A foreign enterprise needs a certificate only if it is carrying on business in Papua New Guinea. The Investment Promotion Act 1992 defines the phrase carefully.
The six inclusions
(a) making application for any permit, licence, lease or authority issued for commercial purposes by the State or a State body;
(b) administering, renting, managing or otherwise dealing with property as owner, agent, legal personal representative or trustee, whether by a servant or agent or otherwise;
(c) maintaining an agent, employee or officer for the purpose of soliciting, procuring or entering into orders, arrangements, agreements or contracts — whether or not that person is continuously resident in the country;
(d) maintaining an office, agency or branch (however described), whether or not also used by another enterprise;
(e) undertaking a building, construction or assembly project, or an ISIC activity numbered 8324 or 8329, that will not be completed within six months;
(f) a combination of paragraphs (a) to (e).
Merely applying for a permit, licence, lease or authority for commercial purposes is carrying on business.
So a foreign enterprise that applies for a mining tenement under the Mining Act 1992, an environment permit under the Environment Act 2000, or a State lease under the Land Act 1996 is carrying on business from the moment of the application — and needs a certificate before making it.
This is the provision most often overlooked, and the consequences are serious: the section 41 offence carries a fine of up to K100,000 plus K10,000 per day.
The ten exclusions
(g) is or becomes a party to an action, suit, or administrative or arbitration proceeding;
(h) effects settlement of such a proceeding, or of a claim or dispute;
(i) holds meetings of its directors or shareholders, or carries on other activities concerning its internal affairs;
(j) maintains a bank account;
(k) effects a sale through an independent contractor;
(l) by advertisement, solicits or procures an order that becomes a binding contract only if accepted outside the country;
(m) creates evidence of a debt or creates a charge on property;
(n) secures or collects its debts, or enforces its rights in regard to securities relating to them;
(o) conducts an isolated transaction completed within the prescribed period, not being one of a number of similar transactions repeated from time to time;
(p) invests any of its funds or holds any real or personal property.
The line between selling through an independent contractor (excluded) and maintaining an agent to solicit orders (included) is one of relationship, not activity.
An independent distributor buying and reselling on its own account is within paragraph (k). A person retained to solicit orders on the enterprise’s behalf is within paragraph (c) — expressly, whether or not continuously resident in the country.
Similarly, advertising into Papua New Guinea is within paragraph (l) only if the resulting contract is accepted outside the country. Where acceptance occurs here, the exclusion does not apply.
Merely investing funds or holding property is not carrying on business — but paragraph (b) makes administering, renting, managing or otherwise dealing with property carrying on business.
The distinction is between passive holding and active dealing. A foreign enterprise that owns land and does nothing with it is within (p); one that rents it out or manages it is within (b).
Note too that acquiring an interest in a national or citizen enterprise is separately regulated by Part IVA, whatever paragraph (p) says.
Sections 3(2) and 3(3)
An enterprise is deemed to carry on business in the country notwithstanding that the business is carried on partly within and partly outside the country.
An enterprise carrying out an activity on behalf of another enterprise under a contract, agreement or understanding is deemed not to be carrying on the business of that other enterprise, but to be carrying on the business of agent, manager, supplier or contractor as is appropriate.
A foreign contractor engaged to perform work for a local principal carries on its own business of contracting — not the principal’s business.
So it needs a certificate for the activity of contracting, and the local principal is not treated as carrying on business through it. The activity stated in the certificate matters: section 29(2)(b)(ii) requires it to be specified, and operating outside it is a breach of the certificate’s terms.
“Activity” and the ISIC
Section 3 defines activity by reference to the International Standard Industrial Classification of All Economic Activities (ISIC) published by the United Nations Statistical Office, as amended from time to time — or an activity reserved under section 27.
It also includes all other antecedent and incidental business activities reasonably required to be conducted in carrying on business in the certified activity. So a certificate for one ISIC activity carries with it the ordinary incidents of conducting it.
Sources
- Investment Promotion Act 1992 — ss 3, 27, 28, 29, 41
- Mining Act 1992; Environment Act 2000; Land Act 1996
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.