(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 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).