Canadian public companies raising capital should consider the following five questions prior to launching a prospectus offering of securities.


Whether companies offer shares, debt, hybrid, committed or contingent, convertible or non-convertible securities, a company’s capital needs will be paramount in determining what type of security to issue, while the decision will also be influenced by a number of further considerations, including market conditions.

Commonly issued securities and reasons for their issuance are as follows:

Common Shares: voting securities with the residual claim to remaining property of the company on dissolution

  • Company considers current common share prices to be attractive and the offering price is not overly dilutive to current investors
  • To reduce indebtedness and decrease its leverage
  • Provides cost flexibility as dividends are paid at company’s discretion

Preferred Shares: hybrid securities with both equity and debt characteristics ranking ahead of common shares with respect to payment of dividends and on dissolution

  • Company does not want to increase debt or dilute common shareholders and the cost of capital (i.e. dividend rate) is attractive
  • Typically non-voting while dividend payments are made, so no impact on common shareholder voting
  • Non-cumulative preferred shares provide financing flexibility as unpaid, undeclared dividends are extinguished

Subscription Receipts: contingent securities that are automatically exchanged for underlying securities (e.g. common shares) upon the occurrence of a specified event, failing which the purchase price is returned to investors and the subscription receipts are cancelled

  • Company requires financing only for a specific purpose (e.g. an acquisition or project) and only wants to issue the underlying securities if the purpose is realized

Debentures or Medium Term Notes: interest-bearing debt securities with a term to maturity greater than one year, ranking ahead of equity on payment of interest and on dissolution of the company

  • Company wants to increase leverage or replace other indebtedness (e.g. pay down a credit facility, fund repayment of maturing debentures or notes) or extend a company’s maturity profile (e.g. by decreasing its use of short-term commercial paper) and the cost of capital (i.e. interest rate) is attractive

Convertible Debentures: debentures that convert into common shares at the option of holders, typically at a premium to common share price at issuance

  • Company wishes to issue common shares, but equity markets are unavailable or the company considers current common share prices to be undervalued 
  • Provides flexibility as company is typically permitted to redeem the debentures when its common shares are trading at a premium to the conversion price, thereby motivating holders to convert

Extendible Debentures: debentures that have a near-term maturity date that is automatically extended upon the occurrence of a specified event, failing which the debentures mature and the principal amount is returned to investors

  • Company needs debt financing only for a specific purpose and only requires the debentures to remain outstanding if the purpose is realized
  • A variant provides the debenture holder with the option to extend maturity and typically provides the company with a lower cost of capital

A prospectus offering is made through investment dealers acting as underwriters on a “bought deal” or “marketed” basis or as agents on a “best efforts” basis.

For underwritten offerings, one or more underwriters agree to purchase the securities as principal, on a firm commitment basis. The dealers’ commitment is typically subject to limited exceptions in an underwriting agreement (e.g. “market out,” “disaster out,” “material change out” or a ratings downgrade of rated securities). The risk of a successful offering is effectively transferred from the company to the underwriters. If the underwriters subsequently encounter difficulties in profitably reselling the offered securities to the public, the company still receives payment in full of the agreed-upon price for the issuance of the securities to the underwriters.

In a “bought deal” underwriting, the underwriters commit to purchase the securities at an agreed price before the transaction is announced publicly. By contrast, in a “marketed” underwritten offering, the company files a preliminary prospectus that does not include the price and the number of securities to be sold. The underwriters market the offering to prospective purchasers using the preliminary prospectus. After completion of the marketing, the company and dealers agree on the price and size of the offering, sign an underwriting agreement and file a final prospectus containing deal-specific terms. Alternatively, an offering may be structured as an “overnight marketed deal,” which commences in a manner similar to a “marketed” underwritten offering but, if successful, quickly (e.g. within one day) becomes a “bought deal.”

In an agency offering, the investment dealers do not purchase the offered securities as principals, but act on a “best efforts” basis as agents of the company. The dealers “market” the offering to potential investors willing to purchase the securities from the company. If some (or in some cases a specified minimum quantity) of the offered securities are not purchased by the public, the agents do not have an obligation to purchase the balance (or to buy any such securities, if a minimum has been specified) from the company.


A well-organized and prepared company can complete a “bought deal” offering pursuant to a short-form prospectus in two to three weeks or a “bought deal” offering pursuant to a prospectus supplement to a short-form base shelf prospectus in seven to 10 days, assuming a short-form base shelf prospectus is already in place. In contrast, a “marketed” underwritten offering or agency offering will require an additional period of marketing (i.e. a “road show”) the length of which will vary depending on the circumstances (e.g. two to four weeks or more). Further preparation time may be required in advance of launching an offering (e.g. for drafting of the prospectus, settling of a “bought deal” agreement or French translation of any documents incorporated by reference – see “Where to Offer the Securities?” below).


A prospectus must contain full, true and plain disclosure of all material facts relating to the offered securities. Accordingly, a convenient time for a company to offer securities by prospectus is shortly after filing its annual or interim financial statements and related management’s discussion and analysis (MD&A) (i.e. upon completion of its regular blackout period). In such cases, since the prospectus incorporates by reference the filed financial statements and MD&A, the company will typically not be aware of any material undisclosed financial information that would impede a public offering.

Public offerings may be undertaken at other times, provided consideration is given to any further disclosures that (1) must be made in the body of the prospectus or another document incorporated by reference (e.g. an earnings pre-release press release) in order for the prospectus to meet the required disclosure standard and (2) can be reliably made (i.e. the company has compiled sufficient information to enable it to provide accurate guidance regarding the results from a substantially completed or recently completed financial period). Such disclosures are sometimes referred to as “flash numbers.”


A public offering of securities within Canada may be made to investors in any or all Canadian provinces or territories. The sale of securities through a prospectus to investors in any such jurisdictions does not add significant expenses to an offering – incremental costs include filing fees and the cost of local counsel to provide offering opinions – or on an on-going basis following the offering, although securities regulators in certain Canadian jurisdictions collect fees based on the size of an offering.

A prospectus offering to purchasers in Quebec requires the French translation of the prospectus and any documents incorporated by reference, increasing the cost of the offering and requiring advance planning to provide sufficient time for translations.

Companies undertaking prospectus offerings may extend offerings to purchasers in the United States or internationally to access a larger pool of potential purchasers and to broaden the company’s securityholder base. However, the offering of securities into a foreign jurisdiction requires the company to comply with the requirements of the foreign jurisdiction and could subject the company to ongoing reporting and other compliance requirements in the foreign jurisdiction. Companies contemplating offering securities outside of Canada should, in advance of launching an offering, obtain advice from legal counsel in such jurisdictions with experience advising Canadian companies (e.g. in the United States: concerning “144A” private placements; “foreign private issuers;” and the Multijurisdictional Disclosure System).