Most commercial land in Papua New Guinea is held by companies. The Land Registration Act accommodates that without difficulty, but three sets of limits catch people out.
A company can be the registered proprietor
A company incorporated under the Companies Act 1997 is a legal person with the capacity to hold and deal with property. Under section 32 of the Land Registration Act, the person described as proprietor on the instrument of title is the registered proprietor — and that person may be a company.
Practical points on execution and identity:
- The company must be executed for correctly, in accordance with its constitution and the Companies Act.
- The name on the title must match the company’s registered name exactly. Companies change names; where the title bears the previous name, section 13(1) lets the proprietor request a new certificate.
- A company may act through an attorney under Part XIII, deposited and entered in the register of powers of attorney.
- The Registrar may, under section 156, require production of documents and summon a person to give evidence on oath about a transaction.
Where citizenship bites
- Freehold. Section 56 of the Constitution reserves the acquisition of freehold to citizens, and the Land (Ownership of Freeholds) Act (Chapter 359) exists precisely to define which corporations are to be regarded as citizens for that purpose. A company is not automatically a citizen because its shareholders are.
- Customary land. Under section 132 of the Land Act 1996, dealings are confined to citizens in accordance with custom. Section 2 of that Act defines “citizen” to include a business group, a land group, and customary kinship, descent and local groups — but an ordinary company is not in that list.
In practice this is why so much commercial land is held under a State lease: leasehold from the State is the form of tenure open to companies, and it is what the whole Register of State Leases is built around.
Section 129(3) — dealing in the shares can be controlled
Unless the Minister has given prior approval on special grounds, the owner of shares in a company, a major asset of which is an urban development lease, shall not dispose of, or enter into a contract or agreement to dispose of or otherwise deal with those shares, unless the improvement and other covenants and conditions in the lease have been fulfilled.
Penalty: a fine not exceeding K50,000.00. And such a disposition or agreement is void and of no effect.
This closes the obvious avoidance route — selling the company instead of the land. Note that the penalty is five times the K10,000 penalty for disposing of the land itself under section 129(2), and that transmission is excluded: shares passing on death or insolvency are not caught (s 129(5)).
If you are buying shares in a PNG company, establish whether an urban development lease is a major asset. If it is, the improvement conditions must have been fulfilled, or prior Ministerial approval obtained, before the share sale agreement is signed.
Due diligence on a company vendor
- Search the title and confirm the proprietor’s name matches the company exactly.
- Search the company — that it exists, is not in liquidation, and that the signatories have authority under its constitution.
- Check for a receiver or liquidator. Insolvency changes who can deal with the land, and Division 1 of Part XII deals with transmission on insolvency.
- Check the Land Act position — rent paid, improvement conditions performed, no notice to show cause.
- Obtain Ministerial approval of the controlled dealing before contracting.
- Inspect the land. A tenancy of three years or less, or a tenant in actual occupation, binds you regardless of the Register.
- Check for charges. A registered mortgage appears on the folio; company charges may also be registered under the Companies Act.
Companies holding for others
A company may hold land as trustee — for a landowner group, a church, a joint venture or a family. The Register generally does not record the terms of a trust; that is the curtain principle, dealt with in Part XI.
Two consequences follow. A buyer dealing with the registered proprietor is not obliged to investigate the trust. And a beneficiary who wants protection against a dealing must lodge a caveat — remembering that the Assurance Fund is not available for loss occasioned by breach of trust (s 142).
Where a group wants a corporate vehicle, the usual answer is an Incorporated Land Group under the Land Groups Incorporation Act — not an ordinary company. An ILG has members, a constitution and accountability to the group, and it is a “citizen” for the purposes of section 132.
Sources
- Land Registration Act (Chapter 191) — ss 13, 32, 33, 142, 156; Parts XI, XII and XIII
- Land Act 1996 — ss 2, 127–129, 132
- Companies Act 1997
- Land (Ownership of Freeholds) Act (Chapter 359)
- Constitution — s 56
- Papua Club Inc v Nasaum Holdings Ltd [2004] PGNC 178; N2603
Before relying on anything here, read the current text of the Land Act 1996 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.