Section 26 of the Companies Act 1997 is short, routinely overlooked, and carries personal liability.
Section 26(1) — the obligation
(a) every written communication sent by, or on behalf of, the company; and
(b) every document issued or signed by, or on behalf of, the company that evidences or creates a legal obligation of the company.
| Paragraph (a) — written communications | Paragraph (b) — obligation documents |
|---|---|
| Letters and letterhead | Contracts and deeds |
| Emails sent on the company’s behalf | Purchase orders and acceptances |
| Quotations and proposals | Invoices and credit notes |
| Notices to shareholders and creditors | Cheques and negotiable instruments |
| Advertisements and circulars | Guarantees and indemnities |
| Websites and social accounts operated for the company | Leases, loan documents and charges |
The name must be legible, complete and prominent enough to be read. A trading style or logo is not a substitute for the registered name — though nothing prevents both appearing. Where the company trades under a business name, both should be shown: the registered company name to satisfy section 26, and the trading name for the market.
Section 26(2) — personal liability for getting it wrong
Where (a) a document that evidences or creates a legal obligation of a company is issued or signed by or on behalf of the company, and (b) the name of the company is incorrectly stated in the document, every person who issued or signed the document is liable to the same extent as the company where the company fails to discharge the obligation — unless:
(c) that person proves that the person in whose favour the obligation was incurred was aware, at the time the document was issued or signed, that the obligation was incurred by the company; or
(d) the Court is satisfied that it would not be just and equitable for that person to be so liable.
Read the structure carefully. Liability attaches to every person who issued or signed the document — a director, a manager, an accounts clerk. It is not liability for the error as such: it bites where the company fails to discharge the obligation. And it is liability to the same extent as the company — the whole debt, not a penalty.
Paragraph (c) puts the burden on the signer to prove the counterparty knew at the time that the obligation was the company’s. Evidence of an established course of dealing with the company will usually do it. Paragraph (d) is the safety valve: the Court may relieve where liability would not be just and equitable — relevant where the error was trivial, the counterparty suffered no confusion, and the signer had no personal involvement in the underlying deal.
The classic case is a cheque or order signed for “ABC Trading” when the company is ABC Trading Limited, or for “ABC Ltd” when the registered name is “A.B.C. (PNG) Limited”. If the company then fails, the signer is exposed.
Section 26(3) — the permitted abbreviations
(a) “Co” or “Coy” instead of the word “Company”;
(b) “Ltd” instead of the word “Limited”;
(c) “&” instead of the word “and”.
That list is exhaustive. Other contractions — dropping “PNG”, shortening a word, using an acronym, omitting “Limited” altogether — are not authorised, and a document using them states the name incorrectly for the purposes of subsection (2).
Section 26(4) — disclosing a former name for twelve months
Where, within the 12 months immediately preceding the giving by a company of any public notice, the name of the company was changed, the company shall ensure the notice states (a) that the name was changed in that period, and (b) the former name or names.
“Public notice” means, under section 3, publication in at least one issue of the National Gazette and a newspaper circulating throughout the country. The rule matters most where creditors must connect a notice with the business they dealt with — a receivership, a liquidation, an amalgamation, or a compromise.
Section 26(5) — the offence
(a) the company commits an offence and is liable on conviction to the penalty in section 413(1); and
(b) every director of the company commits an offence and is liable on conviction to the penalty in section 414(1).
Note that the directors’ offence under paragraph (b) is not limited to the director who signed. It attaches to every director, which makes name compliance a board-level matter rather than an administrative detail. Section 419 sets out the defences generally available under the Act.
Six practical rules
- Use the exact registered name on everything in section 26(1), with only the section 26(3) abbreviations.
- Put the name and company number in the email footer as well as on letterhead — paragraph (a) covers written communications generally.
- Check invoices and cheques. These are the documents that create obligations and the ones most often misnamed.
- Sign in a representative capacity — the company name, then “by its director” and the signature — and never in a way that suggests you contract personally.
- After a change of name, update every template at once and add the former-name disclosure to any public notice for 12 months.
- If you receive a document with the wrong name, keep it. It may give you a second person to sue under section 26(2).
Sources
- Companies Act 1997 — ss 3, 22, 24, 26, 155, 413, 414, 419, 424
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.