CORPORATIONS ACT 2001

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 s 113(1)]  

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)   [ Share offers]  

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 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)   [ Strict liability offence]  

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)   [ Effect of contravention]  

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).


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