Commonwealth Consolidated Acts

CORPORATIONS ACT 2001 - SECT 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).

             (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.

             (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.

          (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 .

             (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).