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Learn about companies and other business types

If you are getting started in business there is plenty to learn.  This section includes information about different types of structures for your business, and provides the basic features of a company – directors, shareholders, addresses and more…

Note | This information is intended as a guide only – it is not intended as legal advice. For more detailed information please refer to the legislation or seek legal advice.

What is a sole trader, partnership and a company?

There are different ways you can structure your business, this sections explains the sole trader, the partnership and the company. People can choose from several different structures for running their business. The most common are as a sole trader, a partnership and a company.

The sole trader

Typically, a sole trader is a smaller business, like a shop or a market stall.  The sole trader is personally liable for debts she or he incurs.  There is no legal separation between the person and the business.

The Partnership

A partnership is where two or more people contribute their own resources- cash, or property, or even their time.  They then have an agreement about how they share the profits between them.  A partnership is usually used by professionals, like accountants and lawyers.

The Company

Around the world, the most popular business structure is a company.  A company is a separate legal entity from the owners, who are called shareholders. The significance of this separation is that in most cases, shareholders cannot be personally liable for the debts of the company. If the company fails, generally the only liability of the shareholder is the amount they have invested in the company to purchase their shares. This type of liability is called ‘limited liability’.  This is why a company name always has ‘limited’ or ‘ltd’ at the end of it’s name.

Another way to look at the separation is to see the company as a separate ‘person’ from its directors (who are responsible for running the company) and its shareholders. A company can do many of the same things as a person- such as own property, enter contracts, sue, and be sued. There is no separate legal ‘person’ for sole traders and partnerships.

Why register a company?

The following are typical reasons why someone might choose to form a company instead of another business type:

  • Limited liability – the company is liable for all of the obligations it incurs, not the shareholders. By comparison, a sole trader or a person involved with a partnership will be personally liable for any business debts that cannot be paid by the business. This is the primary reason people choose the company structure.
  • Shareholder control – the Companies Act allows a good degree of control to shareholders through their to vote on certain decisions, such as removing directors. The shareholder can control the company without the need to be involved with the day-to-day running of the business.
  • Continuity of existence – a company will usually survive changes of ownership, and will continue to exist until it is removed from the company register. A partnership often ends on retirement or death of a partner.
  • Shares can be transferred – it is easier to sell and transfer shares in a company than it is to sell or transfer a partnership interest.

A company will also give the business credibility towards third parties, such as lenders and other people it does business with, because certain information is made available to the public and it has to abide by clear rules under the Companies Act.

Under the Companies Act, one person can form a company, by being the only shareholder and the only director. This way they can exercise full control over their business, but also enjoy the above benefits of having a company.

Note | This information is intended as a guide only – it is not intended as legal advice. For more detailed information please refer to the legislation or seek legal advice.

A guide to choosing a name for your company.

  • You need to choose a company name when you register a company.
  • The name needs to be distinctive and cannot copy other companies.
  • You should do a search of company names before you choose your own to make sure that your preferred name is not already taken.
  • The company name must have the word ‘limited’ or ‘ltd’ at the end.
  • Registration of a company name provides limited name protection – that is, it will prevent another company being incorporated under an identical or almost identical name.
  • You can change the name of your company online through the Companies Registry. . You will have to pay a fee if you wish to change the company name.

What are company rules?

Every company has a set of company rules which determine how the company will be administered.  They used to be called the memorandum and articles of association.

The company rules govern how a company must operate internally. These rules cover things such as the appointment, removal and powers of directors, rules for meetings and shareholder rights.

A company may adopt its own tailored rules at the time of its incorporation or simply adopt the model rules already contained in the Companies Act.

When you register (or re-register) your company you will have the option to upload your own set of company rules, or choosing to adopt the model rules.

Copies of the model rules for each of the following types of companies can be found in this section (and are also included in the Companies Act) by clicking on the links:

Guide to being a company director

If you are a director of a company in Vanuatu you must comply with the requirements of the Companies Act . Failure to comply may lead to penalties, disqualification, and may lead to you being sued. The following is a guide to let you know the main responsibilities of being a director. It is not a substitute for legal advice- so if you have any uncertainty, we recommend you speak to a legal professional.

Shares and Shareholders

Shareholders are investors in the company. They usually pay money into the company in return for shares. The number of shares they hold determines the level of control they have, at shareholder level, within the company.

For example, if a shareholder holds 750 shares out of a total of 1,000 shares, that shareholder controls 75% of the votes at a general meeting of the company.

Shareholders do not make decisions on running a company, unless they are also directors.  In small companies, often a shareholder is also a director.  The directors manage the business and affairs (filing etc) of the company.  For more information on directors see Company Directors above. 

Every company must have at least one shareholder and at least one share.

Company addresses

You need to notify the VFSC of a registered office and a postal address for your company. You must also provide contact details for communication.

Maintaining records

The Companies Act  requires every company to keep and maintain certain records:

  • company records
  • share register; 
  • accounting records; and
  • annual returns.

Note: Many small businesses choose to have their accountant, solicitor or business advisor hold and maintain these records for them.

A guide to overseas companies

An “overseas company” means a corporation that is incorporated outside Vanuatu, whether or not it is registered in Vanuatu. Overseas companies carrying on business in Vanuatu must register with the VFSC.

About International Companies

International companies cannot do business in Vanuatu except to further their business elsewhere. This category of company provides for more flexibility and simpler administration than the previous form of Exempted Company.

(Note that a TRUST is not a legal entity but something which sets out the terms on which someone holds property on behalf of another. Only a Local Company which holds a valid Trust Company Licence can charge for trustee services.)

International Companies have a public file but such companies do not have to file as many documents as the other  categories of companies nor do they have to file an Annual Return. They have a “Constitution” instead of Rules. They must file the details of their Incorporators, their Registered Office and their Registered Agent and of mortgages and charges on their property.  Filings are done in paper form directly with the VFSC office.

About Company and Trusts Service Providers

Special licensing requirements apply to providers of company and trusts services in Vanuatu.  a list of licensed providers is provided here.

When researching an agent for your company and trust services needs, you should ensure they are properly licensed by the VFSC.

These entities and individuals assist investors with company trading and registration requirements for a fee. They range from Local Companies, Trust Companies, lawyers, and accountants to private individuals. A list of the current providers can be found in the CTSP Directory. Not all providers are members of the Financial Centre Association of Vanuatu.