In brief: Major changes to PNG company law have important ramifications for company directors, company secretaries, and anyone with an interest in the winding up of a company. Partner Richard Kriedemann (view CV) and Senior Associate Sarah Kuman report on the impact of the new laws.
WHAT DOES THIS MEAN FOR YOU?
- Directors need to familiarise themselves with their new duties under the changes.
- In addition, 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.
The Companies (Amendment) Act 2014 and the Business Names Act 2014 commenced retrospectively on 8 December 2014.
Companies (Amendment) Act
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;
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 lodgment of annual returns.
Business Names Act
With the introduction of the Business Names Act 2014 (the new Act), the Business Names Act (Chapter 145) has been repealed and replaced.
The new Act, among other things, permits 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.
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.
Changes in fees
In addition to the changes to the Companies Act and the Business Names Act, the Investment Promotion Authority will be introducing changes to annual return fees and fees associated with reinstating a deregistered company.
Annual returns for reporting companies will now 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.
While the Companies (Amendment) Act and the Business Names Act are now in force, the changes in fees for annual returns and reinstatement of deregistered companies will apply from 4 April 2015.
Again, business name owners should note that business names must now be renewed annually and take steps to ensure this is done.
If you have outstanding annual returns to be submitted for companies that are either incorporated or registered to carry on business in PNG, arrange submission of these returns before 4 April 2015 so as to avoid incurring the new fees, which are significantly higher than the current fees.
We will be issuing further updates on the above changes. If you require assistance on or clarification of any of the matters described below, we would be pleased to discuss how we can help.