The Registrar of Companies keeps both registers, and the 2023 Act borrows so heavily from the Companies Act that the two structures look alike on paper. The difference lies in who benefits from the money.
The test: where do the profits go?
To incorporate as an association a body must have the prescribed qualifications for incorporation in section 3 of the Associations Incorporation Act 2023. Beyond having an approved kind of purpose, it must undertake that it “will apply its profits (if any) or other income in promoting its objects” and “will prohibit the payment of any dividend or distribution or payment in the nature of a dividend or distribution to its members”. Both statements must be made in the notice of intention (section 6(2)(b)(ix) and (x)) and are printed on the prescribed form.
A company under the Companies Act 1997 exists to return value to its shareholders; distributions to them are its ordinary business. So the question is simple. If the people forming the group expect, now or later, to receive a share of its profits, it must be a company. If the group’s income will only ever be spent on its purposes, it can be an association.
An association may run a canteen, hire out its hall, sell produce, charge fees or collect royalties. Section 73(3) even contemplates an association “carrying on a retail business”. What it may not do is distribute the surplus to members. Applying profits “to a purpose other than promoting its objects” is a ground for removal from the register (section 108(i)).
You cannot be both
Section 8(1) provides that “any entity which is incorporated under another Act in Papua New Guinea may not simultaneously be registered as an incorporated association”. A company cannot also be an association; nor can a business group or a land group. The only exception is a political party registered under the Organic Law on the Integrity of Political Parties and Candidates, or any other Act that itself requires dual registration (section 8(2)). A company may, however, be a member of an association (section 8(3)), which is how industry bodies and federations are built.
The Registrar may redirect you
Section 9(5) gives the Registrar power to reject an application for incorporation, or cancel an incorporation already granted, “on the ground that it would be more appropriate for the association to be incorporated under the Companies Act 1997 or another Act”. The same idea appears among the grounds of objection in section 9(1): that the association is formed “for improper profit”, or that it seeks the wrong category. A group whose real purpose is to hold a business for the benefit of its founders should expect to be told to form a company.
The two structures side by side
| Feature | Incorporated association | Company |
|---|---|---|
| Governing Act | Associations Incorporation Act 2023 | Companies Act 1997 |
| Purpose | Non-profit; profits applied to objects | Any lawful purpose; profits to shareholders |
| Owners | Members with votes, no shares | Shareholders |
| Managers | Committee of at least three; public officer | Directors of at least one; secretary optional |
| Liability of owners | Members not liable for debts (s 61) | Shareholders not liable beyond unpaid shares |
| Formation | Public notice, 60-day objection period, then application | Application with consents; immediate |
| Reporting | Annual return; annual report to members; financial statements and audit above thresholds | Annual return; financial statements and audit unless exempt |
| On winding up | Surplus distributed as members resolve, subject to the Court; public benefit surplus only to another public benefit association | Surplus to shareholders |
Other structures to consider
- Incorporated land group under the Land Groups Incorporation Act: for customary landowning clans dealing with their land. Many landowner bodies hold their land through an ILG and their community programmes through an association.
- Business group under the Business Groups Incorporation Act: a customary group carrying on business for its members’ benefit.
- Company limited by guarantee is not a separate form in Papua New Guinea; a non-profit that wants company structure must use an ordinary company with a constitution barring distributions.
- Trust: a charity may operate as a trust, but a trust is not a legal person and its trustees hold the property. An association may itself act as trustee (section 14(2)(a)).
The company side of this comparison is covered by the site’s company law series.
Churches, sports bodies, cultural groups, women’s and youth organisations, charities, NGOs, professional associations and landowner welfare bodies should incorporate as associations. Anything whose founders want to be paid out of profits should be a company. If the group is genuinely non-profit but wants the flexibility of the Companies Act, take advice before choosing; the Registrar can question the choice under section 9(5), and switching later means forming a new entity.
Sources
- Associations Incorporation Act 2023 — ss 3 (prescribed qualifications for incorporation), 6(2), 8, 9(1), 9(5), 14, 61, 73(3), 108(i), 143
- Companies Act 1997
Before relying on anything here, read the current text of the Associations Incorporation Act 2023 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.