CSA Proposes Changes To Make Rights Offerings More Attractive To Reporting Issuers

Co-author: Devina D'Silva, Student-at-Law

Rights offerings allow issuers to raise capital while providing existing security holders with the opportunity to avoid dilution of their holdings. Unless an exemption is available, a rights offering must be made pursuant to a prospectus prepared in accordance with applicable Canadian securities laws. While a prospectus-exempt rights offering is theoretically appealing, in reality the associated time and cost of these distributions has led to issuers rarely making use of this exemption. In light of this, on November 27, 2014, the Canadian Securities Administrators (the "CSA") published for a 90-day comment period proposed amendments to the current prospectus-exempt rights offering regime, designed to make these offerings more attractive to issuers. The CSA intends to achieve this goal by creating a streamlined prospectus exemption for rights offerings conducted by issuers other than investment funds (the "Proposed Exemption")