The Investment Promotion Authority (IPA) has issued an ultimatum to all companies operating in Papua New Guinea (PNG) who have outstanding Annual Returns.
Under the Companies Act 1997 (the Act), the obligation to file an Annual Return once every calendar year applies to all companies operating in PNG whether incorporated in PNG (Section 215) or foreign incorporated and registered as an overseas company in PNG (Section 391).
A company has 1 month to file the Annual Return from when it falls due (Section 215(1) of the Act and Regulation 7 of the Company Regulation 2015). After this date, a late penalty fee of K1000 would ordinarily apply.
As an incentive to all companies to be in compliance with their reporting obligations, the IPA has temporarily waived the penalty fee for any Annual Returns filed online until 30 June 2017.
The IPA has issued this notice along with a full listing of defaulting companies on their website (accessed here).
Under the Act, failure to lodge an Annual Return within 6 months from when it falls due is grounds for removal of companies from the Register of Companies (Register) (Section 366(1)(f))1.
According to the IPA’s notice, the IPA’s online registry system (referred to as the Automated Compliance Program) will automatically remove any company whose Annual Returns are not up to date from the online registry towards the end of 2017.
Such companies will then be listed in the Notice of Intention to Deregister on the website and by official notice in the National Gazette (Part XIX of the Act). Note that under Section 368(3)(b) of the Act, every person who holds a registered charge over a company threatened to be deregistered is specifically entitled to receive notice that a company is to be removed from the Register.
A party may either obtain a court order, or provide reasonable grounds to the Registrar of Companies (Registrar) for the company not to be removed from the Register (Section 370). If no such objection is made, the Registrar is then entitled to deal with the assets of the company including to sell or otherwise dispose of the deregistered company’s property. This includes the power to rescind any contract or enter into any contract on behalf of the company at their sole discretion.
The consequences of deregistration can have serious implications not only for the deregistered company but also for their contract counter-parties (including lenders and financiers). As the property of a company removed from the Register automatically vests in the Registrar (Section 373(1)), this will affect any party who seeks to enforce their contractual rights against the deregistered company especially where there is security over that company’s assets.
It is imperative that all companies are in compliance with their reporting requirements to avoid deregistration. You should also consider the compliance of any company that you have contracted with, lent to, or taken security from.