Section 155 of the Companies Act 1997 answers a question that arises in every commercial dealing: how does a company sign?
Section 155(1) — three categories
(a) an obligation which, if entered into by a natural person, would by law be required to be by deed, may be entered into on behalf of the company in writing signed under the common seal of the company; or
(b) an obligation which, if entered into by a natural person, is by law required to be in writing, may be entered into on behalf of the company in writing by a person acting under the company’s express or implied authority; or
(c) an obligation which, if entered into by a natural person, is not by law required to be in writing, may be entered into on behalf of the company in writing or orally by a person acting under the company’s express or implied authority.
Ask what formality the law would demand of a natural person for this obligation, then apply the matching paragraph. Deed → common seal. Writing → writing, signed by an authorised person. Anything else → writing or orally, by an authorised person.
“Express or implied authority” carries the ordinary agency meaning, and is reinforced from the outside by section 19, under which a company cannot generally assert against an outsider that a person it held out lacked the authority such a person customarily has.
Section 155(2) — and it applies everywhere
Subsection (1) applies to a contract or other obligation — (a) whether or not it was entered into in the country; and (b) whether or not the law governing it is the law of Papua New Guinea.
This matches section 17(1), which gives a company full capacity both within and outside the country. A Papua New Guinea company contracting abroad under foreign law may still execute in accordance with section 155 — though a foreign counterparty will often want execution formalities that also satisfy its own law.
Section 155(3) — the official seal for use overseas
A company may, if its constitution so authorises, have for use in any place outside the country an official seal, which shall be a facsimile of the common seal with the addition on its face of the name of every place where it is to be used. The person affixing it shall certify on the instrument the date on which and the place at which it is affixed.
| Common seal | Official seal | |
|---|---|---|
| Used for | Obligations that would require a deed — s 155(1)(a) | The same, in a named place outside the country |
| Requires constitutional authority? | No | Yes — the constitution must authorise it |
| Form | As the company determines | A facsimile of the common seal plus the name of every place where used |
| Extra formality | None specified | The person affixing it must certify the date and place |
Section 155(3) operates only where the constitution so authorises. A company incorporated without a constitution — which section 27 permits — cannot have an official seal for overseas use. If overseas execution under seal is contemplated, adopt a constitution that authorises it, or execute in a way that satisfies the relevant foreign law.
Section 156 — company attorneys
(1) Subject to its constitution, a company may, by an instrument in writing executed in accordance with section 155(1)(a), appoint a person as its attorney either generally or in relation to a specified matter.
(2) An act of the attorney in accordance with the instrument binds the company.
(3) Any power of attorney executed by a company shall be revoked upon the commencement of liquidation of the company or, if there is no liquidation, upon removal of the company from the register kept pursuant to section 395.
- The appointment must be under the common seal — section 155(1)(a) — not merely signed by a director.
- The attorney binds the company only in accordance with the instrument. Draft the scope carefully; a general power is a substantial delegation.
- Subsection (3) is an automatic revocation. A counterparty relying on a company power of attorney should check that the company is not in liquidation and has not been removed from the register.
Who decides, inside the company
Section 155 is about form. Whether the person signing had authority is a separate question, governed by:
- Section 109 — the business and affairs of a company shall be managed by, or under the direction or supervision of, the board;
- Section 111 — the board may delegate its powers, subject to the constitution, and remains responsible in the terms that section sets;
- Section 110 — a major transaction requires a special resolution of shareholders; and
- Sections 117 to 122 — where a director is interested, disclosure is required and the transaction may be voidable under section 119.
A company generally cannot assert against a person dealing with it that the Act or its constitution was not complied with, that a person named in the latest section 137 notice was not properly appointed, or that a document issued by an officer with actual or usual authority is not genuine — even in the face of fraud or forgery, unless the outsider had actual knowledge. The internal rules bind the directors; they do not usually unwind the deal.
Executing documents in practice
- Identify the category. Land transfers, mortgages, guarantees given as deeds and powers of attorney fall in paragraph (a) and need the common seal.
- State the company’s name correctly. Section 26(2) makes the person who signs a misnamed obligation document personally liable if the company fails to perform.
- Use the section 26(3) abbreviations only — “Co”, “Coy”, “Ltd”, “&”. They are expressly permitted for section 155 purposes.
- Record the board authority in the minutes, and for a substantial transaction obtain a directors’ certificate under section 438.
- Check for a major transaction before signing anything worth more than half the value of the company’s assets.
- Keep the seal secure, and record each sealing in the company records required by section 164.
Sources
- Companies Act 1997 — ss 17, 19, 26, 27, 109–111, 117–122, 137, 155, 156, 164, 395, 438
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.