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| Contract · Civil procedure |
A proprietary company is a form of corporation in Australia that is limited by shares. However, unlike a public company there are, depending on jurisdiction, restrictions on what they can and cannot do.
In Australia, a proprietary company is defined under section 45A(1) of the Corporations Act.
The Act puts certain restrictions on proprietary companies such as not permitting them to have more than 50 members (shareholders). Another important restriction relates to fundraising. A proprietary company must not engage in fundraising that would require a prospectus to be issued. The Corporations Act states in which circumstances a company must issue a prospectus when attempting to raise funds. This means that a Proprietary company must not offer its shares to the public.
Section 45A of the Act also distinguishes proprietary companies as either "large proprietary" or "small proprietary". The differences here relate to issues such as gross operating revenue, consolidated gross assets, and the amount of employed persons.
Large proprietary companies are required to appoint an auditor and lodge appropriate financial statements with the Australian Securities and Investments Commission (ASIC).
Proprietary limited company
Under Australian law, a proprietary limited company, abbreviated as Pty Ltd company, Pty Ltd, or P/L, is a business structure that has at least one shareholder with a limited number of shares. The opposite of a proprietary limited company is a public limited company.
Under the governing Australian Corporations Act 2001 (Cth), a proprietary company must either be:
- limited by shares (Ltd), where shareholders are afforded more protection when it comes to the level of liability that they face for company debts; or
- unlimited, where shareholders face unlimited liability.
The proprietary limited company must have at least one shareholder and must have no more than 50 non-employee shareholders and at least one director who must live in Australia. A secretary can be appointed (Sect. 204A), that must be at least 18 years of age. One person may simultaneously hold the positions of company director and secretary.
Proprietary limited companies are also classified as “large” or “small”. A proprietary company is classified as small only if it meets at least two of the following criteria:
- It has assets of less than $12.5 million at the end of a financial year.
- It has fewer than 50 employees at the end of a financial year.
- It has a gross operating revenue of less than $25 million for the financial year.
Most large proprietary companies have to lodge audited accounts. Small proprietary companies only have to prepare audited financial statements if ordered to do so by the Australian Securities and Investments Commission (ASIC) or members holding five percent of voting shares and, in some cases, if controlled by a foreign company.
In business strategy or finance presentations, P/L is often a reference for “profit/loss”.
Company names
Proprietary companies have the word "Proprietary" in their name, thus Relays Proprietary Limited, abbreviated to Relays Pty Ltd or Relays P/L.
Other countries
- In India, a proprietary company would be named "Relays Private Limited", abbreviated to "Relays Pvt. Ltd."
- In Singapore, a proprietary company would be named "Relays (Private) Limited".
- In the United Kingdom, a proprietary company is assumed when the name ends in "Limited", as in Relays Limited. A public limited company is designated by the abbreviation "plc" as in "Relays plc". This was done when the distinction was introduced to minimise the amount of name changing.
