Simplified Rights Offering Rules Announced By Canadian Securities Administrators

by Bennett Jones LLP

The Canadian Securities Administrators (CSA) have announced that a revised rights offering regime for reporting issuers will come into force on December 8, 2015 (the New Rules). The New Rules will benefit reporting issuers seeking to raise capital from existing securityholders by:

  • shortening the timeframe for completion of a rights offering;
  • implifying securities regulatory filings through a new reader-friendly Q&A format;
  • eliminating the need for regulatory approvals;
  • permitting the issuance of up to 100 percent of the outstanding number of securities (or principal amount, in the case of debt securities) in a 12-month period; and
  • reducing legal, printing and distribution costs of securities regulatory filings.


Rights offerings are a financing structure where existing securityholders are given a preferential right to purchase additional securities of an issuer in order to maintain their pro rata ownership of such issuer.

Reporting issuers and market participants frequently point to the cost and lengthy regulatory review process as barriers to undertaking rights offerings in Canada. In responding to these concerns, the CSA proposed amendments to the rights offering regime and circulated a Notice and Request for Comment on November 27, 2014. The New Rules were finalized on September 24, 2015, and are scheduled to come into force on December 8, 2015.

Rights Offerings under the New Rules

The New Rules will be incorporated into the existing prospectus exemption rules under National Instrument 45-106 – Prospectus Exemptions of the Canadian Securities Administrators (NI 45-106). Reporting issuers (other than investment funds) who have filed all applicable periodic and timely disclosure documents are eligible to rely on the New Rules in completing a rights offering.

Simplified Process

The streamlined process for rights offerings under the New Rules is set out below:

Notice and Disclosure: An offering notice is prepared in accordance with Form 14 of NI 45-106 (an Offering Notice). The Offering Notice is presented in a Q&A format and requires answers to nine prescribed questions.

An offering circular is concurrently prepared in accordance with Form 15 of NI 45-106 (an Offering Circular). The Offering Circular is presented in a Q&A format and requires answers to 34 prescribed questions, including the use of proceeds, procedural matters for exercising rights, and interests of underwriters and insiders.

In accordance with the TSX Company Manual, TSX-listed issuers are to consult with the exchange and provide drafts of the Offering Circular to the exchange. The offering must receive final acceptance from the TSX at least seven trading days prior to commencing a rights offering. We anticipate this review period may be shortened or eliminated to accommodate the intent of the New Rules.

Commencement of Offering: 
The offering is commenced when the Offering Notice is electronically filed on SEDAR and sent to all existing Canadian-resident holders of the class of securities being offered. At the same time, the Offering Circular is electronically filed on SEDAR and made available, but is not required to be physically delivered, to intermediaries and securityholders.
Exercise Period: Securityholders must be provided with not less than 21 and not more than 90 days to exercise their rights under the offering (and, if applicable, elect to participate in additional subscription privileges, as described below).
Closing: The issuer must file a closing news release. The closing news release is to contain prescribed information relating to the offering, including the gross proceeds, the number of securities distributed and confirmation that the securities distributed were issued under the basic subscription privilege, the additional subscription privilege and/or a stand-by commitment.

Permitted Offering Terms

Rights offerings under the New Rules must comply with the following terms:

Exercise Period: The rights offering may not close less than 21 and not more than 90 days from the day the Offering Notice is first sent to securityholders.
Pricing: The subscription price for securities issued under the New Rules must be less than the market price (as defined in the New Rules) at the time of filing the Offering Notice. For reporting issuers not listed on a marketplace, the subscription price must be less than the fair value of the securities at the time of filing the Offering Notice.
Dilution Limit: The total number of securities issuable under the rights offering (together with all other rights offerings during the 12-month period immediately preceding the offering) must not exceed 100 percent of the outstanding securities of the issuer (or principal amount, in the case of debt securities).
Additional Subscription Privileges (optional):
The offering may give securityholders the right to subscribe for securities not taken-up by other securityholders under the basic subscription privileges, but is limited to each securityholder's pro rata participation in the basic offering.
Stand-by Commitment (optional): 
The issuer may arrange for a stand-by commitment, by a guarantor with sufficient financial resources, to acquire the securities not otherwise subscribed for by existing securityholders, provided it first grants additional subscription privileges to its existing securityholders.
Exchange Requirements (if applicable): The rules and regulations of the TSX Company Manual and TSX Venture Exchange impose additional requirements for rights offerings. For example, the TSX Company Manual requires that a rights offering be accepted for filing by the TSX before it is commenced. We anticipate that the TSX and TSX-V will modify their rights offering regimes to accommodate the intent of the New Rules.

Secondary Market Liability and Investor Protection Changes

Under the New Rules, investors will be given a statutory right of action for damages resulting from any misrepresentation in an issuer's continuous disclosure record (including misrepresentation in an Offering Circular).

Other Changes

The New Rules remove the ability of non-reporting issuers to complete a prospectus-exempt rights offering.

In addition, the New Rules allow a foreign issuer to complete a rights offering in Canada if, to its knowledge, all securityholders resident anywhere in Canada constitute 10 percent or less of all holders of the applicable class of securities.

Next Steps

The TSX and TSX-V have not yet announced changes to their respective rights offering regimes in light of the New Rules; however, we will continue to monitor developments and will provide updates as appropriate. Bennett Jones would be pleased to work with your business in determining how best to leverage the New Rules and facilitate a successful rights offering to your existing securityholders.

Written by:

Bennett Jones LLP

Bennett Jones LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.