Registering a company can provide a range of benefits, including access to government subsidies and other incentives, as well as legal protection for the business and its owners.
In addition to registering with the government, businesses in Nepal may also need to obtain various permits and licenses depending on the type of business they are operating. It is important to work with a qualified legal and accounting team to ensure that all necessary permits and licenses are obtained and that the business is operating in compliance with all relevant laws and regulations. In this article, we will guide you through the basics of company registration in Nepal and provide you with a step-by-step guide on how to register your company successfully. From eligibility criteria to post-registration compliance, we will cover all the essential aspects of company registration in Nepal, so you can start your business journey with confidence and clarity.
Types of Companies You Can Register in Nepal
In Nepal, there are several types of companies that can be registered. Each type has its own advantages and disadvantages. Here is an overview of the different types of companies in Nepal:
A private company is owned by one or more individuals and is not publicly traded. Private companies can have a minimum of two and a maximum of 50 shareholders. The shareholders have limited liability, which means their personal assets are protected in case of any company debts or losses. The advantages of a private company include more control over the business operations and fewer regulatory requirements. However, the main disadvantage is limited access to capital.
A public company is owned by the public through the sale of shares. These companies can have a minimum of seven shareholders and are required to have their shares listed on the stock exchange. The advantages of a public company include greater access to capital and higher visibility in the market. However, public companies also have to comply with more regulatory requirements and are subject to greater scrutiny.
Joint Venture Company
A joint venture company is owned by two or more parties who agree to work together on a specific project or business venture. Joint ventures can be established between Nepali and foreign companies, or between Nepali companies. The advantages of a joint venture include the sharing of resources and expertise, as well as access to new markets. However, joint ventures also require a lot of coordination and may involve cultural or language barriers.
Eligibility Criteria to Register Company in Nepal
- You must be at least 18 years old and have a sound mind.
- You must not have been convicted of any criminal offence.
- Likewise, you must not have been declared bankrupt or insolvent.
Documents Required to Register a Company in Nepal
To register a company in Nepal, you need to prepare and submit the following documents:
Memorandum of Association (MOA): This document outlines the objectives, scope, and nature of the business and the company’s relationship with its shareholders.
Articles of Association (AOA): This document contains the rules and regulations that govern the company’s internal affairs, including the rights and obligations of its shareholders and directors.
Company Registration Form (online): You can apply for company registration online by filling out the registration form on the website of the Office of Company Registrar.
Identification and Address Proofs of the Directors and Shareholders: You need to provide the copies of citizenship certificates, passports, or other identity proofs of the directors and shareholders. You also need to provide the address proofs, such as utility bills or bank statements.
It’s essential to ensure that all the documents are accurate, complete, and in compliance with the applicable laws and regulations.
Steps for Company Registration in Nepal
The process of company registration in Nepal involves the following steps:
Step 1: Name Reservation
- Choose a unique and meaningful name for your company that reflects your business objectives and brand identity.
- Check the availability of the name on the website of the Office of Company Registrar.
- Reserve the name by filling out the online application form and paying the necessary fees.
- Once the name is approved, you can proceed with the next steps of company registration.
Step 2: Drafting MOA and AOA
- Prepare the MOA and AOA according to the applicable laws and regulations, including the Companies Act and the Company Registration Rules.
- Define the company’s objectives, scope, and nature of business in the MOA.
- Include the rules and regulations that govern the company’s internal affairs, including the rights and obligations of the shareholders and directors in the AOA.
Step 3: Filling Company Registration Form
- Fill out the company registration form online by providing the necessary details, such as company name, registered office address, directors’ and shareholders’ details, MOA, and AOA.
- Attach the scanned copies of the required documents, such as MOA, AOA, and identity and address proofs of the directors and shareholders.
Step 4: Submission of the Application
- Once you have completed the online application form and paid the fees, submit the application to the Office of Company Registrar.
- The application will be reviewed by the Registrar, and if all the documents and information are accurate and complete, the company will be registered.
Step 6: Obtaining PAN and VAT Registration
After the company registration, you need to obtain Permanent Account Number (PAN) and Value Added Tax (VAT) registration from the Inland Revenue Department and the Department of Customs, respectively.PAN / VAT registration are mandatory for conducting business in Nepal.
Cost of Company Registration in Nepal
When starting a business in Nepal, one of the essential steps is company registration. The cost of company registration in Nepal is relatively low compared to other countries, making it an attractive destination for entrepreneurs. However, there are several fees associated with company registration that entrepreneurs should be aware of.The fees associated with company registration in Nepal can be broadly classified into two categories: government fees and professional fees.
Nepal Government has made the company registration free of cost. This was announced by finance minister on the budget speech of 2080/81 (yet to be implemented). As of now (Asar 2080), the old rates still apply.
Professional fees are the fees charged by lawyers, chartered accountants, and other professionals for their services in assisting with company registration. These fees vary depending on the complexity of the company registration process and the services required.
Additional Costs to Consider during and after registration of company
Apart from the fees associated with company registration, there are other costs to consider when starting a business in Nepal. These include:
- Rent and utilities for office space
- Hiring employees and paying salaries
- Taxes and other compliance costs
- Marketing and advertising costs
- Cost of goods or services sold
Entrepreneurs should factor in these costs when planning their budget for starting a business in Nepal. By understanding the cost breakdown of registration fees and factoring in additional costs, you can plan your budget and start business operations in Nepal.
Timeframe for Company Registration in Nepal
Once the application for company registration is submitted along with all the required documents and fees, the process typically takes around 5-7 working days for completion. However, the timeframe may vary depending on various factors.
Factors that may impact registration time include:
- Completeness of the application: The application for company registration must be complete in all respects, with no errors or omissions. Any discrepancies or incomplete information may result in delays in processing the application.
- Type of company: The type of company being registered also plays a role in the timeframe for registration. For example, registering a private limited company may take longer than registering a sole proprietorship.
- Number of shareholders: If the company has many shareholders, the registration process may take longer as the authorities will need to verify the details of each shareholder.
- Government processing time: The processing time for company registration also depends on the workload of the government department responsible for the registration process.
- Other factors: Factors such as holidays, strikes, and other unforeseen events may also impact the timeframe for company registration.
It is important to note that the timeframe for company registration in Nepal is an estimate and may vary depending on the circumstances. Therefore, it is advisable to start the registration process well in advance to ensure timely completion.
Post-Registration Compliance Requirements
Once a company is registered in Nepal, it must comply with various legal and regulatory requirements. Some key compliance obligations are:
Annual filings: Companies in Nepal are required to file annual returns with the Company Registrar’s Office. The annual return should contain details such as the company’s financial statements, shareholder details, and director details.
Tax compliance: Companies must comply with tax regulations and file tax returns with the tax authorities. The tax obligations of a company depend on various factors such as the type of business, turnover, and location.
Accounting requirements: Nepalese companies are required to maintain proper accounting records and prepare financial statements in compliance with the applicable accounting standards.
Labor laws: Companies must comply with labor laws and regulations in Nepal. Employers must provide proper contracts, minimum wages, and other benefits to their employees.
Renewal of licences: Companies may be required to renew licences or permits periodically. For example, a business operating in the travel and tour industry shall renew it’s licence every five years. Similarly, companies with EXIM codes should renew the code annually.
Overview of tax and accounting requirements
Companies in Nepal are subject to various taxes, including income tax, value-added tax, and customs duties. The tax rates and requirements vary depending on the nature of the business and the turnover. Companies must maintain proper accounting records and prepare financial statements in compliance with the Nepalese accounting standards.
Labor laws and regulations in Nepal
The Labor Act of Nepal governs employment in the country. The law provides for minimum wages, working hours, leaves, and other benefits for employees. Employers must comply with the provisions of the law and provide proper contracts to their employees.
Compliance with legal and regulatory requirements is essential for the smooth functioning of a company in Nepal. Companies must ensure that they comply with all applicable laws and regulations to avoid penalties and legal issues.
Company Registration in Nepal: Tips for Success
Registering a company in Nepal can be a complex process, but following these tips can help ensure a successful registration:
- Hire a reputable lawyer or consultant: A lawyer or consultant can provide guidance and assistance in navigating the legal requirements and procedures for registering a company in Nepal. It’s important to choose a reputable and experienced professional to ensure the process runs smoothly.
- Make sure the documents contain accurate information: Mistakes in documents can cause huge headaches later on. So, it is advised to double or triple check all the legal documents before submitting them to the OCR.
- Follow legal requirements and procedures: Companies must comply with legal requirements and procedures to register in Nepal. This includes completing all required documents accurately and on time, obtaining necessary approvals, and paying all fees and taxes.
- Maintain transparency and accuracy in all documents: All documents submitted during the registration process must be accurate and transparent. Any discrepancies or errors can delay the registration process or result in legal issues later on.
- Keep up-to-date with changes in regulations and laws: Regulations and laws related to company registration in Nepal can change frequently. It’s essential to stay informed and up-to-date on any changes that may affect the registration process or compliance obligations.
By following these tips, entrepreneurs can successfully register their company in Nepal and ensure compliance with legal and regulatory requirements.
FAQs on Company Registration Process
What is the minimum capital required for company registration in Nepal?
There is no minimum capital requirement for registering a company in Nepal. However, companies must have a paid-up capital of at least NPR 100,000 (approximately USD 850) to open a bank account. However, in the budget speech of 2080/81, finance minister stated that from new financial year, Nepali citizens can open a company with just Rs.100 authorized capital.
How long does it take to register a company in Nepal?
The registration process can take anywhere from a few days to several weeks, depending on various factors such as the type of company, the completeness of the application, and the workload of the government agencies involved.
Can a foreign national register a company in Nepal?
Yes, foreign nationals can register a company in Nepal. However, they may need to obtain certain approvals and permits from relevant government agencies.
What are the tax implications of registering a company in Nepal?
Companies in Nepal are subject to various taxes such as income tax, value-added tax (VAT), and customs duties. It’s important to understand and comply with these tax obligations to avoid legal issues and penalties.
Is it mandatory to register a company for VAT in Nepal?
Yes, service based companies with an annual turnover of Rs. 20,00,000 or more must register for VAT in Nepal. Similarly, companies that sell goods should register the VAT if the turnover exceeds Rs. 50,00,000 annually. Failure to do so can result in penalties and legal issues.
Can the government fees for company registration in Nepal be paid online?
Yes, the government fees can be paid online through the eSewa, Khalti and ConnectIPS.
What is the difference between a private company and a public company in Nepal?
A private company is owned by a small group of people and is not publicly traded, while a public company is owned by the public and can be traded on the stock exchange.
Are there any tax incentives for registering a company in Nepal?
Yes, there are several tax incentives provided by the Nepalese government to promote investment and entrepreneurship in the country.
Is it necessary to hire a professional to assist with company registration in Nepal?
While it is not necessary to hire a professional, it is recommended as the process can be complex and time-consuming.
Can the registration fees for a company in Nepal be waived or reduced?
No, the registration fees are fixed by the government and cannot be waived or reduced.
Final thoughts on the importance of proper company registration in Nepal
Registering a company in Nepal can be a challenging and time-consuming process, but it is an important step for entrepreneurs who want to operate legally and take advantage of the country’s business opportunities. In this article, we covered the key points that entrepreneurs should know when registering a company in Nepal, including the eligibility criteria, required documents, costs, timeframe, post-registration compliance requirements, and tips for success. We also answered some frequently asked questions about company registration in Nepal, such as the minimum capital requirement, registration time, foreign registration, tax implications, and VAT registration.
Proper company registration in Nepal is crucial for ensuring legal compliance, protecting business interests, and gaining access to various benefits such as tax incentives, funding opportunities, and government support. Entrepreneurs should follow the legal requirements and procedures, hire a reputable lawyer or consultant, and maintain transparency and accuracy in all documents. It’s also important to keep up-to-date with changes in regulations and laws and comply with post-registration obligations such as tax and accounting requirements and labour laws.