Guide to Post-Registration Activities for Companies in Nepal

This guide outlines the mandatory activities and legal requirements that companies in Nepal must undertake after incorporation, as stipulated by the Companies Act, 2063, to ensure compliance and operational readiness.

1. Obtain Necessary Permissions or Licenses

Before pursuing its objectives, a company must secure the required permissions or licenses from the relevant regulatory body as per Nepal’s laws. The company must notify the Office of the Registrar of Companies within 15 days of receiving such approval.

• Examples of Approvals:
  • Industrial companies: Approval from the Department of Industries or Department of Cottage and Small Industries.
  • Insurance companies: Approval from the Insurance Committee.
  • Banks and financial institutions: Approval from Nepal Rastra Bank.
• Key Note: Company registration does not automatically grant permission to implement objectives. Specific approvals are mandatory.

2. Obtain Permanent Account Number (PAN)

The company must obtain a Permanent Income Tax Account Number (PAN) from the Internal Revenue Office before commencing business operations, after securing necessary permissions or licenses.

3. Approval to Commence Trading

• Public Limited Companies:
  • Promoters must pay the full amount for shares agreed upon in the memorandum and articles of association.
  • Apply to the Office of the Registrar of Companies for trading approval, submitting proof of payment and prior approvals from relevant bodies.
  • No prospectus publication or liability-creating activities are allowed until trading approval is granted.
• Private Limited Companies:
  • Can commence trading upon receiving the company registration certificate.
  • If specific approvals are required by law for certain transactions, trading must begin only after obtaining such approvals.

4. Publication of Articles of Association and Rules

• Public Limited Companies:
  • Must publish their articles of association and rules within 3 months of receiving trading permission (Section 22(1)).
  • Any amendments to these documents must also be published within 3 months (Section 22(2)).
• Private Limited Companies:
  • Not required to publish articles of association or rules.

5. Approval and Publication of Prospectus

• Public Limited Companies:
  • Must publish a prospectus approved by the Securities and Exchange Board of Nepal before issuing securities to the public.
  • The prospectus must be recorded with the Office of the Registrar of Companies before publication, including any amendments.
  • The company is responsible for complying with all commitments in the prospectus.
• Private Limited Companies:
  • Not required to issue or publish a prospectus.

6. Provision of Copies

• Companies must provide copies of the following documents upon request by shareholders or interested parties, charging the prescribed fee:
  • Memorandum of association, articles of association, prospectus, annual accounts, audit reports, directors’ reports, or any document submitted to the Office.
• Public Companies: Open to requests from anyone.
• Shareholders: May request copies of general meeting minutes, subject to prescribed fees.

7. Allotment of Shares

• Public Companies:
  • Shares must be allotted within 3 months from the closure of the share issue, with shareholders notified in the prescribed format.
  • If at least 50% of publicly issued shares are not sold (without a guarantee agreement), shares cannot be allotted.
  • The company may request a 3-month extension from the Office, specifying reasons for non-allotment.
  • If shares remain unallotted, the company may allot them through negotiation or other means.
  • If allotment is not completed within the specified period, the company must refund the share application amount with prescribed interest.
• Private Companies: No specific allotment requirements unless stipulated in the articles of association.

8. General Meetings

Companies must hold two types of general meetings: Annual General Meeting (AGM) and Special General Meeting (SGM).

• Public Companies:
  • AGM Notice: At least 21 days in advance, published twice in national newspapers.
  • SGM Notice: At least 15 days in advance, published similarly.
• Private Companies:
  • Notice and procedures as per the articles of association.
  • If no new matters are discussed, a 7-day notice published in a national daily newspaper is sufficient.

9. Annual General Meeting (AGM)

• Public Companies:
  • First AGM within 1 year of commencing business.
  • Subsequent AGMs within 6 months of the financial year-end.
  • If unable to hold the AGM, apply to the Registrar for an extension (up to 3 months), but fines under Section 81 may still apply.
  • AGM must be held in the district of the registered office or a convenient location for most shareholders, unless approved otherwise by the Office.
  • Matters for discussion are outlined in Section 76 of the Companies Act.
• Private Companies:
  • AGM procedures as per the articles of association.
  • Can be held anywhere, unless otherwise specified.

10. Special General Meeting (SGM)

• Can be called by:
  • The Board of Directors if deemed necessary.
  • The auditor, if required during account examination, by requesting the Board or applying to the Office.
  • Shareholders holding at least 10% of paid-up capital or 25% of total shareholders, by applying to the company.
  • The Office, if deemed necessary or upon shareholder complaint.
• If the Board fails to call an SGM within 30 days of a valid request, shareholders may escalate to the Office.

11. Matters Requiring Special Resolution

A special resolution (requiring 75% approval of shares present) is needed for:

• Increasing authorized capital.
• Reducing or altering share capital.
• Changing the company’s name or main purpose.
• Merging with another company.
• Issuing bonus shares.
• Repurchasing company shares.
• Selling shares at a discount.
• Converting between private and public company status.
• Other matters specified in the Companies Act or regulations.

12. Legality and Quorum of Meetings

• Meetings must comply with the Companies Act and articles of association.
• Public Companies:
  • Quorum: At least 3 shareholders representing over 50% of allotted shares, unless a higher number is specified.
• Private Companies:
  • Quorum as per the articles of association.
• A meeting is deemed valid if proper notice is sent and approved by attendees (Sections 67 and 73).

13. Discussion and Decision at General Meetings

• Chaired by the Chairman of the Board or a nominated director.
• All matters presented as resolutions; the chairman announces outcomes.
• Special Resolutions: Require 75% approval of shares present.
• Minutes must be recorded, signed by the chairman and company secretary (or a shareholder representative if no secretary), and maintained in a separate book.

14. Submission of Details to the Office

• All Companies:
  • Submit shareholder and debenture holder details (Section 51(2)) and other matters (Section 78) at least 21 days before the first AGM, approved by the board and certified by the auditor.
  • Submit details as per Sections 120, 131, and 156 within prescribed timelines.
• Public Companies:
  • Within 30 days of the AGM, submit:
    • Number of shareholders present.
    • Annual financial statements.
    • Directors’ and auditors’ reports.
    • Meeting decisions.
• Private Companies:
  • Submit audited financial statements within 6 months of the financial year-end.
• Non-Compliance: Fines apply under Section 81(2) for late submissions.

15. Company Books and Accounts

• Maintain accounts in Nepali or English using the double-entry system, reflecting true transaction status.
• Accounts must comply with accounting standards and the Companies Act.
• Accounts must be kept at the registered office unless approved otherwise.
• Cash balances (except as specified by the board) must be deposited in a bank, and transactions conducted through the bank.
• Financial Statements:
  • Prepared at least 30 days before the AGM (public companies) or within 6 months of the financial year-end (private companies).
  • Include:
    • Balance sheet.
    • Profit and loss account.
    • Cash flow statement.
  • Must comply with Section 109.
• Accounts must be audited annually by a registered auditor, with the audit report approved at the AGM and submitted to the Office.

16. Appointment of Auditors

• All Companies:
  • Appoint a registered auditor for annual account audits.
  • Public Companies: Appointed by the AGM per Section 18.
  • Private Companies: Appointed as per articles of association, regulations, unanimous agreement, or by the AGM.
  • Notify the Office of the auditor’s name within 15 days.
• Auditor’s remuneration is set by the appointing authority.
• Directors and employees must provide requested books and accounts and respond to auditor queries promptly.
• Listed Companies (with ≥ Rs 30 million paid-up capital or government ownership):
  • Form an audit committee with at least 3 members, chaired by a non-operational member.
  • At least one member must have accounting expertise or a relevant degree and experience.

17. Other Compliance Requirements

• Display a Nepali signboard at the registered office and place of business.
• Conduct all transactions in the company’s name.
• Private Limited Companies: Add “Pvt. Ltd.” to the name; Public Limited Companies: Add “Limited” or “Ltd.” (except for non-profit companies).
• Private Companies:
  • Cannot sell shares or debentures publicly.
  • Securities transfers must follow articles of association, regulations, or unanimous agreements.
• Operate without causing public inconvenience.
• Do not open partnerships or private firms.
• Non-profit companies cannot distribute dividends or payments to members or their relatives.
• Directors and officers must follow guidelines issued under the Companies Act.

Conclusion

Post-incorporation activities are critical for legal compliance and operational success in Nepal. Companies must diligently follow the Companies Act, 2063, to obtain necessary approvals, maintain proper records, conduct general meetings, and submit required documents to the Office of the Registrar of Companies. Failure to comply may result in fines or legal consequences. Both public and private companies should tailor their compliance efforts to their specific requirements, as outlined above.