What Approvals Are Needed to List Units on PNGX in Papua New Guinea?

Most unit trusts in Papua New Guinea are unlisted: investors buy and redeem units through the trustee. A trustee may instead have the units quoted on PNGX Markets Ltd, the stock exchange approved under section 9 of the Capital Market Act 2015, so that unit holders can trade them. Listing adds a layer of approvals to the prospectus rules.

Commission approval under section 116

Paragraph (c) adds any acquisition or disposal of assets that would significantly change the business direction or policy of a listed unit trust scheme, so a listed fund switching from property to equities needs approval for that too. Contravening section 116 is an offence punishable by a fine of up to K10,000,000 or ten years’ imprisonment, or both (section 116(7)). Schedule 5 lists proposals needing no approval, such as government securities and bonus issues (section 116(6)).

Application, grant, conditions and refusal

The applicant submits the documents and information the Commission specifies; the Commission may call for more (section 117). It may approve the application outright or subject to terms, conditions and revisions (section 118(1)), and may vary conditions at any time (section 118(2)). Breaching a condition is an offence with the same K10,000,000 or ten-year penalty (section 118(5)).

Section 118(3) is the critical restraint: no person shall “effect, carry out or implement” any part of the proposal unless the Commission has approved the application and given prior approval to implement it. A conditional agreement that does not bind until approval is not implementation (section 118(4)). Implementing without approval is an offence (section 119(6)).

The Commission may refuse where the applicant has not complied with the Act or its guidelines, the application is false, misleading or incomplete, the issuer’s governance record or directors’ integrity is in doubt, or approval would harm investors or the public interest (section 119(1); the grounds are printed with “and” but operate as alternatives). An approval may later be revoked, revised or further conditioned after a hearing where false statements were made, conditions breached or circumstances changed, without affecting third-party rights already created (section 119(2)–(3)). Submitting false or misleading information in the approval process, or failing to correct it promptly, is an offence under section 120.

Application money and the three-day and six-week rules

Where a proposal has been approved and no prospectus is required, section 121 requires application money to be held in a trust account at a licensed institution until the exchange grants quotation. If quotation is refused the money must be repaid at once without interest; after 14 days the issuer’s officers become jointly and severally liable with interest at 10 per cent a year (section 121(2)). The money is protected from the issuer’s creditors and any waiver is void (section 121(3)–(4)).

Where a prospectus states or implies that listing has been or will be applied for, section 139 applies. Any allotment under the prospectus is void if the application to the exchange is not made in the exchange’s required form before the third business day after the prospectus is issued, or if permission is not granted within six weeks of issue (or a longer period the Commission specifies) (section 139(1)). The issuer must then refund all application money forthwith without interest; after 14 days the officers become jointly and severally liable with 10 per cent interest unless they prove the default was not due to their misconduct or negligence (section 139(2), (4)). Money must be kept in trust in a separate account while a refund may be owed (section 139(7)), the Commission may exempt an allotment by Gazette order (section 139(3)), and a prospectus must not falsely state that permission has been granted (section 139(9)). Contravention carries the K10,000,000 or ten-year penalty (section 139(12)).

PNGX listing rules and other approvals

Commission approval does not itself list the units. The trustee must also apply to PNGX under its listing rules, which govern admission, continuous disclosure and removal from the official list and are enforceable through section 443. The offer document must be a prospectus registered under section 128, which the Commission must refuse if the section 116 approval is missing or its conditions unmet (section 129(1)(d)). Once units are listed and trading, a stop order can no longer be served on the prospectus (section 141(8)). Offering or listing securities of a public company or listed corporation outside Papua New Guinea needs separate approval under section 116(3).