Papua New Guinea’s Parliament has certified a revised Companies Act. What does this mean for business in PNG and when will the new amendments come into force? Cieran Kelly, Senior Tax Consultant, Tax, Transactions & Accounting at KPMG, explains.

The Investment Promotion Authority in Port Moresby, which houses the Companies Office.  Credit: BAI

On 2 September 2022, legislation amending the Companies Act was certified. It will not come into force until commencement is gazetted in the National Gazette.

The stated aims of the amendments are to reform the law relating to companies, combat money-laundering, provide for better internal governance and facilitate re-registration of companies. To these ends, the new legislation changes the Companies Act in four ways:

KPMG’s Cieran Kelly.

1. There is a new section 72, titled ‘beneficial ownership of shares’. It requires companies to obtain and maintain sufficient information to identify the beneficial owners of issued shares.

In this context, the reference to a beneficial owner means one of two things. Either a natural person who owns or controls a share or other membership interest in a company; or a natural person who exercises ultimate effective control directly or indirectly over a legal person or arrangement affecting shares or membership interests or decisions in a company. This is to allow a competent authority to request that information if the need for it arises.

For context, these new rules are part of wider international efforts to protect against the misuse of corporate vehicles to facilitate a broad range of financial crimes. As corporate vehicles can obscure the identity of natural persons, the purpose of assets and the sources of funds; international transparency standards require governments to be able to have access to adequate, accurate and timely beneficial ownership information.

‘The amendments also permit existing companies, both domestic and overseas, to apply for reregistration.’

At present, there are limited legislative mechanisms to compel beneficial owners to provide information to a company, so the risk of non-compliance is borne directly by the company and its directors.

The penalty for failing to obtain and maintain the information required, or failing to disclose it to a
competent authority if requested, is a fine not exceeding K50,000.00 for the company and a fine not exceeding K100,000.00 for every director.

2. When the amendments to the Companies Act come into force, companies can be removed from the register without notice when their company annual return is six months or more overdue.

In such cases, objections by the company are not allowed.

Where a company that has been removed from the register wishes to apply to be restored, it will
have two years to do so. It is a condition of restoration that the company pays all outstanding fees.

The amendments also permit existing companies, both domestic and overseas, to apply for
re-registration. The reason for these rules, as we understand, is that the current database that runs
the registry is being upgraded to a newer one. Part of that transition will require existing companies to re-register on the new database.

3. There are several minor amendments.

For example, references to the repealed Securities Act are replaced with references to its successors, the Securities Commission Act, and the Capital Market Act.

4. The fourth and final major change to the Companies Act is the reduction in the number of items that must be contained in an annual return.

Cieran Kelly is Senior Tax Consultant, Tax, Transactions & Accounting at KPMG in PNG. This is an edited version of the article ‘Important amendments to the Papua New Guinea Companies Act’, first published in the October 2022 edition of KPMG’s Kundu.