Most small- to medium-sized businesses prefer to establish proprietary companies limited by shares. A Pty Ltd company must have at least one shareholder but cannot have more than 50.

Companies can create different classes of shares, which may entitle shareholders to different rights or have certain restrictions attached to them. For instance, different classes of shares may come with different voting rights at shareholder meetings.

Shareholders are the owners of a company. A company's original shareholder(s) must be listed when you apply to register the company with ASIC. In some instances, the company can issue additional shares to other shareholders.

The final way that someone becomes a shareholder in a private or proprietary company, limited by shares, is that he or she purchases shares from an existing shareholder. The company then registers that transfer of share ownership with ASIC.

If your company is administered using the Replaceable Rules, additional shares must be offered to existing shareholders in the proportions they already hold BEFORE new shares can be offered to other people.

Shareholders can have an influence over how a Pty Ltd company operates. They can pass resolutions -- ordinary or special -- to make decisions about matters affecting the company.

The Corporations Act determines when shareholder meetings can be held: either at regular intervals or when it becomes necessary to resolve a particular issue. As a company shareholder, you may request copies of meeting records or shareholder decisions carried at a meeting.

Directors can call meetings of shareholders or of certain classes of shareholders. Shareholders can also call their own meetings or instruct the company's directors to call a meeting, if they have 5% of the votes that can be cast at a general meeting of the company.

Unless you hold a class of shares that carries certain voting restrictions, or the company's constitution says otherwise, the Replaceable Rules state that each shareholder is entitled to one vote per share on a poll and one vote on a show of hands.

Shareholders may be entitled to receive returns and dividends from the company, provided they are paid in line with the company's constitution or the Replaceable Rules. Directors may face legal and civil penalties, and may have to pay compensation, if they are found to make distributions to shareholders at a time when the company cannot pay its bills.

In order to cease being  a shareholder, the individual has to sell all their shares and the company must register that sale. You also cease to be a shareholder if you fail to pay share calls or if you accept a share buyback offer from the company.

The only other way to cease being a shareholder is if the company is deregistered by ASIC. When selling shares you must ensure the sale is within the terms of the company's constitution or the Replaceable Rules.