Proprietary does not mean Private

The attached is a high level outline of the some governance considerations that differ between Proprietary (private) and public companies.

The following assumes that the company has elected to have a constitution (in preference to the replaceable rules), and that constitution (agreement between the company, officers and members) is subservient to a shareholders agreement (i.e. the agreement between the members).

This is a topic best suited for your lawyers and or reviewed in each Offer Document, Shareholders Agreement and Company Constitution though we can offer some general commentary based on our own experiences as investors in proprietary companies over the years. These are introductory pointers are not advise, and will vary between offers and platforms

The three main challenges that influence the type of governance a Proprietary Company has.

  1. Who’s has control in certain circumstances.
  2. Factors that directly impact the value of my investment.
  3. Promises and consequential adjustments.

Control/Status quo
Pre-emptive Rights

Control/Status quo
Pre-emptive Rights

  • Transfer Limitations
  • Transfer Restriction
  • Director entitlements
  • Voting Controls
  • Super Majority Voting

Dilution and Valuation

  • Related Party Dealings
  • Representative Directors
  • Tag and Drag Along
  • Funding Sources
  • Power of Attorney
  • Milestone/timelines
  • Exit Premium

Promises Promises

  • Representations & Warranties
  • Financial Reporting & Info Rights
  • Audit & Regulatory Lodgements
  • Disclosure and DD
  • Anti Dilution
  • Milestone Funding
  • Liquidity Preference
  • Super Majority Voting
  • Remuneration/Budget Controls
  • Vesting Founder/ESOP
  • D&O Insurance
  • Compete/Poaching/Employment
  • Unanimous Variation

Existing Assumptions (before Pty Crowdfunding)


  • Funding Source
  • Transferability
  • Shareholder rights
  • Representation
  • Related Party dealing
  • Valuation
  • Financial Reporting

Proprietary Ltd

  • Wholesale
  • Limited transfers
  • Private rights
  • Private Representation
  • Related Party Dealing Expected
  • Valuation Controls
  • Private Financial Reporting

Public Ltd

  • Retail & Wholesale
  • Transfers expected
  • Public rights
  • Public Representation
  • Nominal Party Dealings
  • Valuation (Market)
  • Public Financial Reporting

Top Governance Tips For Crowdfunded Proprietary Companies


  • Flexible and easily managed share structures
  • Access to future funding rounds
  • Clear pathway to Exit (timetable and dealings between all parties)
  • Avoidance of potential deadlock and indecision
  • Flexible remuneration (cash and equity)
  • Maintained confidentiality
  • Efficient and clear minority reporting and governance
  • Founder Earn-in agreements (vesting)
  • Representations and warranties
  • Independent Directors
  • Shareholder Approval Requirements


  • Unlimited power of attorney over share transfers
  • Excessive restriction on share transfers
  • Exoneration by executive
  • Workarounds (e.g. avoiding shareholder resolutions)
  • Unspecified policy on ESS / Performance shares
  • Unclear ‘Calve out’ scenarios
  • Inappropriate employment / non-compete clauses
  • Liquidity preferences (without follow-on investment)
  • Unworkable shareholder mechanics (small holdings)