Rule 3(2) of the Code provides:

If, under this Code, the time within which or the day on which any thing is to be done expires or falls on a day other than a working day as defined in section 2 of the Companies Act 1993⁵, the time so limited is extended to, and such thing may be done, on the next day that is a working day as so defined.

The purpose of rule 3(2) is to ensure that Code-regulated transactions are carried out under normal business conditions. Rule 3(2) varies a time period prescribed in the Code if that period would otherwise require a person to do something on a non-working day.

The phrase "any thing is to be done", in light of the purpose of rule 3(2) and the context in which the words appear, refers to an instance where a party is under a legal obligation, imposed by the Code, to do some thing.

Accordingly, rule 3(2) does not apply to things to be done by an offeree under a takeover offer, or an acquirer (for the purposes of rule 7(c)), or an allottee (for the purposes of rule 7(d)). While these parties may be bound by private contractual obligations relating to timing, there are no Code rules that put timing obligations on any of these parties. The Code does provide for rights and obligations for these parties and some of these relate to timing rules (for example, rules 59 and 60 permit an outstanding security holder under a compulsory acquisition to return their instrument of transfer within 21 days to be eligible to receive the consideration from the dominant owner within 7 days), but none of the Code's rules is a binding obligation on offerees, acquirers, or allottees requiring them to do some thing within a certain time.

Rule 3(2) can be relied upon by an offeror or a target company because those persons are under legal obligations imposed by the Code to do certain things in a certain time in relation to a Code-regulated transaction.

The following test may assist if any uncertainty arises as to the application of rule 3(2):

1. Does the relevant rule in the Code prescribe a mandatory deadline within which a party must do some thing (ie. is under a legal
2. obligation to do that thing)?
3. If so, does the deadline expire on a day that is not a working day (as defined in section 2 of the Companies Act 1993)?
4. If so, the deadline is extended to the next day that is a working day and the affected party may do whatever the Code requires at any
5. time up to and including that next working day.

Rule 3(2) of the Code applies only to those under a legal obligation to do some thing. Section 35(6) of the Interpretation Act has a broader application, and the context of the Code does not require that section 35(6) should not apply.

Section 35(6) of the Interpretation Act 1999 provides:

"A thing that, under an enactment, must or may be done on a particular day or within a limited period of time may, if that day or the last day of that period is not a working day, be done on the next working day."

There is one rule, 59(1), where section 35(6) of the Interpretation Act may apply. Rule 59(1) of the Code provides:

"An outstanding security holder who receives an acquisition notice accompanied by an instrument of transfer may, within 21 days after the date on which the acquisition notice is sent, return to the dominant owner, at the address specified in the acquisition notice, the duly executed instrument of transfer along with any other documents that are necessary to enable the dominant owner to be registered as the holder of the securities belonging to the outstanding security holder."

By applying section 35(6) of the Interpretation Act to rule 59(1), if the final day on which the outstanding security holder may send the executed instrument of transfer falls on a non-working day, section 35(6) will extend the period to the next day that is a working day. So, although rule 3(2) of the Code does not address this situation, section 35(6) means that an outstanding security holder can, if the day that is 21 days after the date on which an acquisition notice is sent, is not a working day, send in their instrument of transfer on the next day that is a working day.

Paragraph 3.3 and Table B provide an illustration of the application of the timing in rule 59(1). Day 1 in the Table would be the day an acquisition notice is received; the shaded boxes would include up to Day 21. The instrument of transfer would be required to be returned on Day 22. If Day 22 was not a working day, the outstanding security holder may return the executed instrument of transfer on the next day that was a working day.

The Panel wishes to clarify the application of rule 7(e) of the Code to joint holders or controllers of voting rights in a Code company (for example, trustees of a family trust, or 'upstream' arrangements whereby a 'holding' company holds or controls the voting rights in a Code company while two or more persons jointly hold or control the shares in the holding company).

The fundamental rule of the Code contained in rule 6 is that no person can:

1. increase their control percentage to more than 20% (together with their associates) of the voting rights in a Code company; or
2. increase an existing control percentage of 20% or more of the voting rights in a Code company.

Rule 7 of the Code provides a number of mechanisms that enable a person, who would otherwise be prevented by rule 6 from doing so, to increase their control percentage.

One of the mechanisms is "creeping" in accordance with rule 7(e) of the Code. Rule 7(e) provides that a person may become the holder or controller of an increased percentage of voting rights in a Code company if:

1. the person holds or controls more than 50%, but less than 90%, of the voting rights in a code company; and
2. the resulting percentage of the total voting rights in the code company that is held or controlled by the person does not exceed by more than 5 the lowest percentage of the total voting rights in the code company that was held or controlled by the person in the 12-month period ending on, and inclusive of, the date of the increase."

In other words, a person whose control percentage is between 50%-90% may make small acquisitions of shares (or other forms of increases) in a Code company. The acquisitions are limited to no more than 5% of the Code company's voting rights within any 12-month period.

The Panel considers that where more than 50% (but less than 90%) of the voting rights in a Code company are jointly held or controlled by two or more persons, those persons may together rely on rule 7(e) in respect of an increase in the percentage of voting rights that they hold or control jointly in a Code company. However, it is only in respect of their jointly held or controlled shares that they can together creep under rule 7(e).

Person A and person B jointly hold as trustees of a family trust 51% of the voting rights in XYZ Limited (a Code company).

A and B may jointly acquire a further 5% of shares in XYZ Ltd (over any 12-month period, counting back from the date of the increase).

However, if A acquired a further 1% of shares on its own account, A would breach the fundamental rule by virtue of being an associate with B (i.e. because B holds or controls 51% of the XYZ shares). A cannot alone rely on rule 7(e) because A does not alone hold or control more than 50%, but less than 90%, of the voting rights in XYZ Ltd.

C and D form a company (HoldCo), which acquires (in compliance with the Code) 51% of the shares in FGH Limited, a Code company. C and D control HoldCo through their each holding 50% of HoldCo's shares and both being HoldCo's directors.

HoldCo may acquire a further 5% of shares in FGH Ltd under the creep rule because it holds the relevant percentage of voting rights in FGH Ltd. As a result of HoldCo's creeping, C and D also increase their control of voting rights in FGH Ltd. Rule 7(e) allows them to do so.

Alternatively, C and D, as the joint controllers (through HoldCo) of the 51% of the voting rights in FGH Ltd may jointly acquire a further 5% of shares directly, as holders. However, neither C nor D can alone increase their holding or controlling of FGH Ltd voting rights under rule 7(e) because they are associates of each other and, as joint controllers of 51% of FGH Ltd, they are each considered to control 51% of the FGH Ltd voting rights.

Where joint controllers of voting rights in a Code company wish to rely on rule 7(e) to increase their control percentage, they would be expected to be able to demonstrate effective joint control of the voting rights that constitute more than 50% for the purposes of rule 7(e). Rule 7(e) does not enable associates to 'pool' their respective interests in a Code company to take advantage of the "creep" exception to the fundamental rule of the Code.