Not sure where the numeric limitation originated but it seems a sensible number. Bear in mind that the limitation is 5% rather than 20 members. This is to stop for example me owning an aircraft and dividing it up into 10,000 shares. I sell one share each to 19 punters who want to fly it and keep the remaining 9,981 shares for myself, retaining effective control.
Even under the 5% rule I have come across "groups" where an owner sold a few shares of his aircraft but kept more than 50% himself and so in principle retained control. They've always struck me as being the worst of both worlds as the original owner could still do whatever he wanted with "his" aircraft and have the other share owners' money to do it with (though m'learned friends could probably argue about reasonable enjoyment of their share of the property or some such notion) I also wonder whether, if push came to shove, the CAA would regard such an arrangement as a genuine group for the purposes of the exemption or as a defacto renting arrangement.
I'd advise anyone thinking of joining a group to look at several and see how they work (or don't!) and also read the advice on the LAA website.
David