Synopsis of Company Act, 2006 (2063)

Private Limited Company -  limits the number of its shareholders from 1 to 50 and it does not allow to invite to the public to subscribe for shares.

Public Limited Company - the minimum number of 7 shareholders (and there is no maximum limit) and should  Offers shares and debentures to the public through a prospectus which

complies with the requirements of the Companies Act and Securities Act.

b) Offers shares and debentures to the public through a prospectus which

complies with the requirements of the Companies Act 2006 and Securities Act.

c) A company can be formed as a public company or alternatively, a company which is incorporated as a private company can also be converted into a public company and vice versa.

d) A not profit distributing company also can be established under the company act.

Documents to be Required to establish the company

·         Memorandum of Association and Article of Association, Agreement among promoters if any, license from concerned organization if required by law, citizenship certificates of promoters in case  if natural person and registration certificates  in case of organization, application to CRO, required fees.

·         Foreign investors should produce the document of approval letter from Department of Industries and agreement of joint venture investments.

Major features of the act:

·      Promote the institutional good governance,

·      Protection of investors / shareholders through financial discipline.

·      Simplify and make flexible the company's  operation and management and  government control has been reduced

·      Not for profit distributing company can be established.

·      Company has a power as the natural person.

·      Provision of Commerce Court (Tribunal)

·      Provision of Company Board ( having jurisdiction power) and Company Advisory Board.

·      Shareholders having 5% or more than 5% amount of total share are called Fundamental Shareholders, and theirs name should be disclosed in the financial statements.

·      Share of own company can buy back in special conditions

Office of the Company Registrar (CRO)

• Powerful regulator for company administration, supervision and control.
• Can punish the company who breaches the prevailing rules and regulation.
• Can examine all documents of the company anytime  and anywhere.

Restriction / Compliance by Company laws:

·         No one is allowed to use word "Company" without registration in CRO.

·         Should send the report of each general assembly's decision,

·         Should submit the share allotment report.

Documents to be submitted by company to CRO

·         Audited financial report after completion of 6 months from Shrawan ( i.e. end of Paush),

·         In case of foreign establishment, within 3 months after completion of the audit report.

Private Company:

·         No limitation of minimum capital, not necessary to disclose the audit and annual report to public except

·          Single person can be a shareholder of the private co.

Public Company

• Minimum capital should be Rs. 10 million
• Minimum shareholders 7 person and no bar to maximum shareholders
• Recruitment of Company Secretary is compulsory,
• Banking and Financial institutions, insurance, mutual fund, Retirement Fund, Capital market related company should be registered as a public company,
• If number of shareholders of private company surpass 50 the company should change to public company,
• Must publish the details of the company ( Bibaranpatra) in the time of public issue of share capital.
• Can raise debenture;

Special decision to be made by General Assembly in the following cases

To raise the authorized capital, to change the amount of share capital, to be merged or to take merged, to change objectives, to issue share in discount, to change status of company from private to public and vice versa, to issue bonus shares.

Company Accounts:

Language of the accounts may be either in Nepali or in English, double entry system, base on NAS and GAAP, books accounts should be kept in registered office and other places as per the allowed by CRO, should prepare and submit to CRO audited financial statement including Balance Sheet, Income statements, Cash Flow statements.

Company Audit:

Auditor should appoint by Annual General Assembly (AGM), should form a Audit Committee ( 3 members)  by  listed company having capital Rs. 30 million. A member of the Committee should be expert in any field of commerce, finance, management, accounts or audit.

Registration Fees of Private and Public Co:

	Fees Rs.
Authorized Capital	Private Co.	Public Co.
Upto .1 million	1000	15000
Above .1 to .5 million	4500
Above .5 to 2.5 million	9500
Above 2.5 to 10 million	16000
Above 10 to 20 million	19000	40000
Above 20 to 30 million	22000
Above 30 to 40 million	25000
Above 40 to 50 million	28000
Above 50 to 60 million	31000
Above 60 to 70 million	34000
Above 70 to 80 million	37000
Above 80 to 90 million	40000
Above 90 to 100 million	43000
Above 100 million	Rs.30/ per .1 million
Additional Rs. 100 million		Additional Rs.30000
Above Rs, 500 million		Rs. 3000 / per Rs. 100 million