Cracking The Code – Relief For Small Code Companies

Recent amendments to the Takeovers Act 1993 and Takeovers Code will be a welcome relief to many small Code companies.  These changes add a threshold below which the Code will not apply to unlisted companies.  This will save small unlisted companies (and their lawyers) from the rigours of deciphering the Code and the associated compliance costs.

As it currently stands, an unlisted company is a Code company subject to the Takeovers Code if it has 50 or more shareholders and 50 or more share parcels.

Under a recent amendment to the definition of “Code company” in the Takeovers Act, an additional income or asset threshold will be introduced.  If the company and its subsidiaries have:

• Total assets of less than $30m; or
• Total revenue of less than $15m,

at the end of the company’s most recent accounting period, then it will not be a Code company, regardless of whether it has 50 or more shareholders and 50 or more share parcels.

These changes will replace the Takeovers Code (Small Code Companies) Exemption Notice 2015, which has previously allowed unlisted Code companies with $20m or less in total assets to opt out of the Code’s fundamental rule, allowing them to issue new shares where the issue would otherwise require shareholder approval.

These changes will take effect from 13 January 2020.