Significant revisions to the prospectus exempt rights
offering regime will be coming into force on December 8, 2015. As
previously noted, the amendments are intended to make
prospectus exempt rights offerings more palatable to issuers while
maintaining investor protections. This new rights offering
prospectus exemption combined with the
new existing security holder prospectus exemption may change
market practice with respect to capital raising strategies.
The new rights offering prospectus exemption is only available
to non-investment fund reporting issuers that meet certain
conditions. The issuer must be a reporting issuer in Canada and it
must be current in its continuous disclosure obligations. In
addition, the exercise period for the rights must be no less than
21 days and no more than 90 days and must commence the day after
the rights offering notice is sent to security holders.
The following are some of the principal features of the new
prospectus exempt rights offering regime:
An important change from the existing
prospectus exempt rights offering regime is that the dilution limit
is increased from 25% to 100%. In the normal course and absent
unusual circumstances, we would not expect the Toronto Stock
Exchange to require security holder approval for dilution in excess
of 25% under a prospectus exempt rights offering. Note that the TSX
Company Manual rules on rights offerings would generally
A rights offering notice must be
provided to security holders in a new Form 45-106F14 Rights
Offering Notice for Reporting Issuers. The rights offering
notice must be under two pages in length and it must be presented
in a question and answer format.
A rights offering circular must be
filed concurrently with the rights offering notice in a new Form
45-106F15 Rights Offering Circular for Reporting Issuers.
The rights offering circular must also be presented in a question
and answer format and information cannot be incorporated by
On the closing date, or as soon
thereafter as practicable, the issuer must issue and file a news
Issuers that have a minimal
connection to Canada can allow Canadian security holders to
participate in a foreign rights offering under another new
prospectus exemption, so long as certain conditions are met. Both
reporting issuers and non-reporting issuers may use this prospectus
exemption so long as neither: (a) the number of beneficial security
holders of the relevant class that are resident in Canada; nor (b)
the number of securities beneficially held by security holders
resident in Canada, exceeds 10% of all security holders or
For further information, please refer to our
full summary of the new prospectus exempt rights offering
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.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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