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Restructuring and insolvency law in Papua New Guinea addresses situations where individuals, companies, or partnerships are unable to meet their financial obligations. The legal framework provides procedures for restructuring debt, managing insolvency, and protecting the rights of creditors and debtors. The primary objective is to ensure that economic distress is managed fairly, assets are maximized for creditor returns, and, where possible, viable businesses are preserved. While influenced by other common law systems, Papua New Guinea’s legal system has developed unique features tailored to its economic and social context.
Engaging a lawyer is crucial when facing restructuring or insolvency challenges in Papua New Guinea. A qualified legal professional can help in a variety of situations, including:
Lawyers provide guidance on rights and responsibilities under local law, representation in court proceedings, and advice on structuring deals that can avoid insolvency altogether.
Papua New Guinea’s restructuring and insolvency laws are primarily governed by the Companies Act 1997 and the Bankruptcy Act (Chapter 253). Key features of the local legal framework include:
Understanding these provisions is essential for anyone dealing with financial distress, whether they are creditors, debtors, or stakeholders in an affected business.
Insolvency occurs when an individual or company cannot pay its debts as they fall due. There are formal procedures established by law to address such situations fairly and efficiently.
Restructuring aims to rescue a financially troubled business through new agreements with creditors, improved management, or operational changes. Liquidation is the process of closing a business, selling its assets, and repaying creditors.
Yes, individuals who cannot pay their debts can apply to be declared bankrupt. Bankruptcy is a legal status that restricts certain activities but allows for the equitable distribution of assets among creditors.
Creditors are repaid in a specific order of priority set by law. Secured creditors are paid first from specific assets, followed by unsecured creditors and finally shareholders, if any surplus remains.
Directors must act in good faith, avoid trading while insolvent, and cooperate with insolvency practitioners. Failure to do so may result in personal liability or legal action.
Voluntary administration is a process where an independent administrator is appointed to assess the company’s affairs and propose arrangements with creditors to either save the business or provide a better outcome than liquidation.
Yes, if a company fails to pay its debts, a creditor can apply to the court to have it wound up and a liquidator appointed to collect and distribute assets.
Yes, alternatives include negotiating payment plans or informal settlements with creditors, and seeking professional debt counseling before considering bankruptcy.
A receiver is appointed to manage or sell specific assets that have been used as security for a loan. Their primary duty is to recover the lender’s money from the proceeds of sale.
Cross-border insolvency is a developing area of law in Papua New Guinea. The courts may recognize foreign insolvency proceedings, but each situation is approached case by case.
If you or your business is facing restructuring or insolvency issues, the following resources may be helpful:
If you believe you need legal assistance for a restructuring or insolvency matter in Papua New Guinea:
Navigating restructuring and insolvency can be complex and stressful. Professional legal support ensures your rights and interests are protected every step of the way.
