Major changes to Papua New Guinean company law have important ramifications for company directors, company secretaries, and those involved winding up a company. Richard Kriedemann and Sarah Kuman report on the impact of the new laws.
Allens’ Sarah Kuman
The PNG parliament has passed amendments to the PNG Companies Act and introduced a new Business Names Act (2014).
Directors need to familiarise themselves with their new duties under the changes.
Companies Act
Directors and company secretaries must be aware of new procedures for share issues and share buybacks; ensure they understand new rules around the provision of financial assistance; be aware of new provisions related to the rights of shareholders, particularly to call meetings, and new requirements relating to the approval of ‘major transactions’; and comply with changes to filing requirements for annual returns, as well as other documents, such as consent forms for new directors and secretaries.
Directors, company secretaries, and anyone else who may have an interest in the winding up of a company, need to familiarise themselves with changes to the liquidation process.
Major changes to PNG company law have important ramifications for company directors, company secretaries, and those involved winding up a company.
The main changes to the PNG Companies Act deal with new capital management procedures, shareholders’ rights, directors’ duties and protection for creditors. These are the first substantive amendments to the PNG Companies Act since it was enacted in 1997.
The amendments change capital management under the Companies Act, by:
- introducing new procedures for share issues and buybacks;
- introducing rights of companies to issue treasury shares, and restrictions on dealing with treasury shares held by the issuing company, and on the manner of transfer or reissue of treasury shares; and
- tightening the rules around financial assistance;
Allens’ Richard Kriedemann
The changes to provisions on shareholder rights:
- introduce new rules on unanimous shareholder agreements and the requirement for statements of rights;
- amend rules on the calling of shareholder meetings;
- introduce new provisions on public access to certain company records; and
- amend certain aspects of the current requirements for major transactions;
As well, the amendments:
- introduce new sections on directors duties, including what is known in Australia as the ‘Business Judgement Rule’ (ie, a defence for claims for breach of the duty of care and diligence for properly informed business decisions made in good faith, in the rational belief that the decision is in the company’s best interests, and without there being any material personal interest);
- introduce changes for the increased protection of creditors, including to the liquidation process;
- introduce new restrictions on directors of ‘phoenix companies’ (ie, companies using names similar to those of a failed company);
- change sections of the Companies Act, to simplify, or shorten, some filing requirements (as the Office of the Registrar of Companies moves towards online lodgements), as well as to clarify some sections of the Act; and
- simplify timing for the lodgement of annual returns.
Business Names Act
The Business Names Act (Chapter 145) has been repealed and replaced with a new act called The Business Names Act 2014.
This allows the registration of business names by individuals and by an array of entities, both incorporated and unincorporated.
The term of a business name registration has been reduced from three years to one year; therefore, owners of registered business names must ensure they renew their business name registration annually.
The new Act does not contain transitional provisions, so it is not clear whether this requirement will apply to business names that are currently registered.
The term of a business name registration has been reduced from three years to one year; therefore, owners of registered business names must ensure they renew their business name registration annually.
In addition, there is no longer a restriction on registration of business names by persons convicted of offences relating to the formation of corporations, or involving fraud or dishonesty, or for offences under the Companies Act.
Penalties for offences under the Business Names Act have been greatly increased. Under the new Act, offences can attract penalties of up to K200,000, as opposed to penalties of between K200 and K1000 under the repealed Business Names Act.
Annual fee returns
Annual returns for reporting companies will, from April, 2015, cost K1000 to lodge over the counter and K750 to submit via the IPA’s online filing system, and late submissions will attract a maximum fee of K1500.
In addition, it will cost K3000 to reinstate a deregistered company, and where the company was deregistered for failing to file annual returns, a fee of K1000 will apply to all outstanding annual returns that must be filed before reinstatement of the deregistered company.
Richard Kriedemann is a partner with law firm, Allens, Sydney and Sarah Kuman is a Senior Associate with Allens, Port Moresby.
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Can a Board Chairman who is also a Trustee with 100% Shares of a Company be to dissolve a Board comprising of 4 Directors or Terminate the Directors and appoint new Directors to take up the vacancies if old directors are incompetent and fail to carry out their duties and responsibilties?
Please, advise.
Who has the power to Dissolve a Board comprising of 4 Directors who are seen to be incompetent and fail continuosly in carrying out their duties and responsibilities, and hence, appoint new Directors to the Board? I guess it’s the Shareholder/Shareholders but I want to confirm it with you. Your prompt response will be appreciated so much.
How do I get a copy of this amended ACT? Please advise
Can a director appoint a proxy to attend a board of directors meeting?
If shareholders had agreed twice to wind down the company (in 2014 and in 2016)
but MD and some shareholders subsequently change their mind, can the remaining minority shareholders (with more than 25% shares) force the sale of the company ?
What is the procedure ?
How much does it cost to engage a lawyer in PNG ?
What is the chance of success ?
Thank you.
Josephine
Looking through the amendments it s good but about the fees. it all increasing.
how is the government’s SME policy come at play here?
A company sell its shares and I buy the share by deposit K200 in to the company account i bring my deposit receipts to the MD and he produce me a shareholder certificate after 3years I didn’t get my divident. So I went to IPA and got the company extract and went through my name is not on the extract as a shareholder. I have my shareholder certificate, deposit receipt copy with me. So what can i do with the company directors? Please reply.
Many of the shareholders, including myself, suspecting that at least two of the directors did not disclose their prior court convictions. Are they not eligible to hold the company’s office as the directors? Can they be removed as director? If so, are there any procedures that must be followed?
Hi,
How can I get a copy of the amended laws ?
Thank you.
josephine
Hi,
1) Does the Amendment to PNG Company Act affect private companies also ?
2) With the new provision on public access to certain company records, does it mean that the
Managing Director has to permit Directors and shareholders to look into the company accounts ?
What is the recourse for shareholders if the MD refuses access to the company accounts ?
3) do the sales of the company properties and the winding down of the company require
unanimous shareholder agreements ?
Thank you
When do the amendments come into effect?
Thanks,
James
Hello James
The amendments came into effect on 8 December 2014 but notice of their commencement was only published in a national gazette printed earlier this month.
Regards
Sarah Kuman
Thanks Sarah.
Keep me updated please…plus, can you upload to this website or email the amended PNG Companies Act 2014 and the PNG Business Names Act 2014 ?
So where can we get a copy of the stated amended laws??
Cheers
Harry
whats happening? K3000 to reinstate a degenerated company?, registering a business every year? We are and must have strategised outsomes! Outsomes ( ie Acts Amended) for the good of the whole nation.
Im having doubts that registering a business name p.a. is already discouraging for small enterprenuers and start-up businesses.
The thing here is weighing the outcomes for the people and the nations benefit.
Hope this ammendments bear a positive effect in the long-run on our majority.
kKa