In Exchange you can ONLY use a subfolder as a shared contacts folder.

If you would like to share contacts, you need to create a top-level public folder which will contain a subfolder with the Contacts type. There are some things you need to remember when working with public folders:

  1. There can be a maximum of 5 top-level public folders on your Shared Exchange account and a maximum of 100 top-level public folders on your Dedicated Exchange account. The number of subfolders is unlimited.
  2. The user who creates a subfolder has Owner permissions by default and can set or reset permissions for other users using Outlook.

Steps to share public folder contacts in Exchange:

  1. Create a top-level public folder in CONTROL PANEL on the Services > Public Folders page.
    Create PF
  2. Assign client permissions on the Services > Public Folders  > click on the Public Folder name > Client Permissions page. You must give the user who will create a subfolder at least Publishing Author permissions for the top-level folder.
    1. Click the Address Book button and select a list of users or groups.
    2. In the Default permissions list, choose the desired level of permissions and click the Add to Access List button.
      PF Permissions
  3. Create a subfolder of an existing top-level public folder using Microsoft Outlook. Remember that the user who creates a subfolder should have at least Publishing Author permissions for the top-level folder.
    1. Log in to your mailbox using Outlook, navigate to Public Folders > All Public Folders and locate the necessary top-level public folder. Right-click on it and select New Folder.
    2. Type in a name for the shared contacts folder.
    3. In the Folder Contains list, select Contact Items and click OK.
      Creating Contacts subfolder
  4. In order to set up the subfolder for shared contacts, you will need to assign client permissions for this folder.
    1. Right-click the shared contacts folder and select Properties.
    2. Go to the Permissions tab.
    3. Click Add and choose users or groups you want to grant access permissions to.
    4. Select the required permissions level in the appropriate list, then click OK.
      Add permissions to subfolder

In order to be able to access shared contacts that were created as a subfolder of a top-level public folder, users and groups need to be granted at least Reviewer permissions for the corresponding top-level public folder in CONTROL PANEL. Permissions on subfolders can differ from permissions on the top-level public folder.

To display a shared contacts folder in the address book in Outlook:

  1. Right-click the folder in the Navigation Pane, click Properties, and then click the Outlook Address Book tab.
  2. To make the contacts show up in your address book, make sure that the Show this folder as an e-mail Address Book check box is selected.
    Show folder as Address Book
  3. After the new address book is created you may set it as the default one in Address Book > Tools > Options.

Read the Knowledge Base article on Managing permissions for public folders for more information about public folder permissions.