In December 2015, the Canadian Securities Administrators (the “CSA”) adopted amendments to the rights offering regime to make it easier for issuers to utilize rights offerings to raise capital, while providing existing securityholders the opportunity to protect themselves from the dilution that could otherwise arise in the context of a financing. On January 18, 2016, the Toronto Stock Exchange (the “TSX”) and the TSX Venture Exchange (the “TSXV”) published additional guidance with respect to the conduct of rights offerings by listed issuers, in anticipation of the adoption of formal amendments to Section 614 – Rights Offerings of the TSX Company Manual and Policy 4.5 – Rights Offerings of the TSXV Corporate Finance Manual (the “TSXV Manual”).
The TSX and TSXV clarified that, although a rights offering circular is no longer subject to CSA review and approval prior to delivery to securityholders, issuers are still required to pre-clear rights offering documents, including the rights offering notice and rights offering circular or prospectus, with the TSX or TSXV, as applicable. In order to give sufficient time for review, issuers should provide the documents to the applicable Exchange at least five trading days prior to finalization.
The TSX and TSXV have also determined to reduce the deadline for finalization of rights offering documents and resolution of any deficiencies identified by the applicable Exchange to at least 5 trading days prior to the record date for the rights offering, rather than at least 7 trading days.
The TSXV also announced that, for TSXV issuers:
- the minimum subscription price for securities to be acquired on the exercise of rights will be reduced from $0.05 to $0.01;
- the minimum exercise price of a warrant forming part of a unit to be acquired on exercise of a right must not be less than the Market Price (as defined in the TSXV Manual) prior to the news release announcing the rights offering and, in any case, not less than $0.05;
- all rights must be transferable but the rights will not be required to be listed on the TSXV, provided that the issuer specifically discloses that it does not intend to list the rights in the press release announcing the rights offering;
- shareholder approval of the creation of a new Control Person (as defined in the TSXV Manual) as a consequence of a stand-by commitment for a rights offering will not generally be required, provided that the rights are: (i) listed for trading on the TSXV; and (ii) the subscription price for the rights is at a “significant discount” to the Market Price, which is defined as equal to at least the maximum Discounted Market Price (as defined in the TSXV Manual). If either criteria is not satisfied, the TSXV may require shareholder approval for the creation of the new Control Person; and
- before the TSXV will accept a rights offering which includes a stand-by commitment, any securityholder who will beneficially own, directly or indirectly, more than 10% of the voting rights attached to all outstanding voting securities of the issuer on completion of the rights offering, must file a PIF or Form 2C1 Declaration with the TSXV.
Until the proposed amendments to the TSXV Manual become effective, issuers that want to utilize the reduced minimum subscription price or not list the rights offered on the TSXV must apply to the TSXV for a waiver of the current requirements of Policy 4.5.
A complete copy of the TSX Staff Notice is available here.
A complete copy of the TSXV Bulletin is available here.