There have been some recent changes which will positively impact smaller/medium sized companies which have – or would like to have – a large number of shareholders. The Takeovers Code protects the rights of shareholders. It does this by regulating events and transactions that will affect the voting rights attached to their shares. While this Code used to apply to small unlisted companies, the Regulatory Systems (Economic Development) Amendment Act (No 2) 2018 has created a narrower definition of a “code company”. Now, a code company is a business that is listed on the stock exchange or:
- has 50 or more shareholders and 50 or more share parcels; and
- is at least medium sized.
The key point here is that a medium sized company is one with at least $30 million in total assets (including the assets of any subsidiaries) or has a total revenue of at least $15 million when assessing the business’ two most recent accounting periods. This lifts the burden off start-ups and SMEs, allowing them the flexibility to manage their business and raise capital without regulatory interference.
We have had clients in the past who have had to consider how they will comply with the Takeovers Code when raising funds that means the number of shareholders go above 50 – this change will be welcome for such businesses.