Statement of reasons
This notice applies to acts or omissions occurring on or after 14 July 2015.
The Takeovers Panel has granted a class exemption from rule 6(1) of the Takeovers Code (the Code) for allotments by small unlisted companies. The purpose is to lower disproportionate cost barriers to capital-raising by these companies. These costs include the costs of holding a shareholders’ meeting to approve an allotment under rule 7(d) of the Code, obtaining an independent adviser’s report, and obtaining legal advice to facilitate the process.
The effect of the exemption is to allow unlisted companies with total assets of $20 million or less to opt out of Code compliance. The exemption applies only to share issues and only if the company first meets 2 main requirements. First, the company’s board must resolve that, in its opinion, opting out is in the best interests of the company. Secondly, the company must have given shareholders a disclosure document and an opportunity to object to the opt out and require full Code compliance. If holders of 5% or more of the free float (which excludes the voting rights of those who will rely on the exemption to increase their holdings in the company, together with their associates) object to the opt out, the issue can proceed only if it is done in full compliance with the Code.
The Takeovers Panel considers it appropriate to grant the exemption, and considers the exemption to be consistent with the objectives of the Code, because—
the exemption reduces compliance costs for some capital raisings for small unlisted Code companies:
the conditions of the exemption ensure that shareholders are treated fairly in the allotment and are provided with sufficient information so that they can decide for themselves whether to opt back into full Code compliance:
by ensuring shareholders are treated fairly, but at lower cost to the company, the exemption maintains a proper relationship between the costs of compliance with the Code and the benefits resulting from it.