(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.

(3) 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.

(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).