Insolvency Law at Papua New Guinea
Papua New Guinea (PNG) has a well-established legal framework for insolvency, primarily governed by the Insolvency Act 1951 and the Companies Act 1997. These laws provide comprehensive procedures for dealing with both corporate and individual insolvency, including liquidation, debt restructuring, and creditor claims.
🏛️ Legal Framework
1. Insolvency Act 1951
The Insolvency Act 1951 (Chapter 253) is the principal legislation governing personal and partnership insolvency in PNG. It outlines the process for distributing the estates of insolvent debtors among creditors and provides mechanisms for the release of insolvent debtors from their debts. Key provisions include: (Insolvency Act 1951)
Acts of Insolvency: Defines various acts that constitute insolvency.
Debtors’ Summonses: Procedures for initiating insolvency proceedings.
Creditors’ Petitions: Allows creditors to petition for the insolvency of a debtor.
Trustees and Committees of Inspection: Establishes the roles and responsibilities of trustees and committees overseeing insolvency proceedings.
The Act is administered by the National Court of Papua New Guinea. (Trustees Companies Act 1966)
2. Companies Act 1997
The Companies Act 1997 governs corporate insolvency in PNG. It provides detailed procedures for the liquidation of companies, including:
Voluntary Liquidation: Initiated by the company itself.
Involuntary (Compulsory) Liquidation: Initiated by creditors through a court order.
Receivership: Appointment of a receiver to manage the company's assets.
Creditor Claims and Priorities: Establishes the order in which creditors are paid during liquidation.
Liquidator's Duties and Powers: Defines the responsibilities and authority of liquidators. (Companies Act 1997, Papua New Guinea, WIPO Lex)
Recent amendments to the Companies Act have introduced stricter regulations to protect creditors, enhance directors' duties, and improve the overall liquidation process. (New Papua New Guinea company law rules for directors - Business Advantage PNG)
⚖️ Insolvency Process Overview
1. Initiation of Insolvency Proceedings
Insolvency proceedings can be initiated through:
Debtors' Summons: Filed by the debtor.
Creditors' Petition: Filed by creditors to the National Court. (Trustees Companies Act 1966)
A debtor is considered insolvent if they are unable to pay their debts as they fall due.
2. Liquidation Process
Once insolvency is declared, the company enters liquidation:
Appointment of Liquidator: A liquidator is appointed to manage the company's affairs.
Asset Distribution: The liquidator sells the company's assets and distributes the proceeds to creditors according to established priorities.
Final Report: The liquidator submits a final report to the court, and upon approval, the company is dissolved.
3. Creditor Claims and Priorities
Creditors must submit their claims within a specified period. Claims are paid in the following order of priority:
Secured Creditors: Creditors with security interests over company assets.
Preferential Creditors: Includes employees owed wages and certain taxes.
Unsecured Creditors: General creditors without security interests.
Shareholders: Receive any remaining assets after all debts are settled.
🧾 Key Considerations
Legal Representation: Parties involved in insolvency proceedings should seek legal advice to navigate the complex legal landscape.
Timely Filing: Creditors must file their claims within the stipulated time frame to ensure consideration.
Compliance with Regulations: Companies and individuals must adhere to the provisions of the Insolvency Act and Companies Act to avoid legal complications.
📚 Further Reading
Insolvency Act 1951
Companies Act 1997
Companies Regulation 1998
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