January 22 2015
Article by Leslie McCallum

A streamlined rights offering regime has been proposed by Canadian securities regulators with the objective of increasing the appeal of rights offerings as a financing method. Rights offerings are relatively uncommon in Canada at present and are most often done by smaller issuers with limited equity financing alternatives; they typically include a "backstop" subscription commitment from a supportive securityholder. The rule changes would significantly increase the permitted size of prospectus-exempt rights offerings and would remove some of the other regulatory disincentives associated with them. The proposed changes should benefit issuers' existing smaller investors, because rights offerings generally provide a better opportunity than other types of financings for retail investors to participate and avoid dilution. The comment period for the proposed rules is open until February 25, 2015.

Key Features of the Proposed New Rights Offering Regime

The following are the key features of the proposed prospectus-exempt rights offering regime that would be available to reporting issuers:

  • rights offering circulars would not be subject to advance review and clearance by securities regulators;
  • circulars would be prepared in a question-and-answer format, including information about the rights offering, the use of proceeds and the financial condition of the issuer;
  • business information would not be required in the circular, and mining issuers would not have to include technical information, so they could avoid triggering the technical report filing requirements under National Instrument 43-101 – Standards of Disclosure for Mineral Projects;
  • the circular would not have to be delivered to securityholders; instead, a one- or two-page notice could be delivered providing basic disclosure about the offering and informing securityholders of how to access the circular electronically;
  • the permitted dilution limit would be increased to 100% from the current 25%;
  • for listed issuers, the subscription price would have to be below the market price (this is consistent with current practice and TSX rules, which require pricing at discount levels similar to those established by TSX's private placement rules); for unlisted issuers, the subscription price would have to be below the fair value of the securities unless insiders are restricted from increasing their proportionate interest in the issuer;
  • the basic subscription privilege would have to be available to securityholders on a pro rata basis;
  • the exercise period would be a minimum of 21 days and a maximum of 90 days; and
  • if the stand-by commitment is from a registered dealer or a party that is not an existing securityholder, it would have to acquire securities as principal and the securities would be subject to a four-month resale hold period.1

Prospectus-Qualified Rights Offerings

Rights offerings may also be done under a prospectus, although fewer issuers may proceed in this manner if the permitted dilution limit for exempt rights offerings is increased to 100%. The securities regulators are not proposing to change the rules applicable to rights offerings under a prospectus, except that the subscription price would have to be at a discount to the market price.

Rights Offerings by Listed Issuers

The proposed changes to the rights offering regime are significant, but listed issuers would still have to comply with TSX requirements which, among other things, require issuers to submit a draft circular to the exchange for advance review and approval. Achieving the objective of increasing the popularity of rights offerings may depend in part on the extent of conformity between securities law requirements and TSX rules.

Cross-Border Rights Offerings

Rights offerings can be extended to an issuer's U.S. securityholders, if certain criteria are met, without SEC review and, if the issuer is not already an SEC registrant, without triggering ongoing SEC reporting obligations. The issuer must qualify as a "foreign private issuer" under SEC rules and no more than 10% of its securities may be held by U.S. residents or, if the 10% threshold is exceeded, the issuer must have been listed on the TSX or TSX-V for at least one year and have a three-year Canadian reporting history. The underlying securities are freely tradeable in the United States but the rights are not and may only be sold outside the United States (including over the TSX or TSX-V) in compliance with Regulation S. For issuers that exceed the 10% limit, SEC rules do not contemplate a notice-and-access method for securities offering documents like that being proposed by Canadian regulators for rights offering circulars. These issuers might need to seek SEC relief in order to send U.S. securityholders only the required notice and not the rights offering circular.


1. The regulators are contemplating whether they should impose a four-month resale hold period even if the stand-by guarantor is an existing securityholder. This hold period would only apply to securities acquired as part of the stand-by commitment, not securities acquired under the basic subscription

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.

Similar Articles
Relevancy Powered by MondaqAI
McCarthy Tétrault LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
McCarthy Tétrault LLP
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions