In Papua New Guinea, many businesses face establishment and development limitations in terms of capital, skilled labour, technology know-how, market access, product distribution and so on. One obvious way for local businesses to expand to meet the demands of this rapidly-growing economy is to enter into a joint venture with another similar business.
IPA can help businesses in PNG locate potential JV partners but stresses that it cannot “force” businesses into JV relationships. There is no maximum equity requirement for either a foreign or domestic party to a JV. Businesses must freely choose to enter into such arrangements and are encouraged to do so on a sound commercial basis.
Foreign investors attracted to PNG will be assisted by the IPA in their search for JV partners. This role of “match-maker” is one of the key functions of the IPA.
Business Entities
Enterprises conducting business in PNG may be operated by individuals, companies or branches of foreign corporations, trusts, partnerships or JVs.
Partnerships and Joint Ventures
The name “partnership” is normally given to a relationship which exists between persons carrying on a business in common with a view to profit. Each partner in a partnership is liable jointly and severally for the debts of the partnership. A partnership is normally limited to 20 members. However, there is a provision for certain professional partnerships to exceed this number. It is possible to have a partnership of two or more companies.
“Joint Ventures” are contractual arrangements entered into by two or more companies, individuals or other entities to carry out a business undertaking in common or otherwise as partners. A JV can either be incorporated or unincorporated, and is usually entered into to carry out a specific business function. An unincorporated JV does not have any legal status of its own. The participants in that JV conduct business in their own right. Each participant must ensure that it has complied with all requirements.
Basic information required to locate a JV partner
The following basic guidelines may be used by businesses to help identify the requirements of a JV partner. These simple steps can be used by both foreign and domestic investors:
- Establish the credibility of the entity which is seeking to enter into a JV
- Obtain details of the proposed business activity
- Obtain details of the entity’s resources
- Obtain basic details of the JV partner sought
- Identify any obvious problems
- Identify any previous JV experiences.
IPA Disclaimer
Businesses operate in PNG on commercial merit and a decision by any business to enter into a JV in PNG should be based on commercial reasons as well as compatibility with the prospective partner. The Government will bear no responsibility for mismatched businesses. Business persons should normally consult with their lawyers and accountants about major investment decisions. For further information, contact The Director, BIEP Division of the IPA on email biepd [at] ipa [dot] gov [dot] pg.