The Companies (Amendment) Act 2022 requires that every company incorporated, or registered as an overseas company, under the Companies Act will be required to re-register under it and to comply with more detailed record-keeping requirements in relation to share ownership.
Paving the way for major upgrades to the electronic online company registry
In this Insight, we detail the potential impacts of the recent changes made to the Papua New Guinea Companies Act, and what you can do to prepare.
Last month, the PNG Government passed a Bill entitled the Companies (Amendment) Bill 2021 (the Amendments).
The Companies Act 1997 last underwent significant amendment in 2014 when a number of changes were made to various processes under the Act following the introduction of the electronic, online company registry administered by the Investment Promotion Authority. We wrote about those changes here.
The latest changes pave the way for a major upgrade of the electronic online company registry, which will require all companies incorporated and registered under the Companies Act to update their data within the new system via a re-registration process.
The Amendments have also been made in an attempt to ensure the Act conforms to international mandates regarding anti-money laundering and counter-terrorist financing. However, as can be seen below, important functions of the IPA must be reinstated to complement these changes and ensure they have the desired effect.
Deregistration for failing to file annual returns in time
The upgrade of the online registry will allow for the automatic deregistration of companies that fail to file annual returns within the requisite time under the Companies Act.
One of the grounds for deregistration under the Act, includes where a company fails to file its annual return within six months of the requisite filing date. The Registrar may remove non-compliant companies from the Register of Companies but must give notice of his intention to do so, and provide a date when the company will be removed. A notice of intention as described above, must be published in the National Gazette and include the intended date of deregistration , which must be at least one month from the date of publication of the notice of intention. In the past, following publication of a notice of intention, defaulting companies have been able to submit unfiled annual returns and demonstrate to the Registrar that grounds for removal no longer apply to that company.
When the new Amendments commence they will, among other things:
extinguish the minimum one month grace period which normally follows publication of a notice of intention; and
extinguish the requirement for the Registrar to publicly advertise a notice of intention to deregister companies that have failed to file one or more annual returns within six months of the filing month; and
extinguish the ability of companies to demonstrate to the Registrar, that the grounds for removal no longer apply to that company.
Under the new Amendments companies may only apply to the National Court to object to their removal from the Companies Register.
It is expected that the 'go live' date of the upgrade will see every company with at least one annual return that is late by more than six months deregistered.
A company deregistered as above, may be reinstated providing application is made to the Registrar within two years of the date of de-registration and all outstanding annual returns are lodged with all filing fees and late fees.
Requirement for re-registration
Every company incorporated under the Companies Act or registered as an overseas company, must re-register under the Companies Act, within one year of the Amendments coming into operation.
A failure to apply for re-registration will result in a company being removed from the Register.
Re-registration will not create a new legal entity or affect the shares or share capital of a company or affect the rights and obligations of shareholders of the company or any other aspect of the company's existence.
We assume that companies subject to a listing agreement are also subject to the requirement for re-registration although practically, some requirements for re-registration may be difficult to satisfy. For example, on re-registration, every company must provide the full name and other prescribed contact details of every shareholder of the company, and the number of shares held by each shareholder.
Anti-Money Laundering provisions
Explanatory notes that accompanied the Companies (Amendment) Bill 2021, provide that international anti-money laundering and anti-terrorism directives require countries to be able to determine the beneficial owners of companies. Amendments have therefore been made to the Act requiring companies to keep track of beneficial ownership in their internal records and the Registrar will have expanded powers of inspection to inspect these records.
Beneficial ownership of shares. Companies will now be required to 'collect and maintain sufficient information to identify the beneficial owner of a share issued by the company'.Whilst the new provision does not prescribe the steps a company is required to follow in order to satisfy this new requirement, based on provisions in the existing anti-money laundering legislation and standards adopted internationally, companies will likely need to collect the full name, date of birth and address details of all beneficial owners of shares issued (and keep up to date records of the documents relied on to verify this information). Practically, this information will need to be collected at the time of issuing shares, at the time a share is transferred and on an ongoing basis (eg annually) to ensure records held are up to date. Penalties for non-compliance can be directed at both the company and the directors of the company.There are no exceptions for publicly listed companies and there is no prescribed transition period to allow companies an opportunity to bring their records in line with the new requirements. However, it does appear that the requirement to re-register as described in Section 2.2 will address this issue.
Registrar's powers of inspection. The Registrar's powers of inspection extend to obligations of companies undertaking activities that may be subject to the Securities Commission Act 2015 and the Capital Markets Act 2015.These extended powers appear to overlap with the duties of the Executive Chairman of the Securities Commission and in some cases, exceed the Chairman's powers of inspection under the Capital Markets Act.
It is good to see the steps taken by Government to bring the Companies Act in line with anti-money laundering and counter-terrorist financing mandates, however, there are existing processes that should be reinstated to support the push for greater transparency. One such process is the examination of annual returns by Companies examiners, to ensure returns are complete and contain the correct information and all companies required to file audited financial statements, do so.
While the Amendment has been passed in Parliament, it has not been certified by the Speaker and is not in operation yet.
We encourage you to read this update and prepare for the filing of re-registration applications (where relevant) and consider whether your company or any subsidiary or joint venture companies are up to date with their annual return filings.
Please contact the people below if you need advice with filing annual returns or require more information about other aspects of the Amendments.
Please Login or Register for Free now to view all updates and articles
A leading provider of legal and tax know-how and information for Asia.