50. Prohibition of public offers by Private Companies

(1) A Private Company must not:

• (a) make an offer of its Securities to the public; or
• (b) allot or agree to allot its Securities to any Person with a view to the Securities being offered to the public.

(2) Unless the contrary is proved, an allotment or agreement to allot Securities is presumed to be made with a view to such Securities being offered to the public if an offer of the Securities (or any of them) is made to the public:

• (a) within 6 months after the allotment or agreement to allot; or
• (b) before the receipt by the Company of the whole of the consideration to be received by the Company in respect of the Securities.

(3) A Private Company does not Contravene subsection (1) if it:

• (a) acts in good faith under arrangements under which it is to re-register as a Public Company before the Securities are allotted;
• (b) undertakes, as part of the terms of the offer, to re-register as a Public Company within 6 months after the day the offer is first made, and the undertaking is complied with; or
• (c) offers Securities by way of placement as provided in the Rules made by the AFSA; or
• (d) offers, allots, or allots by agreement Debt Securities, subject to Registrar’s approval.

(4) For this section:

• (a) an offer to the public includes an offer to any section of the public, however selected; and
• (b) an offer is not regarded as an offer to the public if:

(i) it can be properly regarded, in all the circumstances, as not being calculated to result, directly or indirectly, in the Securities becoming available to Persons other than those receiving the offer; or

(ii) it can be properly regarded, in all the circumstances, as being made to an existing Shareholder or Employee of the Company (or a member of the Person’s immediate family), an existing holder of a Debt Security of the Company, or a trustee for any of them, and, if it is made on terms renounceable, it can only be renounced in favour of another Person who is entitled to receive that offer; or

(iii) it can be properly regarded, in all the circumstances, as being an offer for Securities to be held under an Employee Share Scheme and, if it is made on terms renounceable, it can only be renounced in favour of another Person who is entitled to receive that offer.

(5) Contravention of subsection (1) is punishable by a fine.

51. Enforcement of section 50(1) prohibition

(1) This section applies if:

• (a) an application is made to the Court by a Shareholder or Creditor of a Company for an order under this section; or
• (b) an application is made to the Court by a Shareholder of a Company for an order under section 175 (Orders for unfair prejudice to Shareholders); or
• (c) an application is made to the Court by the Registrar for an order under this section in relation to a Company.

(2) If it appears to the Court that the Company is Contravening or is proposing to Contravene section 50(1) (Prohibition of public offers by Private Companies), the Court may order restraining the Company from Contravening or continuing to Contravene the subsection.

(3) If it appears to the Court that the Company has Contravened section 50(1), the Court may make 1 or more order sunder subsection (4).

(4) If subsection (3) applies, the Court may:

• (a) order the Company to re-register as a Public Company; or
• (b) if it appears to the Court that the Company does not meet the requirements for re-registration as a Public Company or it is impractical or undesirable to require the Company to re-register as a Public Company, make any of the following orders against either the Company or any Person Knowingly Concerned in the Contravention (whether or not the Person is an Officer of the Company):

(i) a remedial order to put an affected party back in the position that the party would have been in apart from the Contravention;

(ii) without limiting subparagraph (i), an order that any Person Knowingly Concerned in the Contravention must offer to purchase Securities at the price and on the other terms the Court considers appropriate;

(iii) if a remedial order is made against the Company—an order that the Company’s share capital be reduced accordingly;

(iv) an order that the Company be subject to a compulsory winding up;

(v) any other order the Court considers appropriate.

(5) In this section: affected party means a Shareholder or Creditor of the Company.