Kiribati | 5 May 2021

New PSDI-supported laws make it easier to start, operate, and grow businesses in Kiribati

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Kiribati now has a suite of modern, foundational business laws after the Companies Act, Company Insolvency Act, and Business Names Act were passed by the country's Parliament last week. The new laws will make it easier for both existing and new businesses to operate in Kiribati.

PSDI has been working with the Government of Kiribati since 2014 to achieve these reforms. A diagnostic undertaken by PSDI in 2016—early in the process—found that business activity in Kiribati was constrained by outdated business laws and high start-up costs for doing business.

The legislation (outlined below) improves the system for applying for business names (otherwise known as 'trading names'), simplifies the start-up and operating requirements for companies, and implements more flexible rules for companies to manage debts, liquidation, and receivership.

Companies Act

The new Companies Act, which replaces the Companies Ordinance 1979, updates Kiribati's laws governing how companies are incorporated and the rules under which they operate. The act:

  • simplifies incorporation procedures and paves the way for electronic filings;
  • ensures the rules governing businesses are flexible enough to meet the needs of Kiribati businesses of all types and sizes;
  • eliminates outdated, time-consuming, and costly requirements such as the need for a company secretary and the need to file financial accounts with the Registrar;
  • promotes the formation of smaller, more nimble businesses through single shareholder and single director companies;
  • removes minimum capital requirements to incorporate, which can disincentivize smaller businesses from using the company legal structure;
  • clearly articulates the rights, duties, and powers of shareholders and protects minority shareholder rights;
  • modernizes directors' duties;
  • introduces a more flexible solvency test for companies to manage their affairs; and
  • ensures Kiribati's companies law is compliant with international Anti-Money Laundering / Countering the Financing of Terrorism frameworks;

Company Insolvency Act

The new Company Insolvency Act replaces the formerly inflexible provisions for managing company insolvency under the Companies Ordinance. This stand-alone legislation:

  • empowers companies to enter proactively into binding compromise agreements with creditors where they are experiencing financial distress;
  • provides for the efficient and orderly liquidation of insolvent companies with clear rules about the priority of debts; and
  • modernizes liquidation and receivership rules.

Business Names Act

The Business Names Act updates the laws governing business names, sometimes known as 'trading names.' A business name is where any business – sole traders, partnerships, companies, and other entities – trades under a name that is not its official legal name. The use of business names is a widespread practice and can improve business marketing and raise a business's profile. Kiribati has approximately 1800 registered business names.

The act, which replaces the Business Names Act 1988:

  • clarifies when business names are needed;
  • expands restrictions around which names can and cannot be used;
  • establishes an appeals process for applicants whose registration is rejected or third parties who claim a registration will be detrimental to them;
  • expands the powers of the Registrar;
  • articulates processes for de-registration and re-registration that will ensure the ongoing accuracy of the register; and
  • paves the way for future online filing of business names.

"These business law reforms—by simplifying the requirements for running a business—will help grow the private sector and increase its contribution to the Kiribati economy," said Kiribati Minister for Commerce, Industry and Cooperatives, the Hon. Minister Bootii Nauan.

"By making it easier and cheaper to start, formalize, and operate businesses in Kiribati, the government is encouraging entrepreneurship and increased participation in the formal economy. This is crucial to reaching Kiribati's 20-year vision of increasing the private sector's contribution to gross domestic product to 65% by 2036 and fulfilling the Government’s Manifesto (Motinnano) of strengthening laws and policies during this 4-year term (2021–2023).”

"These reforms show that the Government of Kiribati is serious about empowering our entrepreneurs. Passing these three new laws is a huge step in the ministry's ongoing legislative reform program, which is working to identify and ease the constraints to doing business in Kiribati," Mr Nauan added.

The new laws are the result of the long-term efforts and commitment of the Ministry of Commerce, Industry and Cooperatives, with support from the PSDI—a technical assistance program undertaken in partnership with the Asian Development Bank (ADB) and the governments of Australia and New Zealand.

"Developing a modern legal environment that makes it easier to do business is one of the most sustainable ways to stimulate economic growth and improve livelihoods," said Regional Director of ADB’s Pacific Liaison and Coordination Office, Ms. Lotte Schou-Zibell. "That's why ADB—through the Pacific Private Sector Development Initiative—is supporting governments throughout the Pacific to reform business laws, ensuring they are well-adapted and suitable for the region's small island economies."

The reforms were also supported by the New Zealand Companies Office, which provided substantial in-depth technical assistance to help identify existing constraints and improve business registration processes.

"The new laws give Kiribati a future-proof legal framework that simplifies and clarifies business registration processes and will allow it to embrace technology and incorporate electronic registrations," said Deputy Registrar at the New Zealand Companies Office, Mr. Michael Brosnahan.

PSDI's companies law reform work in Kiribati is part of its broader business law reform work program, which works across the 14 Pacific developing member countries of the Asian Development Bank to create simplified, modern, and locally tailored business laws that encourage business activity, formalization, and entrepreneurship.