Example
Issuer A makes an offer of securities to the public for subscription in a simplified disclosure prospectus. Tom subscribes for some of those securities. After Tom has subscribed for the securities, the Commission makes a delayed allotment order that applies to the simplified disclosure prospectus. Section 37A(1)(ab)(ii) and (3) to (8) apply.
In these circumstances, Issuer A's options may include the following:
(a) Issuer A may ask Tom if he wants to resubscribe for the securities. In this case, Issuer A could obtain Tom's permission to use the money that Tom paid Issuer A when he originally subscribed for the securities (Tom's subscription money) to resubscribe for those securities after the date on which the delayed allotment order was made. Issuer A may then allot those securities to Tom (once the delayed allotment order has expired or has been revoked) without contravening section 37A(1)(ab)(ii); or
(c) Issuer A could allot the securities to Tom (once the delayed allotment order has expired or has been revoked) without Tom having resubscribed for the securities. In this case, the allotment would be valid (see section 37A(5)), but it is voidable at the instance of Tom (see section 37A(3)) and Issuer A has committed an offence (see sections 37A(1)(ab)(ii) and 59(1)).
Tom's options include the following:
(a) Tom may decide to leave Tom's subscription money with Issuer A and use that money to resubscribe for the securities. If Issuer A agrees to this, Issuer A may allot those securities to Tom (once the delayed allotment order has expired or has been revoked) without contravening section 37A(1)(ab)(ii); or
(c) Tom may decide to take no action at all. In this case, if Issuer A allots the securities to Tom (once the delayed allotment order has expired or has been revoked), the allotment would be valid (see section 37A(5)), but it is voidable at the instance of Tom (see section 37A(3)) and Issuer A has committed an offence (see sections 37A(1)(ab)(ii) and 59(1)). If Issuer A does not allot the securities to Tom, Issuer A must pay Tom's subscription money back to him (see section 36A).
Regardless of which option is taken by Issuer A or Tom, if Issuer A allots securities to Tom in contravention of section 44AD(1) (for example, by allotting the securities to Tom before the delayed allotment order has expired or has been revoked), that allotment is invalid and of no effect (see sections 44AD(1), (2), and (4) and 37(1A)(b) and (4) to (7)) and Issuer A has committed offences (see sections 59(1) and 60(2)).