Company law of Nepal in the course of Development & Going on

Published Date: 2023-02-02

Company law of Nepal in the course of Development & Going on

What is company law?

A company is a voluntary association of a person who has come together for carrying on some business and sharing the profits. It is defined as any company incorporated under the Companies Act.

How can we understand the development of Nepal’s company law?

  • The history of the companies law began in Nepal in 1993 B.S. with the enactments of Nepal Company Kanoon, in 1993 during the Rana Regime. Till 1993, Nepal was not actively involved in the international arena. Company law of England has influenced India and Nepal being a neighboring country, has that impact. However, looking at the development of Nepal’s company law it is found to differ from the company law of England.
 
  • There is no history in Nepal of establishing a company by making a special law for the purpose of providing a monopoly in the trade of a particular sector or a particular commodity. But there are examples in Nepal where organized organizations have been established to operate air transport services. Nepal Air Services Corporation Act, 2019 is one example of this. The history of companies law in Nepal can be classified into following the wing categories:
  1. Nepal company kanoon, 1993 B.S.
  2. Company kanoon (Act), 2007 B.S.
  3. Company Act. 2021 B.S.
  4. Company Act, 2053 B.S.
  5. Company Act, 2063 B.S.

How can we understand the development of Nepal’s company law in different stages?

We can understand as:
Preliminary Age (1993- 2007 B.S.) -The Company Act, 1993
Company Ain 1993 was made, by the order of JuddhaShumsher Rana. It has 95 sections. Institutions and companies were dealt with the same laws, there is no separation made under this Act. Some ambiguities and imperfections of this company act are:
  • No differentiation between the private and public companies,
  • No clear provision for the establishment of the company having limited responsibility or unlimited responsibility.
  • There is no clear provision for the managing agent but the term manager or secretary is used in some places but it is not defined.
  • No provision regarding the Registration of foreign companies.
  • Absence of provision that, a company established under this act would be a corporation and that could be sued and sued by any other person.
Middle Age (2007 till 2021)
  • Company Act 2007 came into force in 2021.
  • After the democratic movement 2007
  • It has differentiated the concept of institutions from the company.
  • It has 160 sections.
I. Section 142 to Section 159 shall be applicable only to a private company. These sections are related to the formation, Regulating, and Liquidation of private companies.
II. Minimum 2 and maximum 50- members of the pvt co.
III. Compulsory to register any kind of production.
IV. Ltd is a sign of a registered company, unregistered co shall be prohibited to write ltd also to sell or bandhas to the person who is not the owner of the share without the permission of members of pvt company.

       Provisions of this act:
  • Definitions of public and private companies.
  • Made separate laws to regulate private and public companies.
  • 1993 company act was first amended in 2018 and secondly in 2019.
  • In the amendment made in 2018, has added the definition, of the rights of shareholders to vote, overall to fulfill the need for modern changes.
  • Amendment made in 2019, has changed the definition of the company: company means the company registered according to this Act.
  • Special privilege to private companies.
      Modern age since 2021
.   First modern stage: (2021-2053)
  • 4 amendments were made.
  • 2046 amendment was important relating to a public company.
  1. Protection of capital of the public company
  2. Regulation of the public company
  3. To buy a 25 kitta share requires the permission of the founder. (before this only for 10 kitta shares, permission is required)
  4. If a such company has a capital of more than 50 lakhs secretary has to be appointed.
  5. Provision of a managing agent under section 74 to section 90 has an important place in this amendment
  6. Managing agent was allowed only in the company till 1993 and it is the same under this.
  • After the fourth amendment of the company Act 2021:
  1. Clarity in law applies to a public company and a private company.
  2. Related to Government company: 2025 amendment has been made, and the order of the king prevails over the Company Act 2025.
  3. Some privilege of the pvt company is ended: compulsorily supervising the account, submitting the preliminary report to the shareowner or taluk aada.
  4. Right to vote and election process.
  5. Different definitions of the company: company means the company. registered with limited liability under the Company Act.
  6. Change in taluk aada.
  7. Registration of foreign companies in accordance with the company law.
  8. Re-appointment of founder and lekhaparikshak.
 Second modern stage: (2053-2062)
  • Modernization- adopted some principles.
  • Some good laws relating 2021 company act have changed.
  • Corporate governance
  • Removed the provision of foreign company registration and lekhaparishak.
  • For the protection of the shareholder, the shareholder can enjoy the right to sue.
  • Articles of the association have to include the methods of formation of the board of directors and meetings of BoDs.
  • Within 45 days of the announcement of the Dividend, it has to be distributed
  • Holding and subsidiary company.
  • The price to buy each kitta share is 100. It is fixed.
  • Use of information technology.
  • Meeting is compulsory.
  • Secretary of the company has to be announced.
  • Within 15 days of submission of the application to register the company, the company registration office has to provide the certificate of registration.
Third modern stage: (2062 and after 2062) 
  • Clear laws
  • Open way for national and international companies
  • Incorporate the principles
  • Enhancement of economy from the market is the motto
  • Corporate governance
  • Protect shareholders (liability)
  • Regulation and administration of the company in a simple and flexible form
  • public and private companies
  • clear jurisdiction of issues related to companies
  • to have transparency, it has made many laws. ( limited liability and corporate veil)
  • use of information technology to form a Board of Directors.
  • Criteria of the active and inactive companies are made.
  • Independent existence of the company by an independent manager.
  • Commercial bench has to be established in the regular court to hear issues of the company.
  • If there is less transaction business run in a year in a private company, then it may not conduct the annual general meeting.
  • Encourage the responsibility of the Board of Directors to have individual liability.
  • Flexible in regulating a company that has only one shareholder.
  • Flexible in conducting the annual general meeting.
  • Company has decided itself to be insolvent (debt/nondebt)
  • If the company is not regulated after registration, the office of registration can declare it invalid.

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