September 03 2015
The Takeovers Panel has granted a class exemption allowing small code companies to issue new shares, without needing to first obtain shareholder approval, in circumstances where the issue would otherwise breach the Takeovers Code.
The Code prohibits a person from holding or controlling more than 20% of the voting rights in a code company (broadly, a listed company or a company with 50 or more shareholders (holding voting shares) and 50 or more share parcels) except where permitted under the Code, ie: with prior shareholder approval where that arises from a share issue.
The exemption permits, for example, a shareholder holding 18% of the voting shares in a small code company being issued voting shares which take their aggregate holding to 22% without incurring the costs of a shareholder meeting and an independent advisor’s report.
The exemption only applies to small code companies, being unlisted code companies with $20 million or less in total assets on a group basis, and only to share issues (not acquisitions of existing share parcels, buybacks, etc). It’s also worth noting there are certain procedural requirements for using the exemption. As well, holders of 5% or more of the company’s shares can object and force full compliance with the Takeovers Code.