Part XX of the Companies Act 1997 governs overseas companies. The threshold question is whether the company is carrying on business in the country.
Section 382(a) — what counts as carrying on business
(i) establishing or using a share transfer office or share registration office in the country;
(ii) administering, renting, managing, or otherwise dealing with property in the country as owner, agent, legal personal representative or trustee, whether by a servant or agent or otherwise;
(iv) maintaining an office, agency, or branch (however described), whether or not it is also used for those purposes by another enterprise;
(v) making an application for, or being issued, any permit, licence, lease or authority issued for commercial purposes by the State — by the National Government, a Provincial Government or any other level of government, a unit, department, agency or instrumentality of either, or any body, authority or instrumentality established by the State or under an Act.
Merely applying for a government permit, licence, lease or authority for commercial purposes brings an overseas company within Part XX. A foreign company bidding for a mining tenement, an environment permit, a lease of State land or any commercial authority is carrying on business here before it does anything else.
Section 382(b) — what does not count
(i) is or becomes a party to a legal proceeding, or settles a proceeding, claim or dispute;
(ii) holds meetings of directors or shareholders or carries on other activities concerning its internal affairs;
(iii) maintains a bank account;
(iv) effects a sale of property through an independent contractor;
(v) solicits or procures an order that becomes a binding contract only if accepted outside the country;
(vi) creates evidence of a debt or creates a charge on property;
(vii) secures or collects its debts or enforces its rights in relation to securities for them;
(viii) conducts an isolated transaction completed within one month, not being one of a number of similar transactions repeated from time to time;
(ix) invests its funds or holds property.
Merely holding property is not carrying on business; administering, renting or managing it is. Passive ownership sits outside Part XX; active management does not.
Similarly, paragraph (b)(v) protects the exporter who takes orders here but concludes contracts abroad, and paragraph (b)(iv) protects sales made through a genuinely independent contractor — but an agency or branch under paragraph (a)(iv) is a different matter.
Note that registering a charge here, and enforcing security here, are expressly outside Part XX — but a lender doing so must still comply with Part XIII where the borrower is a PNG company.
Section 382B — the name must be reserved first
(1) An overseas company shall not carry on business in Papua New Guinea unless its name has been reserved.
(2) A registered overseas company carrying on business here shall not change its name unless the new name has first been reserved.
(3) Sections 21, 22 and 23 apply with necessary modifications.
(4) Contravention is an offence by the company, penalty under section 413(2), and by all its directors, penalty under section 414(2).
Reservation comes before business, not merely before registration. The name restrictions in section 22 apply, so an overseas company whose home name is identical or almost identical to a registered PNG company’s, or is undesirable, cannot use it here unmodified.
Sections 383 to 385 — the duty to register
(1) An overseas company that commences to carry on business in the country shall apply for registration within one month of commencing.
(2) An overseas company already carrying on business when the Act commenced, and not registered under Part XII of the repealed Act, had one month from commencement of the Act.
(3) Failure is an offence by the company (s 413(2)) and by every director and every person in default (s 414(2)).
Section 384 allows an overseas company not carrying on business here to register anyway, for name protection. Part XX then applies with modifications: in sections 392 and 393 the words “seek removal from the register” are substituted for “cease to carry on business in the country”, and Schedule 12 section 1(c) does not apply.
Section 385 is important: failure to comply with section 383 does not affect the validity or enforceability of any transaction entered into by the overseas company. An unregistered overseas company can still sue on its contracts — the sanction is the offence, not unenforceability.
Section 386 — what the application must contain
(a) state the name of the overseas company;
(b) state the full names and addresses of its directors at the date of the application;
(c) where it has a place of business here, state the full address of that place — or of the principal place of business where there is more than one — and its postal address;
(d) have attached evidence of incorporation and a copy of the instrument constituting or defining the constitution, if any, with a certified translation where not in English;
(e) state the full name, residential address and postal address of one or more persons resident or incorporated in the country authorised to accept service of documents on the company’s behalf;
(f) state whether the company is carrying on or intends to carry on business in the country;
(g) any other prescribed details.
Paragraph (e) is the practical key for anyone dealing with an overseas company: the resident agent for service is on the public register, and service on that person is service on the company.
Section 387 — registration and certificates
(1) On receiving a properly completed application, the Registrar shall register the application on the register and issue a certificate of registration in the prescribed form.
(2) On a notice of change of name or other particulars under section 388(2) or 389(1), the Registrar shall enter the new name or particulars and, where appropriate, issue a new certificate.
(3) Section 22(2) and (3) — the name restrictions — apply with necessary modifications.
Under section 382A the Registrar may, on application, approve the use of a different form from that prescribed for specified overseas companies, and may revoke that approval; a document given in an approved form is treated as given in the prescribed form.
What a registered overseas company must then do — name disclosure, notifying changes, financial reporting, annual returns, and ceasing to carry on business — is dealt with in the next article.
Sources
- Companies Act 1997 — ss 21–23, 382, 382A, 382B, 383–389, 413, 414; Schedule 12
- Mining Act 1992; Environment Act 2000
Before relying on anything here, read the current text of the Companies Act 1997 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.