The Takeovers Panel is consulting on the cost of legal compliance for small companies that are caught by the Takeovers Code (making them Code Companies).
The Panel is interested in submissions from the public on whether the cost of complying with the Takeovers Code is too expensive for small Code Companies.
In our experience, Code Company status is toxic for unlisted technology and other high growth companies seeking to raise capital from sophisticated investors. It is not simply a matter of cost of compliance with the Code (although this is certainly a factor). The Code creates structural impediments to raising capital, making investment in these types of Code Companies riskier than investment in non-Code companies. Sophisticated investors have a wide array of investment choices, and can and do avoid investment in Code Companies for these reasons.
We think it is really important for New Zealand’s high growth companies to be able to access capital efficiently. We have therefore proposed to the Takeovers Panel that it reintroduce a turnover and/or net asset threshold in addition to the current 50 shareholder threshold, both of which a company would have to exceed before becoming a Code Company. This change would be a relief to many high growth companies, including those seeking to raise company via crowdfunding platforms.
Please get in touch if you would like to share your comments or experiences with us.
Submissions close this Friday 12 December.
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