Takeovers Code to exclude small code companies

The recently passed Regulatory Systems (Economic Development) Amendment Act (No 2) 2018 (Act) has amended the threshold at which the Takeovers Code applies to unlisted New Zealand incorporated companies.

An unlisted company currently comes under the definition of a “code company” if it has 50 or more shareholders and 50 or more share parcels. The Act modifies this definition in the Code by introducing an additional threshold requiring the company and its subsidiaries also have total assets of at least $30 million, or total revenue of at least $15 million, as at its most recently completed accounting period. At least one of these thresholds must be met for a company to be deemed a “code company”, and for the Code to apply.

The main reason for the change is the Panel’s concern that compliance costs for small unlisted companies are disproportionate to the benefits of having to comply with the Code.

We consider this to be a positive change in balancing the costs and benefits of complying with the Code.

The Act will take effect from 13 January 2020, when the Takeovers Code (Small Code Companies) Exemption Notice 2016 will be revoked (this provided some relief for small Code companies).

Please contact one of our experts if you have any questions or would like to better understand the implications of this change.

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