CODEWORD

Rule 3A(2) of the Code provides that:

…if, as a result of a transaction or an event regulated under this Code, a company that previously satisfied subclause (1)(c) [i.e., had 50 or more shareholders (holding voting rights) and 50 or more share parcels] ceases to have 50 or more shareholders and 50 or more share parcels, that company continues to be a Code company for the purposes of Part 7.

This rule was added to the Code in August 2012. The words “for the purposes of Part 7” imply that a person became a dominant owner of a Code company. Part 7 of the Code deals with compulsory acquisitions of voting securities by dominant owners.

The rule is intended to clarify that if a non-listed Code company is subject to a takeover offer or other Code-regulated transaction, and, as a result of that transaction a person becomes a dominant owner (as defined in Part 7), the company remains a Code company even if it drops below the ‘50 shareholders/50 share parcels’ threshold. This is solely for the purpose of undertaking the compulsory acquisition process in Part 7.

If a non-listed listed Code company drops below the ‘50 shareholders/50 share parcels’ threshold without any person becoming a dominant owner, then rule 3A(2) does not apply to that company and it ceases to be a Code company.