Section 32 of the Investment Promotion Act 1992 exists because certification is granted to a particular enterprise on the basis of who owns and controls it.
Section 32(1) — a fresh application in 14 days
Subject to subsection (2), where there is a change in the ownership, shareholding or beneficial ownership or control of a foreign enterprise — other than a foreign enterprise that is a public company listed on a prescribed stock exchange — the foreign enterprise shall, within 14 days of the date of the change, apply for a certificate under section 28.
Section 32(1) does not require notice of the change. It requires a new application under section 28 — in the prescribed form, with the prescribed particulars and fee, and with the management documents required by section 28(3).
The Authority then reviews it afresh under section 28(4) and (4A), applying the character test to the new owners and their associates.
Fourteen days is short. Where a transaction will cross the thresholds, the application should be prepared before completion.
Section 32(2) — when the rule bites
(a) is —
(i) not less than 10% in any one year; or
(ii) represents a change of not less than 25% in the ownership of the enterprise as from the date of certification under this Act, or registration under the repealed Act; and
(b) does not arise from an alteration in ownership of an enterprise which is a subsidiary of a holding company, where the ownership of the holding company does not change and the enterprise remains a subsidiary of that holding company.
| Situation | Fresh application required? |
|---|---|
| Change of 10% or more in one year | Yes |
| Cumulative change of 25% or more since certification | Yes |
| Change below both thresholds | No — but s 28(2A) requires written notice within one month |
| Internal reorganisation within an unchanged group | No — excluded by s 32(2)(b) |
| Foreign enterprise is a listed public company | No — excluded by s 32(1) |
| Citizen or national enterprise becomes foreign | Yes — s 32(4), within 14 days |
The 10% test is measured in any one year — a rolling annual measure that catches a single significant transfer.
The 25% test is measured from the date of certification — a cumulative measure that catches a series of small transfers, each below 10% a year, which together shift a quarter of the enterprise.
Either test alone is enough: paragraph (a) is disjunctive. But paragraph (b) then carves out group reorganisations, and it is joined to (a) by “and” — so both limbs must be satisfied for section 32(1) to apply.
The two exclusions
Section 32(1) excludes a foreign enterprise that is a public company listed on a prescribed stock exchange. Shares in a listed company change hands constantly; requiring a fresh application on every 10% movement would be unworkable.
Note the qualification: the exchange must be prescribed.
Section 32(2)(b) excludes a change arising from an alteration in the ownership of a subsidiary of a holding company, where the ownership of the holding company does not change and the enterprise remains a subsidiary of it.
Section 32(3) applies the meanings of subsidiary and holding company in the Companies Act — expressed by reference to Chapter 146, the predecessor of the Companies Act 1997, where those definitions are now found.
The rationale is that ultimate ownership and control are unchanged — which is precisely what section 32 is concerned with. Move a subsidiary within an unchanged group and no fresh application is needed; change the group’s own ownership and it is.
Section 32(4) — becoming a foreign enterprise
Where there is a change in the shareholding or beneficial ownership of a citizen or national enterprise and as a result the enterprise becomes a foreign enterprise, it shall within 14 days of the change apply for a certificate under section 28.
A Papua New Guinean company that has never needed a certificate must obtain one within 14 days if a share transfer makes it a foreign enterprise.
And because that definition turns on control as well as ownership, the trigger may be a change that leaves the citizen shareholding above 50% — for example, a new shareholders’ agreement giving a foreign minority holder effective control.
Where the company operates in a reserved activity, the position is worse: section 27(4) prevents a certificate being granted at all, and the grandfathering in section 27(5) and (6) addresses activities becoming reserved, not enterprises becoming foreign.
Note also section 41(1A), which makes the selling national enterprise and its officers and owners liable where a relevant interest is transferred to a foreign enterprise before that enterprise obtains a Part IVA certificate.
Section 33 — variation
(1) A foreign enterprise granted a certificate may apply to the Authority, in the prescribed form and on payment of the prescribed fee, for a variation of — the activity; its location of carrying on business in an activity; or any other prescribed term or condition.
(2) An application under subsection (1) shall be considered as if it were an application for a certificate under section 28.
So a variation is assessed on the same criteria as an original application, and the same 35-working-day decision period and duty to give reasons apply. A refusal of a variation is separately appellable under section 40(1)(c).
Section 33 is the correct route for expanding the certified activity or moving location — and doing either without varying the certificate is a breach of its terms under section 41(1)(e).
Sources
- Investment Promotion Act 1992 — ss 3, 27, 28, 32, 33, 36, 40, 41
- Companies Act 1997
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.