Forms of investment in Papua New Guinea explained


An introduction to the business structures foreign investors need to know to conduct business in Papua New Guinea, including how to register as a foreign company.

Business executives, media and PNG representatives at the 2018 Business Advantage PNG Investment Conference. Source: BAI

Most foreign investors will be familiar with the types of structures through which business is most often conducted in PNG. The key business structures in PNG are:

  • sole trader,
  • partnership,
  • joint venture,
  • trust, and
  • company.

This list is not exhaustive. For example, certain Papua New Guinean legislation makes it possible for citizens to form business and land groups through which they can trade.

However, the structures listed above are those most commonly used by foreign investors or are those a foreign investor is most likely to come across in conducting its business. Not-for-profit organisations from abroad normally incorporate as associations.

The ultimate decision as to the most appropriate business structure for the purposes of a particular foreign investment proposal will depend on a number of factors, including the extent of regulation, taxation, financing requirements and the nature of the particular enterprise and industry.

Sole trader

A sole trader is an individual who carries on business on his or her own behalf. A sole trader can carry on business either under his or her own name or under an adopted business name. If a business name is adopted, this name must be registered under the Business Names Act.

  • The principal advantages of conducting business as a sole trader are:
  • It is comparatively easy to wind up or sell such a business
  • The costs of establishing and operating the business are generally less than those associated with other business structures; and
  • Other than preparing an individual tax return, there are no reporting or disclosure requirements.

The major disadvantage is that a sole proprietor has unlimited personal liability for his or her business obligations and debts.

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There may also be income tax disadvantages in operating this way.


A partnership exists where two or more entities or persons agree to carry on business in common with a view to deriving profit jointly.

A partnership is not a separate legal entity and the liability of the partners for the obligations of the partnership is joint and unlimited. Often the rights of the partners as between themselves are regulated by the terms of a partnership agreement. However, matters not covered by a partnership agreement may be regulated by the Partnership Act.

Partnerships are generally limited to 20 partners. However, some professional partnerships are able to exceed this number. Corporations and citizens of countries other than PNG are able to conduct business in the country through a partnership. The interest of a partner is not freely transferable as the consent of the other partners is necessary before a partnership interest can be transferred.

The principal advantages of a partnership are:

  • The partnership arrangements need not be committed to writing (although, for taxation reasons and so as to avoid disputes, it is prudent to do so)
  • The degree of control among the partners can be agreed and management may be vested in a particular partner or committee of partners
  • Partnership losses can be offset against other income of individual partners for income tax purposes
  • Partnership accounts need not be made public
  • The partnership agreement is a flexible document which can be tailored to meet specific needs; and
  • Partnership profits are only taxed once as income of the individual partners (whereas the profits of a company are taxed once as company income and again as shareholders’ income).

Joint venture

A joint venture is a contractual arrangement between two or more entities to carry out a business undertaking in common, otherwise than as partners. A joint venture can be incorporated or unincorporated and is usually entered into to undertake a specific business activity.

An unincorporated joint venture is often appropriate for mining, oil or gas projects, which generally involve high preproduction costs. The parties to a joint venture usually enter into a detailed agreement which specifies their respective rights and obligations. A joint venture differs from a partnership in several respects, the main one being that the participants do not carry on business in common. Rather, each participant contributes funds or other property to an agreed stage of a project, the fruits of which are distributed directly to them in the manner and proportions set out in the joint venture agreement.

Generally speaking, a joint venture is not required to lodge a separate tax return and every participant may immediately incorporate its share of the costs of the project into its general income-producing expenses for tax purposes (other than mining and petroleum development projects, for which such costs must be incorporated into project income-producing expenses). Furthermore, each participant is free to treat its share of the cost of the project independently of the other participants, thereby offering greater tax and accounting flexibility than a partnership.

It is common for an unincorporated joint venture to be formed and managed so that each participant’s liability is limited to its agreed interest in the project.


A trust can be established by deed empowering a trustee to carry on business. In such circumstances, the trustee holds the assets of the business and runs the business for the benefit of the trust’s beneficiaries. It is possible for a trustee to be a company, thereby attracting limited liability and ensuring perpetual succession of the trustee. However, the trust itself must have a finite life.

The flexibility of available trust structures means that a deed can be drawn to suit most circumstances. The beneficiaries’ entitlements under a trust structure may be in a fixed proportion or variable at the discretion of the trustee.

A unit trust structure may be adopted where the beneficiary’s entitlement to the income and capital of a trust depends on the number of units the beneficiary holds in the trust. Units are similar to shares in a company, although there are some fundamental legal differences between the two. Where a number of separate individuals or companies are involved in a particular business activity, a unit trust structure can be used. The beneficial ownership of the trust property is divided into a number of fixed units. Unlike a discretionary trust, which is more commonly used as a vehicle to conduct family businesses, unit trusts tend not to allow the trustee the discretion to redistribute the beneficial interest in income or capital among unit holders.

The principal advantages of a trust structure are that trusts are relatively easy to form and are subject to relatively few government controls on their formation and operation.

However, certain provisions of the Trustees and Executors Act apply to trusts. Where a company acts as trustee, it will need to comply with the requirements of the Companies Act. Certain trustee companies will also need to comply with the Trustee Companies Act.

Generally, trustees are personally liable for their actions as trustees but they may have a right of indemnity against the trust assets provided they act within the scope of their authority. However, in recent years courts in other jurisdictions have become increasingly concerned about this state of affairs and have held beneficiaries of trusts to be personally liable for trust debts in some circumstances. The courts in PNG may follow this lead.

The principal disadvantages of a trust structure are:

  • There must be strict adherence to the terms of the trust deed and, where the trustee is a company, it must also comply with its constituent documents and the Companies Act
  • Legislation relating to the powers and duties of trustees must be adhered to
  • The courts have developed a complex set of rules relating to trusts
  • A trust structure will not enable individual participants to offset trust losses incurred in a year of income against assessable income derived from other sources; and
  • The taxation regime in PNG does not favour trusts.


While it is possible to conduct business in PNG through any of the structures discussed above, most foreign investors use a company as the vehicle for their investment.

The Companies Act 1997 provides for companies (and, therefore, the liability of members) to be limited by shares or unlimited.

In general terms, the Companies Act 1997 regulates the incorporation and management of a company in PNG including such matters as legal capacity, the raising of debt and equity capital, registration of security interests over corporate property, shareholders’ meetings, the preparation of accounts, appointment and functions of auditors, directors’ duties, corporate arrangements and reconstructions, takeovers, reductions of capital and winding up.

The principal advantages of conducting business through a company are:

  • A company is a separate legal entity from its members, which enables investors to combine resources with the benefit of limited liability
  • A company may purchase, hold and sell property, sue and be sued and enter into contracts
  • A company has perpetual existence (unless it is wound up); and
  • A company may raise money by issuing additional securities.

The principal disadvantages of conducting business through a company are:

  • A company is subject to a number of disclosure, reporting and record-keeping requirements
  • A formal procedure must be complied with to incorporate and to wind up a company; and
  • Dividends are taxed once as company income and again as shareholders’ income.
  • A foreign company seeking to conduct business in PNG has the choice of either:
  • Incorporating a subsidiary in PNG; or
  • Registering itself as a foreign company in PNG.


To incorporate a company the following five forms must be submitted to the Registrar of Companies:

  • Form 1 – application for registration of a company, including details of company’s addresses (registered office, address for service and postal address); director details (full name, nationality, date of birth and residential and postal addresses); secretary (if any, same details as directors); shareholder details (including number and class of shares issued to each shareholder and whether the shareholder is a natural person or a registered entity); and whether a constitution has been adopted and include a certified copy of the proposed constitution and also accompanied by a notice reserving a name for the proposed company.
  • Form 2 – consent of each proposed director of the company. The consent includes a certificate that the director is not disqualified from being appointed as a director of a company. The minimum number of directors is one who must be a PNG resident.
  • Form 3 – consent of each secretary (if any). There is no requirement to have a secretary.
  • Form 4 – consent of each shareholder of the proposed company.
  • Form 6 – Application for reservation of company name.


It is not a legal requirement for a company to have a Constitution. Where a company does not have a Constitution, the company, the board, each director, and each shareholder of the company have the rights, powers, duties, and obligations set out in the Companies Act.

Where a company has a Constitution, the company, the board, each director, and each shareholder of the company have the rights, powers, duties, and obligations set out in the Companies Act except to the extent that they are negated or modified, in accordance with the Companies  Act, by the constitution of the company.

A Constitution sets out the rules for governing the company, the directors and shareholders in the company and their relationship with each other. It may cover such matters as the rights, duties and powers and obligations of the company, directors and shareholders.

The Registrar must be notified in the prescribed form of any changes in the constitution within one month.

Company officers

The Companies Act, does not require a company to have a secretary. Where a secretary is appointed, they must be a natural person ordinarily resident in PNG and shall have the rights, powers and duties given to them by the Act, Constitution or the Board of the company.

Every company must have at least one director who is ordinarily a resident of PNG.

Registered office

Every company must have a registered office in PNG that is identifiable and easily accessible to the public. The Registrar must be notified in the prescribed form of any change in the registered office. The notice cannot be retrospective and will only take effect after 10 business days from lodgement.

Address for service

Every company must have an address for service in PNG. This may be the same address as a company’s registered office or it may be elsewhere, but it must not be a postal address. The address for service must have a readily identifiable street address and be at a place that is readily accessible during normal business hours. The Registrar must be notified in the prescribed form of any change in the address for service. The notice cannot be retrospective and will only take effect after five business days from the date of registration of the notice..

Reporting requirements

An annual return must be lodged every year with the Registrar of Companies within six months of the end of its financial year. All companies are required to lodge an annual return in the prescribed form with the Registrar at least once a year during any day of the month of which the company is obliged to submit its annual return.

Where a company is required to have its financial statements audited, it is further required to submit its annual return accompanied by its financial statements and the audit report no later than 14 days after the date of its annual meeting.

Appointment of an Auditor

At each annual meeting, a company must appoint an auditor to hold office until the conclusion of the next annual meeting, and to audit the financial statements of the company. Companies that are exempt from appointing an auditor include an exempt company and a company that is, or is of a class, that is exempted from the requirements of appointing an auditor by the Registrar.

Accounting Standards Board

The Accounting Standards Board (ASB) is established under the Companies Act 1997 with the following functions to develop, approve, amend and revoke financial reporting standards for the purpose of the Act; to make determinations on the applications of any approved financial reporting standards; and to give directions as to the accounting policies which have authoritative support within the accounting profession in PNG.

Directions issued by the ASB as to accounting policies that have authoritative support within the accounting profession are to be termed as Accounting Standards Board Directives(ASBD), and form part of generally-accepted accounting practice (GAAP) in PNG. Papua New Guinea Accounting Standards (PNGAS) are issued where the International Accounting Standards Board (IASB) do not cover specific PNG accounting requirements. The ASB has a regulatory function whereby it reviews all financial statements lodged by reporting companies to monitor compliance with the approved reporting standards and to ensure that duly qualified or registered company auditors carry out audits in PNG for reporting companies.

Company records

A company must keep the following documents at its registered office: the constitution of the company; minutes of all meetings and shareholders’ resolutions within the last seven years; an interests register (of directors’ interests); minutes of all meetings; directors’ resolutions and directors’ committees within the last seven years; certificates given by directors under the Act within the last seven years and the full names of directors and secretaries; copies of all written communications to all shareholders of the same class of shares during the last seven years; including annual reports made; copies of all financial statements required to be completed by the Act for the last seven years completed accounting periods of the company, and the share register.

Notwithstanding the general requirements to keep the above records at the company’s registered office, the records (except the share register) may be kept at any other location in the country provided that the location is notified to the Registrar within one month of their first having been kept elsewhere.

Company name and business name

Company names and business names are different.

A company name is the name under which a company is incorporated and ends with the word Limited or the abbreviation ‘Ltd’, while a business name is a name under which the business is carried on. A company (or individual) on business in PNG under any name other than its own must register that business name with the IPA Form.

Registering as a foreign company in PNG

A company that is incorporated outside PNG that wishes to carry on business in PNG, other than through a subsidiary, must register as an overseas company with the PNG Companies Office in the prescribed form including certified copies of its certificate of incorporation in its home jurisdiction and equivalent copy of its constitution (where applicable).

Overseas companies must lodge an annual return together with a certified copy of its audited financial statements with the Companies Office. Overseas companies automatically fall under the category of a ‘reporting company’ and therefore must present its audited financial statements. An audit exemption application can be lodged to exempt the company from these audit requirements. An overseas company must apply for Certification under the Investment Promotion Act 1992 before it can carry on business in PNG.

A company which chooses to conduct business through a branch registered in PNG can repatriate its profits without being subject to withholding tax. This differs for a PNG incorporated subsidiary, which may have its dividends subject to a dividend withholding tax. A higher rate of income tax is imposed on non-resident companies.

If a foreign company merely wishes to have a representative office in PNG, it may be exempt from lodging tax returns if it derives no income in PNG.

The Companies Act adopts similar principles and standards of corporate regulation to those in place in New Zealand.

This section was prepared by Dentons PNG for Business Advantage PNG.


  1. Sandranega says

    Great to know how businesses and company doing in our country interested to register my own investment business

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