On the heels of recent amendments by the Canadian Securities
Administrators (CSA), the Toronto Stock Exchange (TSX) has issued
guidance to issuers on rights offerings.
The TSX announced that: (i) despite the CSA amendments, rights
offering documents must still be pre-cleared with the TSX; and (ii)
the advance notification period to set a record date is reduced to
five days, from seven days. The TSXV issued similar guidance
that addresses some additional issues.
Interestingly, the TSX did not address whether shareholder
approval would be required for rights offerings which result in
dilution in excess of 25% – shareholder approval is typically
required for private placements resulting in dilution over
25%. However, we do not expect that shareholder approval for
a rights offering would be required by the TSX in such
circumstances so long as dilution is below 100%, as permitted by
the new rights offering prospectus exemption.
On December 8, 2015,
National Instrument 45-106 Prospectus
Exemptions was amended to establish a more
streamlined rights offering regime. The new rights offering
regime, which is available to reporting issuers that are not
investment funds, does not require that a rights offering circular
by reviewed by securities commissions, increases the dilution limit
to 100% (instead of 25%) and simplifies the prescribed rights
offering circular. We have outlined some of the key aspects
of the amended rights offering in a previous post.
TSX Notice 2016-0002
TSX Staff Notice 2016-0002 states that the TSX
requires pre-clearance of rights offering documents. The
rights offering documents that need to be pre-cleared include the
rights offering notice and the rights circular. The TSX
advises that the rights offering documents should be filed in draft
form with the TSX at least five days in advance of
finalization. The TSX will review pricing and the mechanics
and timing of the rights offering.
After reviewing the rights offering documents, the TSX will
typically provide comments on such documents to be addressed by the
issuer. The TSX Company Manual currently states that the
rights offering documents must be finalized at least seven trading
days in advance of the record date. In an effort to contribute
to the streamlining of the process, the TSX will now only require
an advance notification period of five days.
TSXV Corporate Finance Bulletin
The TSXV Corporate Finance Bulletin provides the
same guidance as the TSX Notice (except that no time period is
provided for how far in advance rights offering documents must be
filed in draft form). In addition, it sets out the
The minimum subscription price for a security to be acquired by
the exercise of a right is proposed to be reduced from $0.05 to
$0.01. Until the proposed amendment comes into force, the
current minimum price will remain but will be reduced upon an
The minimum exercise price of a warrant forming part of a unit
acquired on the exercise of a right cannot be less than the market
price prior to the news release and in any case must not be less
Rights offered pursuant to a rights offering are not required
to be listed for trading on the TSXV. However, if the rights
are not listed, that fact must be disclosed in the news release
announcing the rights offering. Until this proposed amendment
comes into force, the TSXV will approve a rights offering, where
the issuer elects not to list the rights, on an application for a
waiver by the issuer.
Notwithstanding that an issuer can choose not to list the
rights on the TSXV, if an issuer so chooses, there may be other
consequences. For example, shareholder approval will
generally not be required if a new control person can result from a
stand-by commitment for a rights offering, provided that the rights
are listed for trading on the TSXV and the subscription price for
the rights is at a prescribed discount (or a discount greater than
the prescribed discount) to the market price.
A personal information form (PIF) must be filed with the TSXV
in respect of any individual who may own or control securities
representing more than 10% of the voting rights attached to all
outstanding voting securities as a result of the completion of a
rights offering which includes a stand-by commitment.
According to the TSX, it is intended that TSX Notice 2016-0002
and the TSXV Corporate Finance Bulletin will be incorporated in section 614 of the TSX Company Manual and in
4.5 Rights Offerings, respectively,in due
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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