THE CORPORATIONS LAW

CHAPTER 2A - REGISTERING A COMPANY

PART 2A.1 - WHAT COMPANIES CAN BE REGISTERED

SECTION 113   PROPRIETARY COMPANIES  

113(1)  [Limitation of non-employee shareholders]  

A company must have no more than 50 non-employee shareholders if it is to:

(a)  be registered as a proprietary company; or

(b)  change to a proprietary company; or

(c)  remain registered as a proprietary company.

Note:

Proprietary companies have different financial reporting obligations depending on whether they are small proprietary companies or large proprietary companies (see section 45A and Part 2M.3).

113(2)  [Application of subsection]  

In applying subsection (1):

(a)  count joint holders of a particular parcel of shares as 1 person; and

(b)  an employee shareholder is:

(i) a shareholder who is an employee of the company or of a subsidiary of the company; or

(ii) a shareholder who was an employee of the company, or of a subsidiary of the company, when they became a shareholder.

113(3)  [Share offers]  

A proprietary company must not engage in any activity that would require disclosure to investors under Chapter 6D, except for an offer of its shares to:

(a)  existing shareholders of the company; or

(b)  employees of the company or of a subsidiary of the company.

113(4)  [Invalidity]  

An act or transaction is not invalid merely because of a contravention of subsection (3).

Note:

If a proprietary company contravenes this section, ASIC may require it to change to a public company (see section 165).