Canadian Securities Regulators Propose Significant Changes To The Rights Offering Regime

The Canadian Securities Administrators, or CSA, have published for comment proposed rule changes which would create a streamlined prospectus exemption for rights offerings conducted by reporting issuers other than investment funds (the Proposed Exemption). The Proposed Exemption is intended to benefit reporting issuers by removing the current regulatory review process, which will reduce the time and associated costs of conducting a rights offering.

Background

Under the current rights offering regime in Canada, reporting issuers who wish to conduct a prospectus-exempt rights offering must use the prospectus exemption (the Current Exemption) available under section 2.1 of National Instrument 45-106 Prospectus and Registration Exemptions. Under the Current Exemption, a rights offering circular must also be filed and reviewed by the applicable securities commission and the reporting issuer may not issue more than 25 percent of its securities in any 12-month period.