Streamlined Rights Offering Regime Proposed By Canadian Securities Regulators

A streamlined rights offering regime has been proposed by Canadian securities regulators with the objective of increasing the appeal of rights offerings as a financing method. Rights offerings are relatively uncommon in Canada at present and are most often done by smaller issuers with limited equity financing alternatives; they typically include a "backstop" subscription commitment from a supportive securityholder. The rule changes would significantly increase the permitted size of prospectus-exempt rights offerings and would remove some of the other regulatory disincentives associated with them. The proposed changes should benefit issuers' existing smaller investors, because rights offerings generally provide a better opportunity than other types of financings for retail investors to participate and avoid dilution. The comment period for the proposed rules is open until February 25, 2015.