Corporations Act 2001

CHAPTER 2A - REGISTERING A COMPANY  

PART 2A.1 - WHAT COMPANIES CAN BE REGISTERED  

SECTION 113   PROPRIETARY COMPANIES  

113(1)  
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)  
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; and

(c)  

do not count as a shareholder any CSF shareholder of the company; and

(d)  

do not count as a shareholder an entity, in relation to a security of the company held by the entity, if:

(i) that security was originally issued to another entity pursuant to a CSF offer by the company; and

(ii) unless the circumstances (if any) prescribed by the regulations for the purposes of this subparagraph exist - no securities of the company have been traded on a financial market (whether in Australia or elsewhere); and

(iii) all the other requirements (if any) prescribed by the regulations for the purposes of this subparagraph are met.

113(3)  

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

(a)  

an offer of its shares, or of options in respect of its shares, to:

(i) existing shareholders of the company; or

(ii) employees of the company or of a subsidiary of the company; or

(b)  a CSF offer.

113(3A)  

An offence based on subsection (3) is an offence of strict liability.

Note: For strict liability , see section 6.1 of the Criminal Code .

113(4)  
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 ).