Companies in Nepal: Types, Laws, and Process

Starting a business can be both exhilarating and daunting. In Nepal, understanding the types of companies available, their governing laws, and the registration process can be the difference between success and failure. With over 1,000 companies registered in Nepal each year, the entrepreneurial spirit is thriving! Let’s dive deep into the various types of companies you can establish, the legal frameworks governing them, and the step-by-step processes involved.

Types of Companies in Nepal

The Companies Act of 2006 lays out the framework for company formation in Nepal. Here's a look at the different classifications of companies you can establish:

1. Private Company
2. Public Company
3. Holding Company
4. Subsidiary Company
5. Foreign Company
6. Listed Company
7. Company Not Distributing Profits

Understanding Each Type

Private Company

A Private Company in Nepal is owned by private individuals and cannot offer its shares to the general public. These companies have specific goals outlined in their formation documents and are characterized by:

• Limited Liability: Owners aren’t personally liable for the company’s debts.
• Restricted Shareholders: A private company can have up to 101 shareholders, with a board of directors limited to between 3 and 11 members.
• No Public Trading: Shares are not available on stock exchanges.

Want to turn your private company into a public one? This can happen through a special resolution in a General Meeting, but be prepared to meet all legal requirements!

Public Company

A Public Company, on the other hand, is designed to raise funds from the general public by issuing shares and debentures. This type of company must adhere to a minimum capital requirement of NPR 1 Crore and has features such as:

• Freely Transferable Shares: Shares can be traded publicly once listed.
• Listed on Stock Exchange: Public companies must be approved by the Securities Board of Nepal (SEBON) for stock market trading.
• Uncapped Shareholders: There’s no limit on the number of shareholders.

Curious about converting from a public to a private company? If the number of shareholders drops below 7 or if you fail to maintain the minimum capital, you can re-convert within six months!

Company Not-Distributing Profits

Companies that operate without the intention of profit are classified as Not-For-Profit Companies. These companies focus on social, educational, or other altruistic purposes and have objectives such as:

• Professional Development: Promoting specific professions.
• Collective Rights Protection: Safeguarding the interests of individuals in a profession.
• Welfare Initiatives: Engaging in scientific, academic, or public utility work.

Governing Laws in Nepal

Understanding the legal framework surrounding companies in Nepal is crucial for entrepreneurs. Here are the main laws you should be aware of:

• Companies Act, 2063 (2006): This act outlines the incorporation process, defining the various types of companies, the requirements for forming a company, and procedures for dissolution.
• Insolvency Act, 2063 (2006): This law details the processes to follow when a company goes bankrupt.

Registration Process for Different Companies

Registering your company is a key step towards legitimacy and success. The process varies slightly depending on the type of company you’re forming. Let’s break it down!

Registration of a Private Company

1. Registration on the OCR Portal: Begin by creating an account on the Office of Company Registrar (OCR) portal.
2. Submit Your Application: Fill out the necessary forms to register your private company.
3. Upload Required Documents: Provide all required documents to the OCR portal for review.
4. Payment of Fees: Ensure that you pay all applicable registration fees.
5. Official Review and Authentication: The OCR will review your application and authenticate your company registration.

Registration of a Public Company

Since most public companies begin as private entities, the registration process often involves conversion rather than direct registration:

1. Submit Application to OCR: After a General Meeting resolves to convert to a public company, submit an application to the OCR within 30 days.
2. Review of Criteria Fulfillment: The OCR reviews your application for compliance.
3. Issuance of Conversion Certificate: If approved, the OCR issues a certificate confirming the conversion.

Registration of Not-For-Profit Companies

1. Name Reservation: Start by reserving a unique company name.
2. Submit Relevant Documents: Provide all necessary documents for registration.
3. Issuance of Registration Certificate: Once approved, you’ll receive a certificate confirming your status as a not-for-profit entity.
4. PAN Registration at IRO: Obtain a Permanent Account Number (PAN) from the Internal Revenue Office.
5. Ward Office Registration: Register at the local Ward Office.
6. Social Welfare Council Registration: If applicable, register with the Social Welfare Council, especially if your organization will seek foreign grants.

Additional Company Types in Nepal

In addition to the main categories mentioned, there are a few more classifications you should be aware of:

• Government Company: These are publicly traded entities that do not have a majority government ownership.
• Foreign Company: Any company incorporated outside of Nepal falls into this category.
• Holding Company: This type of company owns or controls another company, known as a subsidiary.
• Subsidiary Company: Controlled directly by a holding company.

Conclusion

Starting a company in Nepal is an exciting venture filled with potential. Understanding the different types of companies, the governing laws, and the registration processes is vital to your success. Whether you’re forming a private company, a public entity, or a not-for-profit organization, being informed is your best strategy!

Next Steps

Now that you’re equipped with the knowledge of company types and registration processes in Nepal, it’s time to take action! Start by identifying the right type of company for your vision and follow the necessary steps to establish your presence in the vibrant Nepalese market. Don’t hesitate to consult with legal experts to navigate the complexities of company formation and ensure compliance with all regulations. Let’s build something great!