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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.

What is a director?

Directors are responsible for overseeing the management of the company. A director might also be a shareholder, but does not have to be a shareholder.

Directors owe duties to the company, to its shareholders, and to others dealing with the company. A director has to be prepared to take on certain responsibilities, and a failure to meet those responsibilities may not only put the company at risk of failure, but it may lead to offences being committed by the director under the Companies Act.

What are the main duties of a director?

To Act in Good faith

The most important duty is that a director must act in good faith, meaning, honestly. This means that a director needs to tell the truth to the company’s owners (shareholders), to third parties (such as a bank who lends the company money), and to the government (such as the inland revenue authorities).

A director must act in a way which they believe is in the best interests of the company. This means that any decisions a director makes, or advice that a director gives, is in the interest of the company first.

To Avoid Conflicts of Interest

Sometimes a director might have the power to make a decision which she might benefit from personally, and might be tempted to take advantage of this. This leads to a conflict of interest and it means that a director may not be acting in the best interests of the company anymore. If this happens, then the director needs to take certain steps before being involved with the decision. For example, she may need the shareholders to approve the director taking part in the decision, or she may need to stand aside and not participate in that decision.

Duty of Care, Diligence and Skill

Directors must act with care, diligence and skill. For example, directors need to have a general understanding of the financial performance of the company in order to make decisions affecting the company. Decisions a director makes should be carefully considered, and they should ask any relevant questions to the company’s management before making decisions.

If you are a director and you are specialized in a particular area, you would be expected to act in a way that anyone with that specialization would act. For example, if you are a qualified accountant, you would be expected to have a very good understanding of the financial position of the company, more so than a director with limited financial training.

Compliance with the company rules and the Companies Act

Each company has a set of rules (see What are company rules), and each company must also comply with the Companies Act. Therefore, each director must also comply with these requirements.

What does it mean if the company is insolvent and what must a director do?

A very important duty of the director is that you must take action if you believe that the company is insolvent. Insolvent means that the company has failed the solvency test, explained below.

The solvency test

The Companies Act requires directors to abide by a two-step test at all times:
1. The company must own more assets than liabilities.
2. The company must be able to pay all its debts as they fall due.

If the company is insolvent, then it is potentially trading with people knowing that it is unable to pay them. A business is not supposed to operate if it cannot pay its debts, because it puts third parties and its own shareholders at risk.

What if a director discovers that the company is insolvent?

The Companies Act requires a director to call a meeting of directors within 10 working days, and they need to decide if the company should appoint a liquidator, or continue to carry on business. A liquidator is somebody who will take over the company with the aim of distributing as much of the value left in the company to the creditors of the company.

Failure to call this meeting could mean that the director will have to personally pay any debts if the company was insolvent, and goes into liquidation.

What can happen if a director does not fulfill her duties?

First of all, a director who fails to fulfill her duties may have a negative effect on the success of the company.

Second, the Companies Act may disqualify a person from being a director, and may also impose a financial penalty.

The company, the shareholders, or a creditor (such as a bank) might also sue the director in some cases. A liquidator may also be able to sue a director in some cases.

Who can not be a director?

A person can not be a director of a company if he/she is:

  • under 18 years of age
  • an undischarged bankrupt
  • prohibited from being a director or promoter of or being concerned or taking part in the management of a company under the Act
  • not eligible because of requirements contained in the company’s rules.

If a company has a corporate director, then there must also be a natural person who is a director.

Notifying director changes
  • Any changes in the directors of a company or information relating to the directors must be notified to the Registrar.
  • A new director must consent to act as a director.
  • A director must provide a physical and postal address.
How many directors should a company have?

A company must have at least one director. However, when you form a company you can choose to appoint as many directors as you like. It is worth bearing in mind that people who accept directorships should be aware of the responsibilities that go with directorships.

Directors of community companies have special responsibilities outlined briefly below. Further details are included in the section on community companies.

Basically, directors of a community company will be required to do the following:

  • file an annual return with the registrar of companies every year for the community company.
  • consult with and report on consultations with the community.
  • report to the registrar in the annual return how they have been paid or what benefits that have received.
  • keep track of and report in the annual return on the disposal of any assets, and follow the special procedures about assets in community companies.
  • report in the annual return explaining how the company’s activities benefited the community.
Cautionary words regarding appointment of directors

Many people may associate some prestige with being a company director, however, it first comes with responsibilities.

By inviting a person to become a director of your company you are also potentially exposing him or her to the risks of the business and to the responsibilities that go with a directorship.
Directors should be capable of adding value to the business and they should be aware of the commitment required.

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.

Important notes:

1. Before a board (the directors or a sole director) makes any change to a company’s details on the VFSC register, it is essential that this has been authorised by proper internal documentation entered in the company’s own records.  This is the responsibility of the directors.

This applies particularly to shareholder and director information, but also to registered addresses and information that has to be stated in annual returns.  A change on the public register is of no value unless this is attended to first. 

The true source of information regarding a company is its own records.

The VFSC register is simply a public record of a company’s own records.

2.  Shareholding is formally notified to the Registrar of Companies on incorporation and in annual returns.  An annual return has to reflect the company’s share register at the date the return is prepared in the month allocated to the company.

As a convenience to those companies that wish to do so, the Registrar allows a board to give informal notice of shareholding changes between incorporation and the first annual return or between annual returns.

The holders of newly issued shares or transferees of existing shares can be recorded in this way but only after the board has entered their names on the company’s share register.

Shareholding details shown on the public register might have been entered from an annual return filed some months previously, so for up-to-the-moment information on who are the shareholders in a particular company, an inspection of its share register – usually kept at the registered office of the company – would have to be arranged.

How many shares should a company have?

The smallest possible number of shares in a company is one.  Any number of shares, however, can be issued for any price.  There is no longer authorised capital, par values or partly paid shares.

For example, intending shareholders might decide that the company will need $10,000 to buy a machine.  They could arrange for the company to issue them each with 5,000 shares for which they would pay $5,000 or one share for which they would pay the same $5,000.  The company would then have the necessary $10,000 to buy its machine.

How are shares valued?

When a company is to be formed, the intending shareholders decide how many shares should be issued and for what price.  Each share could then be  said to be worth the money paid for shares overall, divided by the money paid for them.  For example, if a company has a total of 100 shares, and $100 was paid for them, then each share has an initial value of $1. As the company grows, the value of the company grows, and so does the value of each share.

If the shareholders wish to sell their shares, they will negotiate a price based on the worth of the shares at that future time. Calling in an outside expert opinion can help determine the shares’ current value.  A share for which a shareholder paid $1 on incorporation could later be worth much more.

Issuing shares

After incorporation, a company must issue to any person named in the application as a shareholder, the number of shares that the application says the shareholders will receive.
After that initial issue, the company may issue shares to any person and in any number it sees fit.  Any issue of shares, including the first issue, must be notified to the registrar within 10 working days of the issue.

This power is subject to the provisions of the Companies Act  and any provisions in the company rules that modify the right to issue shares.

An issue is complete when the name of the holder is entered on the company’s own share register.

In certain circumstances, provided that the company is solvent, a company may purchase its own shares or may redeem shares.  A company is solvent when it is able to pay its debts as and when they fall due, and where the value of the company’s assets is not less than its liabilities.

Shareholder Rights

Shareholders have one vote for each share they hold on a poll at a general meeting.  They have the right to an equal share in any dividend.

They have the right to an equal share in any surplus assets – that is, assets that remain when a company has paid its creditors before it is removed from the register.  These rights can all be varied in the company’s rules.

Shareholders have no right to participate in the management of a company’s business or in its affairs (filing notice or documents with the Registrar, for example), unless the Act or the company rules allow this.  Directors are appointed to manage the company’s business and affairs.

How much do shareholders pay for their shares?

The price payable for the shares is generally dependent on the money the company will need to establish its business (for example, to buy a machine).

After incorporation, the same is true.  The company will need money to expand its business and the board will have to decide if the company should borrow this or ask the shareholders to fund this by paying for new shares for a sum to be agreed.

When is payment required for shares?

In most cases, shareholders pay for their shares in full on incorporation of the company – by cash or cheque or sometimes by delivery of an item of recognised equivalent value such as a motor vehicle.

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.

Registered office address

The registered office address of the company where company records are kept, and where certain records may be viewed by shareholders; this must be a physical address – it cannot be a PO Box or Private Bag address.

Postal Address

This may be a PO Box or other postal address.

Address for communication

The Registrar will mostly use email to contact the company regarding administrative matters.  You can also provide a postal address.  You supply details of this address when you first register your company with the VFSC.

Note: The registered office may be the addresses of their accountant or solicitor.

Notifying address changes

If you need to change the registered office or postal address, you must:

  • Notify the Registrar through the online VFSC Registry, and specify the date (in the future) of the change of address taking place.

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.
Company Records

A company must keep a variety of documents at its registered office, including the company rules, minutes of meetings of shareholders and directors for 7 years, accounting records, copies of communications to shareholders and the share register.

Share register

A company must keep a share register that records the shares issued by the company and states:

• In alphabetical order, the names, last known address and the number of shares held by shareholders over the previous 7 years
• Details of any share issues, repurchases, redemptions or transfers of shares.

The share register must be able to tell the story of who, in the last 7 years has owned what shares and how any change in ownership of the shares has happened.

A share register is very important to the shareholder because it is proof that the shareholder actual owns legal title to their shares.

An agent may maintain the share register on behalf of the company.

Accounting Records

The directors of a company must keep accounting records which:

• correctly record and explain the transactions of the company,
• allow at any time, the financial position of the company to be determined with reasonable accuracy,
• enable the directors to ensure that the company complies with the Companies Act and regulations, and
• will enable the financial statements to be readily and properly audited.

Annual returns

The annual return contains the basic details about the company such as shareholder and director details. In return for benefitting from having a company structure, the government requires companies to make certain information available to the public and to keep that information up to date. Submitting this document ensures that the most up to date company details are made available to the public.

The  each company is allocated a month of the year when it must submit an annual return (corresponding to the month of incorporation) to the Registrar. The annual return must be in the prescribed form, signed (electronically if via the VFSC registry) by a director, legal practitioner or chartered accountant, and any fee must be paid within the prescribed time limit, otherwise late charges may apply.

Filing of documents

As noted above, some of this information must also be recorded and maintained with the VFSC.  Interaction with VFSC is predominantly through the use of online services.  For the small number of instances where there is no online service available, there are forms available for filing documents at VFSC.

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.

Which overseas companies must register in Vanuatu?

All overseas companies must apply to register as an overseas company within twenty working days of commencing business in Vanuatu.

What is ‘carrying on business’?

Carrying on business is defined in Part 11 of the Companies Act 2009

Companies Act No.25 of 2012

Copies of the original Companies Act

English version (PDF)

French version (PDF)

Companies (Amendment) Act No. 32 of 2017 (PDF)

Companies Act No. 25 of 2012 Consolidated 18.8.2020 (1) (2) (PDF)

Obligations of overseas companies

If you are a registered overseas company you must:

  • file an annual return for overseas companies every year by the date specified by the registrar
  • comply with foreign investment laws and any other law of Vanuatu
  • give public notice and file with the Registrar if the overseas company intends to cease carrying on business.


You must file a form if you:

  • changes the company name
  • changes registered offices or postal addresses of the overseas company or change the Vanuatu postal address
  • changes directors or any of their details
  • changes the person or address of any person authorized to accept service in Vanuatu of documents on behalf of the overseas company

Fees may be applicable and must be paid in advance either online or with VFSC. More information on fees is available here.

What information will appear on the register for an overseas company?

Once a company is registered on the companies register in Vanuatu, certain details will appear on the register and be available for searching.

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.