On November 27, 2014, the Canadian Securities Administrators (CSA) published for comment proposed amendments to various National Instruments which, if adopted, would overhaul how rights offerings under the rights offering prospectus exemption are conducted. The amendments would also have minor revisions to the requirements of rights offerings conducted by way of prospectus.  The CSA indicate that the amendments are meant to make the rights offering exemption more accessible by streamlining the process.

A rights offering is a financing where the issuer grants to its current securityholders one right per security held. The right or a certain number of rights would then be exercisable prior to the expiry date to purchase an additional security of the issuer at a certain subscription price. The issuer can issue these rights under a prospectus or by using a prospectus exemption.

The proposed amendments include amendments to National Instrument 41-101 General Prospectus Requirements (NI 41-101), National Instrument 44-101 Short Form Prospectus Distributions, National Instrument 45-102 Resale Restrictions, Companion Policy 45-106CP to NI 45-106 and Companion Policy 41-101CP to National Instrument 44-101.

Summary of Amendments

Currently, National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106) provides a specific prospectus exemption (Current Exemption) for rights offerings which comply with National Instrument 45-101 Rights Offerings (NI 45-101). However, the CSA note that the Current Exemption is not commonly utilized because rights offerings complying with the Current Exemption are time consuming and costly. Under the proposed amendments, NI 45-101 would be repealed and the Current Exemption would be replaced by a new exemption in NI 45-106 (New Exemption) that would substantially change the requirements for a prospectus exempt rights offering.

Below is a summary of the major changes under the New Exemption:

  • Availability: Only reporting issuers, other than certain investment funds, would be able to utilize the New Exemption. In addition, the Current Exemption would be repealed, meaning there would no longer be an ability for non-reporting issuers to undertake a rights offering under a specific rights offering prospectus exemption.
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