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THE COMPANIES ACT, 2063 (2006)
Date of Authentication: 2063.7.17.6 7 kartik 2063 ( 3 November 2006)
1. The Act Amending Some Nepal Acts, 2064 2064.5 .9 (26 August 2007)
ACT NO. 18 OF THE YEAR 2063 (2006)
An Act made to amend and consolidate the law relati ng to companies
Preamble:
Whereas, it is expedient to amend and consolidate t he law relating
to companies in order to bring about dynamism in th e economic development
of the country by promoting investment in the indus try, trade and business
sectors through economic liberalization and make th e incorporation,
operation and administration of companies much easi er, simpler and more
transparent;
Now, therefore, be it enacted by the House of Repre sentatives in the First Year
of the issuance of the Proclamation of the House of Representatives, 2063
(2006).
Chapter 1
PRELIMINARY
1. Short title and commencement : (1) This act may be called as the
“Companies Act, 2063(2006)”.
(2) This Act shall be deemed to have come into forc e on 20
Ashwin 2063 (6 October 2006).
2.
Definitions : In this Act, unless the subject or the context ot herwise
requires,
(a) “Company” means a company incorporated under
this Act.

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(b) “Private company” means a private company
incorporated under this Act.
(c) “Public company” means a company other than a
private company.
(d) “Holding company” means a company-having
control over a subsidiary company.
(e) “Subsidiary company” means a company controlled
by a holding company.
(f) “Foreign company” means a company incorporated
outside Nepal.
(g) “Listed company” means public company which has
its securities listed in the stock exchange.
(h) “company not distributing profits” means company
incorporated under Chapter 19 on conditions that it
shall not be entitled to distribute or pay to its
members any dividends or any other moneys out of
the profits earned or savings made for the attainme nt
of any objectives.
(i) “Promoter” means a person who, having consented
to the matters contained in the memorandum of
association and the articles of association to be
furnished in the Office for the incorporation of a
company, signs the same in the capacity of promoter .
(j) “Officer” includes director, chief executive, manag er,
company secretary, liquidator and any employee
undertaking departmental responsibility of the
company.

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(k) “Memorandum of association” means the
memorandum of association of a company.
(l) “Articles of association” means the articles of
association of a company.
(m) “Prospectus” means a prospectus to be published by
a company pursuant to Section 23.
(n) “Share” means the divided portion of the share
capital of a company.
(o) “Preference share” means a share issued as a
preference share pursuant to this Act.
(p) “Ordinary share” means a share other than a
preference share.
(q) “Bonus share” means a share issued as an additional
share to shareholders, by capitalizing the saving
earned from the profits or the reserve fund of a
company, and this term includes the increase of the
paid up value of a share by capitalizing the saving or
reserve fund.
(r) “Shareholder” means a person having ownership in
the share of a company.
(s) “Debenture” means any bond issued by accompany
whether putting its assets as collateral or not.
(t) “Debenture trustee” means a body corporate
undertaking the responsibility for the protection o f
interests of debenture-holders at the time of issua nce
of debentures by a company.

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(u) “Register” means a register of shareholders or
debenture-holders maintained under Section 46.
(v) “Seal of company” means the seal of a company to be
used by it.
(w) “Securities Board” means the securities board
established under the prevailing law to regulate an d
manage securities.
(x) “Securities” means any shares, bonds, debentures or
stocks issued by a company, and this term includes
the receipt relating to deposits of securities and the
rights and entitlement relating to securities.
(y) “Director” means any director of a company and this
term includes any alternate director.
(z) “Board of directors” means the board of directors o f
a company.
(z1) “Managing director” means a managing director of a
company.
(z2) “Premium share” means a share so issued by a
company as to sell it for a value in excess of its
face value.
(z3) “Net worth” means the assets of a company remaining after deducting the paid up capital,
reserve, fund or free reserve of whatever designati on
to which shareholders have right or all other
liabilities other than goodwill, if any, of the com pany
as well as loss provisions , if any, from the total
assets of the company for the time being.

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(z4) “Consensus agreement” means an agreement made unanimously by all the shareholders of a private
company existing for the time being in respect of t he
operation of the company.
(z5) “Office” means the Company Registrar’s Office set
up by the Government of Nepal for the
administration of companies.
(z6) “Register” means the Registrar of the Offi ce.
(z7) “Independent director” means any independent
director appointed under Sub-section (3) of Section 86.
(z8) “Court” means the commercial bench of a court
specified by the Government Nepal by a notification
in the Nepal Gazette, with the consent of the
Supreme Court.
(z9) “Close relative” means a partition shareholder in
joint family or husband, wife, father, mother, mother-in -law, father-in- law, elder brother,
younger brother, elder sister, younger sister, sist er-
in–law ,(elder or younger brother’s wife), brother- in–
law , sister–in–law, brother-in- law, (husband of
elder sister), uncle, aunt, maternal uncle, matern al
aunt, son, daughter, daughter-in-law ,grand–son,
grand-daughter, grand-daughter-in– law or son-in–
law .
(z10) “Prescribed” or “as prescribed” means prescri bed or
as prescribed by the Government of Nepal by a
notification in the Nepal Gazette.

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Chapter 2
INCORPORATION OF COM PANY
3. Incorporation of Company : (1) Any person desirous of undertaking
any enterprise with profit motive may, either singl y or jointly with
others, incorporate a company for the attainment of one or more
objecttves set forth in the memorandum of associati on.
(2) There shall be a minimum of seven promoters for the
incorporation of a public company.
Provided, however, that seven promoters shall not b e required for the
incorporation of another public company by any publ ic company.
(3) Notwithstanding anything contained elsewhere in this Section,
a company not distributing profits may, subject to the provisions
contained in Chapter-19, be incorporated for the at tainment of one or
more objectives.
4.
Application to be made for incorporation of company : (1) Any
person desirous of incorporating a company pursuan t to Section 3 shall
make an application to the Office, in such format a nd accompanied by
such fees as prescribed, and along with the followi ng documents, as
well:
(a) The memorandum of association of the proposed
company,
(b) The articles of association of the proposed company ,
(c) In the case of a public company, a copy of the
agreement, if any, entered into between the
promoters prior to the incorporation of the company ,

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(d) In the case of a private company, a copy of the
consensus agreement, if any, entered into ,
(e) Where prior approval or license has to be obtained
from anybody under the prevailing law prior to the
registration of a company carrying on any particula r
type of business or transaction pursuant to the
prevailing law, such approval or license,
(f) Where the promoter is a Nepalese citizen, a certifi ed
copy of the citizenship certificate and where a
corporate body is a promoter, a certificate of
registration of incorporation, decision of the Boar d of
directors, regulating The incorporation of the
company and major documents regarding
incorporation.
(g) Where the promoter is a foreign person or company
or body, permission obtained under the prevailing
law to make investment or carry on business or
transaction in Nepal,
(h) Where the promoters is a foreign person, a document
proving the country of his citizenship,
(i) Where the promoter is a foreign company or body, a
certified copy of the incorporation of such company
or body and major documents relating to such
incorporation.
(2) Notwithstanding anything contained in Sub-secti on(1), if the
promoter agrees to accept the articles of associati on in the format
prescribed for the incorporation of a company with a single promoter of

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single shareholder, it shall not be required to submit the articles of
association of the proposed company.
5.
Registration of company : (1) Where an application is made for the
incorporation of a company pursuant to Section 4, t he Office shall, after
making necessary inquiries, register such company w ithin 15 days after
the date of making of the application and grant the company
registration certificate to the applicant, in the f ormat as prescribed.
(2) After a company has been registered pursuant to Sub-section
(1), the company shall be deemed incorporated.
(3) The office shall maintain a company register in the format as
prescribed, for purpose of Sub-section (1).
(4) After the incorporation of a company under this Section,
subject to this Act, the matters contained in the m emorandum of
association and the articles of association shall b e binding on the
company and its shareholders as if these where the provisions
contained in separate agreements between the compan y and every
shareholder and amongst its shareholders.
(5) Without registering a company under this Act, n o person shall
use the name company and carry on any kind of trans action by the
name of any firm or institution.
6.
Power to refuse to register company : (1) The Office may refuse to
register a company in any of the following circumst ances:
(a) If the name of the proposed company in identical
with the name by which a company in existence has
been previously registered or so resembles the name
of that company as it might cause misleading,

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(b) If the name or objective of the proposed company is
contrary to the prevailing law or appears to be
improper or undesirable in view of public interest,
morality, decency, etiquette etc. or reflects crimi nal
motive ,
(c) If the name of the proposed company is identical
with the name of a company of which registration
has been cancelled pursuant to this Act or that of a
company which has been insolvent under the
prevailing law or so resembles such name as it migh t
cause misleading and a period of five years shall n ot
expired after such cancellation of registration or
insolvency,
(d) If the requirements for the incorporation of a
company under this Act are not fulfilled.
(2) If the office refuses to register company in an y of the
circumstances as referred to in Sub-section (1) it shall give a notice
there of, accompanied by the reasons therefore, to the applicant no later
than 15 days after the date of application made for the incorporation of
company pursuant to Section 4.
(3) If the office refuses to register any company p ursuant to Sub-
section (1) or fails to give a notice pursuant to S ub-section (2), a person
who is not satisfied may file a complaint in the co urt within fifteen days.
7.
Company to be a body corporate : (1) Any company incorporated
under this Act shall be an autonomous and corporate body with
perpetual succession.

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(2) Subject to this Act, company like an individual , acquire, hold,
sell, dispose of or otherwise deal with, any movabl e or immovable
property.
(3) An company may sue and be also sued by its own name.
(4) An company may, like an individual, enter into a contract and
exercise the rights and perform the obligations as referred to in the
contract.
8.
Limited liability : The liability of a shareholder of a company
incorporated under this Act in respect of its trans actions shall be limited
on to the maximum value of shares which he has subs cribed or
undertaken to subscribe .
9.
Number of shareholders : (1) The number of shareholders of a private
company shall not exceed fifty.
(2) Subject to the proviso to Sub-section (2) of se ction 3, the
number of shareholders of a public company shall be seven in
minimum and a maximum of any number.
(3) Notwithstanding anything contained in Sub-sect ion (1), any
employee who has purchased a share of a company und er scheme of
selling shares to employees or any employee who has already
purchased a share under such scheme but is not in s ervice of the
company for the time being shall not be counted as a shareholder.
10.
Terms to be abided by company: An company incorporated under
this Act shall abide by the following terms, in add ition to those set forth
in this Art, memorandum of association or articles of association:
(a) The company shall carry on all of its activities an d
transactions by its name.

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(b) A private company shall add the words “private
limited’’ to its name as the last words and a publi c
company shall add the word “limited” to its name as
the last word.
Provided, however, that this provision shall not
apply to a company not distributing profit.
(c) A private company shall not sell its shares and
debentures publicly.
(d) A private company shall not pledge, or otherwise
transfer title to, its securities to any person oth er than
its shareholder without fulfilling the procedures
contained in the memorandum of consensus
agreement,
(e) A company shall not open a partnership or private
firm.
(f) Except as otherwise provided in this Act, a company
not distributing profits shall not distribute divid ends
among its members or pay, directly or indirectly, a ny
amount to a member or his/her close relative.
11.
Paid up capital of public company : (1) The paid up capital of a
public company shall be a minimum of ten million ru pees, except as
otherwise provided in the prevailing law or in a no tification by the
Government of Nepal in the Nepal Gazette that the p aid up capital of
any particular company shall be in excess of the sa id required minimum.
(2) Notwithstanding anything contained in subsectio n (1), a
public company which does not have the paid up capi tal as mentioned
in that subsection at the time of commencement of this Act shall

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maintain the capital referred to in subsection (1) no later than 22
Ashwin 2065 (8 December 2008).
12.
To be incorporated as public company to carry on so me specific
transactions : Notwithstanding anything contained elsewhere in this
Act, a company carrying on the business of banking, financial
transactions, insurance business related transactio ns, stock exchange
business, pension fund or mutual fund or a company carrying on such
other business or transactions as may be prescribed shall be
incorporated as a public company.
13.
Conversion of private company into public company : (1) In the
following circumstances, a private company shall be converted into a
public company under this section:
(a) If the general meeting of the private company, by
adopting a special resolution, decides to convert t hat
company into a public company,
Provided, however, that no private company shall be
capable of being converted into a public company
unless and until it fulfills the requirements to be
fulfilled under this Act for being a public company
(b) If twenty five percent or more of the shares of a
private company are subscribed by one or more
than one public company,
Provided, however, that in computing the
percentage as referred to in this Clause, the share
passed by any banking or financial company as a
trustee shall not be calculated.

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(c) If a private company subscribes twenty five percen t
or more of the shares of a public company.
(2) In the circumstances as refer to in Clause (a) of Sub-section (1),
the concerned private company, shall for being conv erted into a public
company, make an application as prescribed, accompa nied by a copy of
the resolution mentioned in that Clause and by the fees as prescribed ,
to the office within thirty days after the date of such resolution.
(3) On receipt of an application pursuant to Sub-st ation (2), the
office shall, if the concerned private company has fulfilled the necessary
requirements for carrying on transactions as a publ ic company, mention
in the company register the contents of conversion of such company
into a public company and give a company conversion certificates as
prescribed within sixty days.
(4) If any private company has to be converted into a public
company owing into the circumstances referred to in Clause (b) or (c) of
Sub-section (1), the concerned private company shal l make an
application, as prescribed, setting out all details , accompanied by the
fees as prescribed, to the Office for being convert ed into a public
company within seven days after the date of occurre nce of such
circumstances.
(5) On receipt of an application pursuant to Sub-se ction(4), the
Office shall, if such company has fulfilled the req uirements to be
fulfilled by a public company under this Act to ca rry on transactions,
mention in the company register the contents of con version of company
into a public company and give a company conversion certificate as
prescribed.
(6) If private company is converted into a public c ompany
pursuant to this Section, any subsidiary company of that company, as

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well, shall, ipso facto be deemed to have been converted into a public
company in the same date.
(7) In the event of conversion into a public compan y pursuant to
Sub-section (6), it shall be the obligation of the concerned company to
make an application, accompanied by the required do cuments, to the
Office to get recorded in the company register the contents of
conversion of such subsidiary company into a public company and
obtain the certificate.
(8) In the event of conversion of any private compa ny into a
public company pursuant to this Section, the provis ions applicable to
the public company under this Act shall be deemed t o be, ipso facto ,
applicable to that company after the date of such c onversion.
(9) In the event of conversion of any private compa ny into a
public company pursuant to this Section, all the as sets and liabilities of
the private company so converted shall devolve on t he successor
company.
14.
Conversion of public company into a private company : (1) In the
following circumstance, a public company shall be c onverted into a
private company under this Section:
(a) If the number of shareholders of the public company
becomes less than seven,
(b) If the public company fails to maintain its paid-up
capital under Section 11 or the paid-up capital as
referred to in section 11 is not maintained because of
reduction in capital pursuant to section 57.

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Provided, however, that this provision shall not
apply to the company as referred to in Sub-sectio n
(2) of Section 11.
(2) In the event of occurrence of a circumstance as referred to in
Sub-section (1), the concerned public company shall make necessary
amendments to its memorandum of association and art icles of
association and convert it into a private company w ithin six months.
(3) The concerned public company shall make an appl ication,
accompanied by copies of the memorandum of associat ion and articles
of association amended pursuant to sub- section (2) and the prescribed
fees, to the Office for being converted into a priv ate company, within
thirty days after the making of such amendment.
(4) On receipt of an application pursuant to Sub-se ction(3),the
Office shall mention in the company register the co ntents of conversion
of such company into a private company and give a c ompany
conversion certificate, as prescribed, within sixty days.
(5) In the event of conversion of any public compan y into a
private company pursuant to Sub-section (4), all th e assets and
liabilities of the public company to be so converte d shall devolve on the
successor company.
15.
Service of summons, notice etc : (1) Notwithstanding anything
contained in the prevailing law, if any notice, sum mons, letters rogatory
etc. required to be served on a company, director, shareholder,
debenture-holder or employee in regard to the trans actions of, or any
matter related with, the company, is delivered at t he registered office of
the company or sent by registered post or sent thro ugh the tale-fax,
email, telex or similar other electronic device ins talled in such office,
such notice, summons or letter oratory shall be dee med to have been

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duly served. If any notice, summons, letters rogeto ry etc. cannot be so
served, the concerned company, director or employee may be informed
thereof by broadcasting or publishing a notice pert aining there to by
radio, television or in any newspaper circulating a t national level. In
such a case, he/ she shall be deemed to have been informed thereof.
(2) Notwithstanding anything contained in the preva iling law, if
any notice, summons, letter rogatory etc. is requir ed to be served by a
company or by any competent authority or court on a ny director,
shareholder, debenture-holder or employee or the co mpany in any
matter related with his/ her duties of office, it m ay be sent to the telex,
email, tele fax address, if any, given by such dire ctor, shareholder or
employee and where such address has not been given, it may be sent by
registered post to the address supplied by him for correspondences by
post and where such summons, notice, letters rogato ry etc. is so sent,
the same shall be deemed to have been duly served.
(3) Notwithstanding anything contained elsewhere in this Act, in
providing a notice or information required to be se nt by accompany to
its shareholder debenture-holder or director under this Act or receiving
any information from them, such notice or informati on may be sent to
an electronic communication address supplied by the m, by using
electronic communication device as provided in the articles of
association of the company or if they so agree.
Provided, however, that such notice or information shall be sent by post
or through other reliable means to the shareholder, debenture-holder or
director who does not consent to the service of suc h notice or
information on him by electronic communication devi ce.
16.
Functions and duties of Registrar : (1) It shall be the duty of the
Registrar to implement this Act and carry out compa ny administration.

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(2) Without prejudice to the generality of Sub-section (1), the
Registrar may frame and issue necessary directives for the
implementation of this Act and the carrying out of company
administration related functions in an effective or systematic manner:
and it shall be the duty of each company and office r to abide by such
directives.
(3) The directives issued pursuant to Sub-section ( 2) shall be
published in such a manner that such directives are available to the
general public.
(4) The Registrar may, as per necessity, delegate a ny of the
powers conferred to him/ her under this Act to any officer employee
subordinate to him.
(5) Notwithstanding anything contained elsewhere in this Section,
nothing in this Section shall be deemed to limit th e direction given by
any regulatory body to a company under the prevaili ng law or the
authority to be exercised by that body in respect o f such company
under the prevailing law.
17.
Pre-incorporation contract: (1) A contract made prior to the
incorporation of a company shall be a proposed cont ract only, and such
contract shall not be binding on the company.
(2) If, prior to the incorporation of a company, an y person carries
on any transaction or borrows money on behalf of th e company, such
person shall be personally liable for any contract related with the
transaction so carried on, subject to Sub-section ( 3).
(3) If, within the time mentioned in any transactio ns or within the
reasonable time after the incorporation of a compan y, the company,
through its act, action or conduct, accepts any act , action or conduct,

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accepts any act, action to borrowing done or made p rior to the date of
authorization to commence its transactions or endor ses such act or
action, that transaction shall be binding on the co mpany and the other
contracting party; and the person carrying out such act to action shall be
released from the personal liability to be borne pu rsuant to Sub-
section(2).
(4) Notwithstanding anything contained elsewhere in this Section,
the consensus agreement of a private company shall govern any
contracts made prior to the incorporation of such c ompany.

Chapter 3
Memorandum of Association, Articles of Association and prospectus
18. Memorandum of Association : (1) The Memorandum of Association of
a company shall state the following matters:
(a) The name of company,
(b) The address of the registered office of the company ,
(c) The objectives of the company,
(d) The acts to be carried out to accomplish the
objectives of the company,
(e) The figure of the authorized capital of the company
and the figure of the share capital to be issued by the
company for time being and the figure of undertaken
to be paid by the promoter of the company,
(f) Types of shares of the company, the rights and
powers inherent in such shares, value of each share
and number of shares of different types,

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(g) Restrictions, if any, in the purchase or transfer of
shares,
(h) Number of shares which the promoters have
undertaken to subscribe for the time being,
(i) Terms of payments of share amounts,
(j) Statements that the liability of shareholders shall be
limited,
(k) The maximum number of shareholders in case of a
private company,
(l) Other necessary matters.
(2) If any of the following matters shall be done o r provided, in
addition to those mentioned in Sub-section(1), the memorandum of
association shall also state such matters:
(a) If the promoter or any other person is entitled to
subscribe shares or acquire title thereto in any
manner other than by making payment in cash, such
matter,
(b) If the company is to acquire any property in any
manner from the promoter or any other person at the
time of commencement of its transactions such
matter,
(c) If the company itself to bear the expenses incurred
on its incorporation, such matter,
(d) If the promoter or any other person is entitled to any
special privilege or right from the company, such
matter.

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(3) In subscribing shares or acquiring title theret o by the
promoter or any other person in consideration f it other than cash
payment as mentioned in Clause (a) of Sub- section (2) and in acquiring
any property by he company from the promoter or any other person at
the time of commencement of its transactions as men tioned in cause (b),
in the case if a public company, such consideration other than cash and
such property shall be caused to be valuated by an engineer or
accountant holding certificate to conduct valuation work under the
prevailing law.
(4) The criteria for the valuation of any property pursuant to
Sub-section (3) shall be as prescribed; and unless such criteria are
prescribed, the person valuating such property shal l mention the
criteria employed by him/her to valuate the proper ty.
(5) If the memorandum of association is inconsisten t with this Act
it shall ipso facto be void to the extent of such inconsistency.
(6) The format of memorandum of association shall b e as
prescribed.
19.
Signature to be affixed on memorandum of associatio n : (1) The
memorandum of association of a company shall state the full names
and addresses of its promoters, indicate the number of shares which
each promoter has undertaken to subscribe and be si gned by each of
them.
(2) The memorandum of association shall clearly con tain the
names and address of a witness for each promoter an d also bear the
signature of such witness.

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(3) Each promoter shall undertake to subscribe the shares as
mentioned in the articles of association of the com pany and at least one
hundred shares if no provision is so mentioned.
(4) No later than one year after the incorporation of a company,
an application may be made, pursuant to a decision of the board of
directors of the company, to the Office for the rec tification of any minor
mistake or printing or typing error appearing in th e memorandum of
association and articles of association submitted a long with an
application made under Section 4.
(5) If an application is made pursuant Sub-section( 4),the Office
shall, if it deems proper after examining it, recti fy such mistake or error
and record the same.
Provided, however, that no matter shall be rectifie d in a manner to alter
the main objectives of the company.
20.
Articles of association : (1) A company shall frame the articles of
association in order to attain the objectives set f orth in its memorandum
of association and carry out its activities in a we ll –managed manner.
(2) The articles of association shall state the fol lowing matters:
(a) Procedures for convening the general meeting of the
company and notice to be given for such meeting,
(b) Proceedings of general meeting,
(c) Number of directors, provision of alternate direct or,
if any, and tenure of directors,
(d) Provisions relating to the minutes of decisions of the
general meeting and the board of directors, and
duplicate copies and inspection thereof,

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(e) If a person has to subscribe shares to become a
director of a company, minimum number of shares,
(f) In the case of a public company, qualifications and
number of independent director,
(g) Where any professional persons, other than
shareholders, are to be appointed as directors,
provisions relating to the number, tenure,
qualifications and procedures of appointment of
such persons,
(h) Powers and duties of the board of directors and the
managing director,
(i) Authority of directors and delegation of authority,
(j) Quorum for a meeting of the board of directors,
notice of meeting and proceedings of meeting,
(k) Lien on shares,
(l) Different classes of shares and the rights, powers and
restrictions attached to such shares,
(m) Provisions relating to calls on shares and forfeitu re of
shares,
(n) Provisions relating to the transfer of shares,
(o) Matters on alteration in share capital,
(p) Matters on buying back of shares by the company, if
the company is to buy back its shares,
(q) Appointment of a company secretary,
(r) Provisions relating to remuneration, allowances and
facilities of directors,

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(s) Use of the company’s seal in its transactions, if it is
to be so used,
(t) Accounts, books of accounts and audit of the
company,
(u) Provisions on powers to raise loans or debentures,
(v) Amalgamation of the company,
(w) Such matters, if any, as required by the prevailing
law to be mentioned in the articles of association of a
company carrying on any specific business,
(x) Such other necessary matters as required to be
mentioned in the articles of association.
(3) If any provision contained in the articles of a ssociation of the
company, inclusive of a provision on the saving of its directors or
officers, is inconsistent with this Act and the mem orandum of
association, such provision shall be void to the ex tent of such
inconsistency.
(4) The format of articles of association shall be as prescribed.
21.
Amendment to memorandum of association and articles of
association : (1) The general meeting of a company may, subject to
Section 6, amend the memorandum of association or a rticles of
association, by adopting a special resolution to th at effect.
(2) The company shall give information of any amend ment made
to the memorandum of association or articles of ass ociation pursuant to
Sub-section (12)to the Office within thirty days; a nd the Office shall
record the same and give information thereof to the concerned
company, within seven days after the receipt of su ch information.

24
(3) Notwithstanding anything contained in Sub-section(2),if any
company has to amend its name, it shall adopt a spe cial resolution to
that effect at its general meeting and make an appl ication, accompanied
by the fees as prescribed, for prior approval of th e Office: and if the
Office gives approval to amend the names as per the application so
received, the name of that company shall be amended .
(4) If a shareholder of a public company who is not satisfied with
an amendment made to the objectives of the company may ,on fulfilling
the following requirements, file a petition, settin g out the reasons
therefore, in the court to have that amendment decl ared null and void:
(a) A shareholder or shareholders holding at least five
percent shares of the paid-up capital of the compan y,
except the shareholders who consent to or vote for
the amendment or alteration, has to make a petition ,
(b) A petition has to be filed within twenty one days
after the adoption of the resolution to amend the
objectives of the company,
(c) Where any one is to file a petition on behalf of on e or
more than one shareholder entitled to make petition ,
the petition has to be filed by a person who is
authorized in writing for that purpose.
(5) Unless and until the court is satisfied that th e information
about the contents, date, time and venue of a petit ion made under Sub-
section (4) has also been given to the company, the petition shall not be
heard.

25
Provided, however, that if it appears from the docu ments submitted to
the court that the concerned company has refused to acknowledge the
notice, nothing shall prevent the court from hearin g the petition.
(6) Where a petition is filed in the court pursuant to Sub-
section(4), the amendment made to the objectives of the company shall
not be effective pending the final decision or orde r by the court in that
matter.
(7) On a petition as referred to in sub- section (4 ) , the court may
issue an appropriate order, specifying the followin g terms and
conditions:
(a) Declaring the amendment made to the objectives of
the company to be fully or partly valid or void,
(b) Requiring the company to subscribe for a reasonable
value, the shares and other rights held by the
shareholders making a petition under Sub-
section(4),upon being disagreed with the making os
alteration in the main objectives of the company,
(c) The shares have to be subscribed under Clause (b)
from the moneys as referred to in Sub-section(2) of
Section 61; and in the case of a company which has
no such moneys, issuing an order to decrease the
capital of the company as if the share capital were
decreased to the extent of such subscription by
adopting a special resolution by the company; and
where such order is issued, the company shall
amend its memorandum of association and articles
of association, subject to the provisions of this A ct.

26
(8) Notwithstanding anything contained elsewhere in this Act,
where an order is issued by the court to fully or p artly void the decision
made by the company to amend its objectives, the co mpany shall not be
entitled to amend its memorandum of association or articles of
association in that matter without permission of th e court or in a
manner contrary to the order of the court.
(9) Where the memorandum of association or articles of
association of a company is altered by an order of the court or the
amendment made by the company is fully or partly en dorsed by the
court, such alteration or endorsement shall be enfo rced as if such
alteration or endorsement were made by the general meeting of the
company on its own.
22.
Memorandum of association and articles of associati on to be
published : (1) A public company shall publish its memorandum of
association and articles of association within thre e months after getting
license to commence its business.
(2) If any amendment is made to the memorandum of a ssociation
and articles of association of a public company, th e amended
memorandum of association and articles of associati on shall be
published within three months after such amendment.
(3) A public company shall so keep the memorandum o f
association and articles of association published p ursuant to Sub–
section (1) or (2) at its registered office that su ch memorandum and
articles can be made available as and when so deman ded by the
concerned.
23.
Prospectus to be published : (1) A public company shall publish its
prospectus prior to issuing its securities publicly .

27
(2) Prior to the publication of prospectus under Sub-section(1),
the prospectus signed by all directors of the compa ny has to be
submitted, along with a written application made to the Securities
Board for approval, under the prevailing laws on se curities.
(3) Unless and until the Securities Board approves and gives
permission for the public issue under Sub-section ( 2) and a copy of such
prospectus is registered with the office, no compan y or no person, on
behalf of such company, shall publish, or cause to be published , the
prospectus of such company.
(4) If it appears that the prospectus submitted pur suant to Sub-
section(2) omits any important matter or contains a ny unnecessary
matter the Securities Board shall cause such prospe ctus to be amended
or altered as required and grant approval to publis h it in accordance
with law.
(5) If the prospectus submitted pursuant too Sub-se ction (2) is
approved by the Securities Board, the concerned com pany shall give to
the Office information thereof, in writing, accompa nied by a copy of the
approval letter of the Securities Board; and on rec eipt of that
information, the Office shall register the prospect us pursuant to this
Section.
Provided, however, that if it appears that any matt er contained in this
Act has not been complied with, the Office may refu se to register it.
(6) If any person demands for a copy of the prospec tus registered
pursuant to Sub-section (5) , the Office shall prov ide such copy by
collecting the prescribed fees.

28
(7) In publishing the prospectus pursuant to Sub-se ction(1), the
company shall also mention that the prospectus has been approved by
the Securities Board and registered with the Office , and the date thereof.
(8) The covering page of each prospectus shall also mention that
such prospectus has been registered pursuant to thi s Section and that
the Securities Board or the Office shall not be lia ble to bear any kind of
responsibility in respect of the matters mentioned therein.
(9) Prior to the approval by the Securities Board o f the prospectus
of any company, the concerned company shall make a declaration
before the Securities Board that the provisions of this Act have been
complied with; and the Securities Board may, if it deems necessary,
seek opinion of the Office on that matter.
(10) Other procedures to be fulfilled in publishing the prospectus
and the matters to be set out in the prospectus sha ll be as mentioned in
the prevailing law on securities.
24.
Liability for matters contained in prospectus : (1) It shall be the
duty and obligation of the concerned company to abi de by the matters
contained in the prospectus published under Section (23).
(2) The directors who have signed the prospectus as referred to in
Sub-section (1) shall be liable for the matters men tioned in that
prospectus .
(3) If any published prospectus contains false stat ements made
maliciously or deliberately and any person sustains any loss or damage
by reason of his/her subscription of securities on the faith of that
prospectus, the directors who have signed that pros pectus shall be
personally liable to pay compensation for the actua l loss or damage so
sustained .

29
Provided, however, that a promoter who resigns befo re the decision
made by the company to publish the prospectus or wh om on becoming
aware of any false statement in the prospectus, pub lishes a notice of
that matter to the information of the general publi c prior to the sale or
allotment of securities or who proves that he/she d id not know that the
prospectus contained any false statement shall not be liable to bear such
compensation.
25.
Duplicate copies to be issued : (1) If any shareholder or any other
person concerned demands for a duplicate copy of th e memorandum of
association, prospectus, annual accounts and audit or directors report
or any document submitted by the company to the Off ice the concerned
company shall provide a duplicate copy of such docu ment by collecting
the fees prescribed in the articles of association.
Provided, however, that any person whoever may dema nd for such
document in the case of a public company.
(2) If the concerned company does not provide dupli cates of such
documents pursuant to Sub-section (1), the Office s hall provide
duplicates of such documents from its records by co llecting the
prescribed fees.
26.
Seal of company and its use : (1) A company which intends to use a
seal in its transactions shall make the seal in its name in clear legible
letters.
(2) The company using the seal as referred to in Su b-section (1),
shall use it in any reports and records to be submi tted on its behalf and
business letters to be used in its name, statements of accounts, bills,
invoices, requisition order forms, notices and offi cial publications,
negotiable instruments, bills of exchange, promisso ry notes, and official
documents signed or issued on its behalf.

30
(3) If any person fails to indicate the name of the company while
signing, on behalf of the company, the documents me ntioned in Sub-
section (2) , such person shall be personably liabl e for the same.
Chapter 4
SHARES AND DEBENTURES
27. Face value of shares and application : (1) The face value of shares of
a private company shall be as specified in its arti cles of association.
(2) The face value of shares of a public company sh all be fifty
rupees per share or shall be equivalent to such amo unt exceeding fifty
rupees as is divisible by the figure ten as provide d in the memorandum
of association and articles of association.
(3) In inviting an application by a public company for the
subscription of its shares, no amount exceeding fif ty per cent of the face
value of each share shall be demanded with the appl ication.
Provided, however, that in raising capital by a com pany which has been
in operation since at least three years ago by publ ishing its audited
fiscal statements for its last three years, at the time of publication of its
prospectus, this provision shall not be applicable.
(4) A person who intends to subscribe the shares of a public
company has to make an application in the format as prescribed.
28.
Allotment of shares : (1) Where a public company invites the general
public to apply for the subscription of its shares it shall allot the shares
and give the shareholders a notice in the format as prescribed, within a
maximum period of three months after the date of c losure of share
issue.

31
Provided, however, that in cases where at least fif ty percent of the total
shares issued publicly cannot be sold failing a gua rantee/underwriting
agreement on the subscription of at least fifty per cent of the publicly
issued shares, no shares shall be allotted.
(2) If the company makes an application, explainin g the reasons
for failure to allot shares within the time-limit s et forth in Sub-section(1),
owing to the circumstance mentioned in the proviso to that Sub-section
within seven days after the expiration of that tim e-limit, the Office may
extend the time limit for up to three months for th e allotment of shares.
If the shares cannot be allotted even within such e xtended time limit,
the company may allot such shares through negotiati ons or any other
methods.
(3) If the allotment of shares cannot be made even within the time
–limit as referred to in Sub-section (1) or (2) , t he amount received for
the subscription of shares as well as an interest t hereon, as prescribed,
from the day of expiration of such time-limit to th e day of refund of
such amount shall be refunded.
(4) If the funds are insufficient to refund the amo unt required to
be refunded pursuant to Sub-section (3), the shortf all amount shall be
borne by the promoters personally.
(5) Where the allotment of shares pursuant to Sub-s ection (1)or (2)
is made discriminatorily or with intent to cause an y loss or damage to
any investor may file a petition, setting out the reasons for the same, in
the court on that matter.
(6) If a petition is filed pursuant to Sub-section 5), where any
investor has sustained any loss or damage by reason of the deliberate
violation of this Section by any officer of the com pany or permission
given by such officer to any one to commit such vio lation, the court

32
may issue an order for realization from such office r personally of
compensation for such loss or damage as well as rea sonable expenses
incurred in the legal action.
29. Power to issue shares at premium
: (1) Any company fulfilling the
following conditions may, with the prior approval o f the Office, issue
shares at a premium:
(a) The company has been making profits and
distributing dividends for three consecutive years,
(b) The company’s net worth exceeds its total liabiliti es,
(c) The company’s general meeting has decided to issue
shares at a premium.
(2) Where the shares are sold at a premium pursuant to Sub-
section (1), a sum in excess of the face value, out of the proceeds thereof,
shall be deposited in a premium account to be opene d to that effect.
(3) The company may use the moneys in the account a s referred
to in Sub-section (2) in the following acts:
(a) Paying up unissued share capital to be issued to th e
shareholders as fully paid bonus shares,
(b) Providing for the premium payable on redemption
of any redeemable preference shares,
(c) Writing off the preliminary expenses made by the
company,
(d) Bearing or reimbursing the expenses of, or the
commission paid or discount allowed on, any issue
of shares of the company.

33
(e) In making a request for approval of the Office to
issue shares at a premium pursuant to Sub-section
(1), the audited financial statements for three yea rs
shall be provided to the Office.
30.
Shares with different rights and rights of such sha reholders : (1)
The company may, by making provisions to that effec t in its
memorandum of association and articles of associati on, issue various
classes of shares with different rights attached th ereto.
(2) Except as otherwise provided in the articles of association of a
accompany, approval of the shareholders of any part icular class shall be
required to make any alteration in the rights of th ose shareholders of
that class.
Provided, however, that no alteration may be made i n the rights of the
shareholders of any particular class in a manner to adversely affect the
rights of the shareholders of any other class.
(3) If the shareholders representing at least ten p ercent share of
any particular class who are not satisfied with a d ecision to make
alteration in the rights attached to the shares of that class pursuant to
Sub- section (2) file a petition in the court to ha ve the decision to make
such alteration void, the decision made to make alt eration in the rights
of the shareholders of such class shall not be enfo rced unless and until
otherwise decided or ordered by the court.
(4) A petition shall be made pursuant to Sub-sectio n (3) within
thirty days after the decision made to make altera tion in the rights
attached to the shares of any particular class; and any decision as
referred to in Sub-section(2) shall not be enforced pending the
expiration of that time limit.

34
(5) If it appears that alteration in the rights conferred to the
shareholders of the class concerned is prejudicial to the rights of the
petitioner shareholders, the court may quash the de cision made on the
alteration in the rights of the shareholders of tha t class.
(6) The board of directors shall submit a proposed resolution on
the alteration in the rights of the shareholders of any particular class
pursuant to Sub-section (2) to the general meeting of the shareholders
of the concerned class; and such resolution has to be adopted as a
special resolution by the general meeting.
(7) Notwithstanding anything contained elsewhere in this Section,
in privatizing a company fully or partly owned by t he Government of
Nepal, as a shareholder, in accordance with the pre vailing law on
privatization, the Government of Nepal may have sp ecial voting right
in making decision on the following matters, as pro vided in the articles
of association, so long as the investment to the Go vernment of Nepal is
retained in such company:
(a) In making decision on a resolution to relinquish th e
title to an undertaking pursuant to Clause (a) of S ub-
section (1) of Section 105,
(b) In making decision on voluntary liquidation of the
company,
(c) In making decision to amalgamate the company into
another company.
31.
Return of shares to be filed with office : (1) A company shall file
with the Office a return of allotments stating the number of shares
issued and allotted, total amount of the shares, th e names and addresses

35
of the allotters, and the amount paid or due and pa yable on each share,
within thirty days after the allotment of shares.
(2) if any shares have been allotted as fully or pa rtly paid up
otherwise than in cash, the company shall file with the Office a deed
constituting the title of the allotter to the share s together with any
contract of sale or a contract for services or othe r consideration in
respect of which that allotment was made, and a ret urn stating the
number and nominal amount of shares so allotted and the extent to
which they are to be treated as paid- up.
32.
Dealing in securities : (1) While issuing its securities to the general
public, a public company shall deal in the securiti es only through a
securities dealer recognized to do securities trans actions including all
acts such as the sale, allotment and recovery of am ounts of such
securities.
(2) A public company shall file with the Office a c opy of an
agreement made by it on the dealing of securities t hrough any body,
within seven days after the date of making of such agreement.
33.
Share certificate : (1) A share certificate in the prescribed format shall
be issued to every shareholder in respect of each share subscribed by
him/her, within two months after the allotment of s hares; the share
certificate shall bear the signature of any two out of a director or chief
executive of the company or the company secretary, in the case of a
public company, and the signature of the person as mentioned in the
articles of association or consensus agreement, in the case of a private
company, and also bear the seal of the company, if any .
(2) While issuing a share certificate in respect of any shares held
jointly by two or more persons, the share certifica te may be issued to
any one of them, by mentioning their names in the c ertificate.

36
Provided, however, that, the names of all sharehold ers shall be
mentioned in the shareholder register.
(3) If a share certificate is lost or destroyed be cause of a divine act
or otherwise, the shareholder shall give informatio n thereof to the
registered office the company immediately when he/s he knows that the
share certificate has been so lost or destroyed bec ause of the divine act
or otherwise.
(4) If any application made pursuant to Sub-sectio n (3), the
company shall , if the matter contained in the app lication seems to be
reasonable after inquiring into all necessary matte rs relating thereto,
issue another share certificate to the applicant, b y collecting the
duplicate fees for duplicate copy as prescribed in the articles of
association; and this matter shall also be recorded in the shareholder
register.
(5) Notwithstanding anything contained elsewhere i n this Section,
if a listed company has caused a register to be mai ntained, pursuant to
Sub-section (6) of Section 46, by the securities r egistrar authorized to
provide securities deposit service under the prevai ling law, provision
may be made to issue to the shareholder a securitie s deposit passbook
or any other certificate certifying him/her to be a shareholder, instead
of a share certificate.
(6) A certificate issued by a company, signed by i ts competent
officer and under the seal of the company, if any, to be used by it,
specifying the number of shares or debentures held by any shareholder
or debenture-holder shall be prima facie evidence of his/her title to such
shares or debentures.
(7) If any company allots any shares or debentures or transfers
such shares or debentures to a representative of a body licensed under

37
the prevailing law to carry on securities dealings, the provision of Sub-
section(1) shall not apply to such shares or debent ures.
34.
Raising loans or issuing debentures : (1) If a public company deems
necessary to raise loans or issue debentures, it ma y, specifying the
reason therefore, a work plan to be executed from p roceeds and budget
necessary for that propose raise loans or issue deb entures with or
without pledging or mortgaging its immovable assets .
Provided, however, that no debentures may be issued unless and until
an approval to commence its business is obtained an d its issued capital
is fully paid up.
(2) Notwithstanding anything contained in the prev ailing law,
any company may, subject to sub- section(1) , raise additional loans or
issue additional debentures against the security al ready furnished by
that company with the already furnished by that com pany with the
previous creditors as a security from such creditor s, within the limit of
such security, by clearly indicating the previous c reditors as well as
amount of loan (amount) already obtained.
(3) Notwithstanding anything contained in the preva iling law,
the matters relating to the terms, repayment period and interest of a
loan borrowed or lent by a company shall be governe d by a deed or
contract concluded between the creditor and the bor rower.
(4) If a company is to raise loans or issue debentu res pursuant to
Sub- section (1) or (2) , the company shall give it s information, along
with the reasons for the same, to the office.
35.
Procedures for issuing debentures : (1) A public company shall, in
issuing debentures pursuant to this Act, issue debe ntures after making

38
provision of a debenture trustee. Such debenture tr ustee has to be a
debenture trustee licensed by the Securities Board.
(2) The matters relating to the creditor and the bo rrower, in
issuing debentures with a debenture trustee, shall be as mentioned in
an agreement to be concluded between such trustee a nd the company.
(3) If the memorandum of association or the article s of association
shall provide that debentures can be converted into shares or such term
has been specified prior to the issuance of debentu res, an debentures
may be converted into shares, subject to the share capital related
provisions of this Act.
(4) If any debentures are to be converted into shar es pursuant to
Sub-section (3), this matter has to be clearly ment ioned in the
prospectus.
(5) Notwithstanding anything contained in the preva iling law,
the court may, if it thinks necessary, issue an o rder of specific
performance to get performed a contract concluded b etween a public
company and a person in respect of the subscription of the debentures
issued by that company.
36.
Agreement to be concluded between debenture trustee and
company
: (1) An agreement has to be concluded between a co mpany
issuing debentures and a debenture trustee acting a s a trustee for the
protection of the interest of debenture-holders, in respect of the
debentures to be raised by such company.
(2) An agreement to be concluded pursuant to Sub-se ction(1)
shall set out the following matters:

39
(a) that the debenture trustee is entitled to carry out , or
cause to be carried out, valuation of the company’s
assets, project analysis or management analysis,
(b) the period of repayment of the principal and intere st
of debentures subscribed by the debenture-holder,
interest rate, mode of repayment of the principal a nd
interest, mode of repayment of the principal and
interest, and matter of conversion of debentures in to
shares, if there is such provision,
(c) Matters, relating to a provision made on the lights of
other creditors over the assets of the company and
liabilities that may arise therefrom in the future.
(d) A provision that, in the case of violation or non-
fulfillment of the terms mentioned in the agreement
or for any other reasonable reason, if it is requir ed to
take the control of financial transactions of the
company or to take possession if the security as
referred to in the agreement, the debenture trustee
may take in his/her possession the assets or
properties of such company to the property that he
has taken as the security of guarantee or hold the
security of guarantee with himself/herself or sell the
same by auction or in any other appropriate manner,
(e) Procedures for payment by the company of the
service charges and other direct expenses of he
debenture trustee,
(f) That the debenture trustee shall not be liable to a ny
loss or damage caused to the company or the

40
debenture-holder from any act done by the trustee i n
that capacity,
(g) That, in the event of occurrence of any circumstanc es
necessitating the liquidation of the company, the
debenture trustee is entitled to take such legal ac tion
as may be taken in behalf of the debenture- holder
and exercise the powers of the debenture holder.
(h) Other necessary matters on the protection of inter est
of the debenture-holder.
(3) The debenture trustee may, for the protection o f interest of the
debenture-holder, take security of the assets of th e company and get
such security registered in his name pursuant to th e prevailing law.
(4) Prior to the taking of security pursuant to Sub -section(3), the
debenture trustee may, if he/she deems necessary, a lso carry out, or
cause to be carried out, the calculation of propert y or assets to taken as
security and the project analysis of management ana lysis of the
company.
(5) After the conclusion of an agreement between a debenture
trustee and a company pursuant to this Section, suc h company has to
obtain the approval of the debenture, trustee if an y.
37.
Inquiry and demand of statements by debenture trust ee : Prior to
concluding an agreement with a company to act as a debenture trustee,
the debenture trustee may hold necessary inquiry in to, and obtain or
demand statements, notice or information on, the fo llowing matters;
and the concerned company has to provide the same i f so demanded:
(a) Whether the memorandum of association or article
of association of the company has a provision that it

41
may raise loans or debentures: and if so, whether t he
board of directors of the company has powers to
make decision to so raise debentures,
(b) Whether the memorandum of association or articles
of association of the company has a provision that
debentures may be raised through a debentures
trustee,
(c) Whether there is a situation that the existing asse ts of
the company can cover the value of debentures
raised,
(d) Matters relating to other creditors and liabilities of
the company.
(e) The company’s balance sheet and auditor’s report.
(f) Such other necessary matters as the debenture
trustee may consider to be appropriate.
38.
Company to submit periodic statements to debenture trustee : (1)
After an agreement has been concluded between a com pany and a
debenture trustee under Section 36, the company has to submit its
statements in financial transactions to the debentu re trustee in every six
months.
(2) In the event of a change in the management or a ny kind of
change in the ownership of the company after raisin g of debentures, the
company has to give information thereof to the debe nture trustee
within seven days after such change.
(3) In the event of necessity of any additional sta tement, notice or
information submitted by the company pursuant to S ub-section(1) or
(2), the debenture trustee may demand such statemen t, notice or

42
information from the company; and it shall be the duty of the company
to provide the statement, notice or information so demanded to the
debenture trustee.
39.
Rights and liabilities of debenture trustee : (1) If the company
violates any of the terms mentioned in the agreemen t concluded under
Section 36, the debenture trustee may instruct such company to fulfill
such terms as soon as possible or to make repayment of the principals
and interest of the debenture-holder within a time limit as specified by
him.
(2) If it is required to take the financial transac tion of the
company under control or to possess the security as referred to in the
agreement by reason of the repayment made under Sub -section (1) or
for any other reason, the debenture trustee may, su bject to the
prevailing law, take the assets, properties or secu rities of such company
under his/her control and hold the assets or proper ties so possessed in
his own or sell such assets or properties by auctio n or otherwise or deal
with the same in other manner.
(3) Following the possession of the assets of the c ompany under
Sub-section (2), the amount of a debenture-holder s hall be repaid out of
the proceeds of sale of the assets. If any amount remains surplus after
repayment of the amount payable to the debenture- h older, the
debenture trustee shall return that amount to the c oncerned company
(4) Notwithstanding anything contained elsewhere in this Act,
except in cases where the debenture trustee himself buys the assets
taken by the debenture trustee as the security, if the proceeds of sale of
the property which the debenture trustee has taken as security or
possessed be not sufficient to repay all the amount s to debenture
holders, the debenture trustee shall pay the amount s to debenture-

43
holders on pro rata; and such shortfall amounts shall not be recovered
from the debenture trustee’s property.
(5) Any debenture-holder holding more than fifty pe rcent
debentures may, showing the ground of failure of a debenture trustee to
act in the interest of debenture-holder, make an ap plication to the
Securities Board to remove such debenture trustee.
(6) If, on examining the application made pursuant to Sub-section
(5), the contents appear to be reasonable, the Secu rities Board may
remove such debenture trustee and arrange for anoth er debenture
trustee.
40.
Service charges to be collected by debenture truste e : (1) The
debenture trustee may collect service charge from a company for
having acted in the capacity of debenture trustee. The amount of such
service charge shall be as specified in the agreeme nt concluded between
the debenture trustee and the concerned company.
(2) The debenture trustee may recover from the conc erned
company such actual expenses incurred in doing any act on behalf of
the company or debenture-holder or in carrying out valuation,
possession or auction sale of the company’s assets.
41.
Debenture trustee to have rights of debenture-ho lder : (1) If a
company raising debentures is liquidated or becomes insolvent for any
other reasons, the debenture trustee shall make rep resentation on behalf
of the debenture-holder.
(2) In the event of necessity to institute a lawsui t on behalf of the
debenture-holder for the repayment of the principal and interest of such
debenture-holder or otherwise, the debenture truste e shall have the
right to institute the lawsuit on behalf of the deb enture-holder.

44
42. Sale or pledge of shares or debentures : (1) The share or debenture
of a company may be sold or pledged as good as mov able property,
subject to this Act, the memorandum of association and articles of
association.
(2) Notwithstanding anything contained in Sub-secti on (1) , the
promoter of a company, other than a private company which has not
borrowed loan from any other company, shall not be entitled to sell or
pledge any share held by him/her until the first g eneral meeting of that
company is held and a call on the share issued in h is/her name is fully
paid up .
(3) where a share or debenture is pledged pursuant to Sub-
section(1), the pledge shall make an application, i n such format and
along with such fees as may be prescribed, to the r egistered office of the
company to have the matter recorded in the register . The applicant shall
also submit the deed on pledge as well as the share or debenture
certificate, along with the application to be so ma de.
(4) Where an application is made pursuant to Sub-se ction (3), the
company shall record in the register the execution of such pledge and
on receipt of information on the redemption of the share or debenture
so pledged, the records of such pledge shall be cro ssed off the register.
43.
Transmission of shares or debentures : (1) If any share or debenture
is sold, subject to Sub-sections(1) and (2) of Sect ion 42, the buyer thereof
shall make an application to the registered office of the company , in
such format and along with such fees as may be pres cribed, to have
such debenture or share transmitted to his/her name . The applicant
shall also submit, along with such application, a c opy of the deed
relating to the sale and purchase of share or deben ture certificate.

45
(2) If an application is made under Sub-section (1) , the company
shall cross off the name of transferor shareholder or debenture holder
and enter the name of the transferee shareholder in the register within
fifteen days after the making of such application.
(3) Notwithstanding anything contained in Sub-secti on (1), if the
prevailing law on securities transactions provides that no deed of
transfer is required to transfer the title to the s hare or debenture of a
company such deed shall not be required to be produ ced along with an
application to be so made.
(4) If a person who transfers any securities makes an application,
also accompanied by a deed of transfer of share, si nged by the
purchaser to get the transfer of any share or deben ture recorded, the
company shall register the name of share or debentu re transferee in the
shareholder register or debenture- holder register as if such application
was made by the transferee him/herself.
(5) If any person acquires the title to any share o r debenture by
operation of any other provision contained in the p revailing law the
provision contained in Sub-section(1), shall not be deemed to prevent
the company from registering such person as a share holder or
debenture-holder.
44.
Refusal to register share or debenture : (1) Notwithstanding
anything contained in Section 42 or 43, a company m ay, in the following
circumstances, refuse to record any pledge of a sha re in the register or
to effect transmission of a share or debenture wher e it has been
disposed of:
(a) If a call on the share has not been paid up,

46
(b) If such transmission will be contrary to the articl es of
association of the company or the agreement
concluded between the shareholders,
(c) If the transfer fee is not furnished along with the
application.
(2) In refusing to record the pledge of a share or debenture in the
register or to effect transmission of a share of de benture under Sub-
section(1), the company shall give information ther eof to both the
transferor and the transferee or the ledger and ple dge of the share or
debenture within fifteen days from the date of maki ng application.
45.
Other circumstances where shares or debentures may be
transmitted : If any person becomes entitled to the share or debenture
holded by any shareholder or debenture-holder becau se of his death,
being insolvent or otherwise under the prevailing l aw, and that person
so acquiring the title or on whom the title is so d evolved makes an
application accompanied by an evidence thereof, to the company, in
such format and accompanied by such fees as prescri bed, the company
shall transmit such share or debenture to him/her.
Provided, however, that notwithstanding that a shar e has not yet been
transferred to the successor so acquiring the title , if an instrument of
transfer of the share held by the previous sharehol der and of his/her
other rights over such share is executed by /her hi s heir established
under the prevailing law, such transfer shall be de emed to have
transferred to such successor.
46.
Shareholder and debenture-holder register : (1) Each company shall
establish a shareholder register and debenture-hold er register in the
prescribed format and maintain the same at its regi stered office.

47
(2) The following matters concerning each shareholder shall be
mentioned in the shareholder register as referred t o in Sub-section(1) ,
according to the serial number of shares:
(a) Full name and address of the shareholder,
(b) Number of shares subscribed by the shareholder,
(c) Total amount paid by the shareholder and
outstanding amount payable by him/her for the
share,
(d) Date of registration of his/her name as the
shareholder,
(e) Date when his name was struck off,
(f) Name and address of the nominee after the death of
the shareholder, if such nominee is appointed.
(3) The following matters concerning each debenture -holder shall
be mentioned in the debenture- holder register as r eferred to in Sub-
section (1), according to the serial number of debe ntures:
(a) Full name and address of the debenture-holder,
(b) Number of debentures subscribed by the debenture-
holder,
(c) Total amount paid by the debenture-holder and
outstanding amount payable by him/her for the
debenture,
(d) Date of registration of his/her name as the
debenture-holder,
(e) Date when the name of the debenture-holder was
struck off,

48
(f) Name and address of the nominee after the death of
the debenture-holder, if such nominee appointed.
(4) If a shareholder or debenture-holder of a compa ny desires to
inspect the register maintained pursuant to Sub-sec tion (1), the
company shall allow him/her for the same.
Provided, however, that in the case of a public com pany, the company
may, by publishing a seven-day advance notice in a newspaper with
national circulation, and in the case of a private company, the company
may, as provided in the articles of association or consensus agreement,
close inspection of the register for a maximum peri od of thirty days at
one time, not exceeding in the aggregate forty-five days in a year.
(5) If any person desires to have a duplicate copy of the
shareholder register, such duplicate copy shall be issued to that person
by collecting the fees as prescribed, in the case o f a public company, and
such fees as mentioned in the memorandum of associa tion, articles of
association or consensus agreement, in the case of a private company,
except in case where inspection is closed pursuant to the proviso to
Sub-section (4) .
(6) Notwithstanding anything contained elsewhere in this Section,
a listed company may cause the securities registrar recognized under
the prevailing law to provide securities deposits s ervice to establish and
maintain a register. A copy of the register so main tained shall be kept at
the registered office of the company, prior to givi ng a notice of the
general meeting each year . The register shall set out the matters
mentioned in Sub-sections (2) and (3) .
(7) If a register maintained under Sub-section (6) is found to have
recorded a false matter in a manner to affect the r ight and interest of a
person, such securities registrar, his/her director , officer and employee

49
shall be liable to punishment as mentioned in Secti on 160, and the
concerned person shall also be entitled to have rec overed the loss and
damage caused to him/her because of such false reco rd.
47.
Information on title to share : (1) If a company asks any shareholder
to provide information as to what capacity one has obtained the shares
with full voting rights registered in his/her name or whether any other
person has investment in the shares registered in t he name of such
shareholder and where there is another person as a the beneficiary of
such shares, as to the identity and nature of the t itle of that person, it
shall be the duty of such shareholder to provide su ch information to the
company within thirty days.
(2) On receipt of the information sought under Sub- section (1) ,
the company shall record opposite the name of the c oncerned
shareholder, in the register the date of demand of such information,
date of receipt of information and the contents of information received
and provide the Office with information pertaining there to within
seven days.
48.
Address of shareholder : (1) Unless otherwise altered by a notice, the
address of a shareholder mentioned in the sharehold er register shall be
considered to be his/her real address.
(2) In the event of change of address of a sharehol der, a written
notice of the new address has to be given to the re gistered office of the
company immediately after such change.
(3) On receipt of the notice as referred to in Sub- section (2) , the
director or company secretary shall record the addr ess so changed in
the shareholder register.

50
(4) When a notice is sent to the address supplied b y a shareholder,
a notice required to be sent by a company to the sh areholder under this
Act shall, unless otherwise proved, be deemed to ha ve been duly sent,
and received by the concerned shareholder.
49.
Index of shareholders : (1) Unless the shareholder register is in such
form as in itself to clearly constitute an index of the names of
shareholders, every company having more than fifty shareholders shall
prepare and keep a separate index of the names of i ts shareholders.
(2) In the event of any alteration in the sharehold ers register,
necessary alteration shall also be made in the inde x prepared under
Sub-section (1) within thirty days after the date of such alteration in the
register.
(3) The index of shareholders shall be kept in such a manner that
necessary information in respect of each shareholde r can be readily
found from the shareholder register.
(4) The index of shareholders shall be kept togethe r with the
shareholder register.
(5) If a company fails to comply with this Section, the company
shall be deemed to have failed to comply with this Act.
50.
Substantial shareholders : (1) If any person subscribes ordinary
shares with full voting rights that are five percen t or more of the paid
up capital of any public company of which shares th at person has held
in his/her name or through his/her agent, that pers on shall be deemed
to have his substantial shareholding in such compan y.
Provided, however, that in the case of a company ha ving the paid up
capital of more than two hundred fifty million rupe es, any person shall
be deemed to have the substantial shareholding desp ite that such

51
person has subscribed one percent or more of the to tal paid-up capital
of such company.
(2) A substantial shareholder of every public compa ny shall give
the company information setting out his/her name, a ddress as well as
full particulars of the shares registered in his/he r or his agent’s name,
within thirty five days after the knowledge of bein g a substantial
shareholder of that company.
(3) If a person ceases to be a substantial sharehol der of any public
company, that person shall give the company informa tion setting out
his/her name, the date on which he ceases to posses s the status of a
substantial shareholder of that company and other p articulars as well as
the reason why he/she has ceased to be a substantia l shareholder,
within thirty-five days after the date of knowledge of that matter.
(4) Every public company shall maintain a separate register for
the purposes of Sub- section (1), (2) and (3).
51.
Inventory of shares, debentures and loans : (1) Every company shall
prepare and maintain an inventory of the existing s hareholders and
debenture -holders and persons who ceased to be sha reholders or
debenture-holders as at thirty days prior to the ho lding of the……..
µ
annual general meeting.
(2) The inventory as referred to in Sub-section (1) spell outs, inter
alia , the following particulars.
(a) Authorized capital and number of shares of the
company,
(b) Issued share capital of the company,
(c) Paid-up capital of the company,
µ Deleted by the Act Amendi ng Some Nepal Acts, 2064

52
(d) Calls made on every share,
(e) Total amount of installments paid,
(f) Total amount due and recoverable,
(g) Total amount paid on share and debentures as
brokerage,
(h) In the event of forfeiture of any shares, total num ber
of such shares, reasons for forfeiture and date the reof,
(i) Loans borrowed from any bank, financial institution
or any other person or guarantee furnished by the
company,
(j) Names and addresses of the existing directors.
(3) The inventory referred to in Sub-section (1) s hall be signed by
at least one director and be submitted to the Offic e within 30 days after
the date at which the annual general meeting of the company is held
and, in the case of a company not holding the annua l general meeting
within one year after the date at which the company has obtained
permission to carry on such business as to require permission of the
concerned body pursuant to the prevailing law, if the company carries
on such business, and after the date of registratio n where such
permission is not required; and if there is any alt eration in the inventory
once it is submitted pursuant to Sub-section (2) , only the details of such
alteration can be submitted.
(4) If any alteration is made in the inventory, as referred to in sun-
section (1), of a company not holding the general m eeting details
thereof shall be sent to the Office within six mont hs of such alteration.
(5) Notwithstanding anything contained elsewhere in this Section,
if any company mentions the details as referred to in Sub-section(1), as

53
well, in the report required to be submitted pursua nt to Section 78, such
company shall not be required to send a separate in ventory to this
Office under this Section .
52.
Lien on shares : A company may attach a share registered in the na me
of a shareholder and dividends payable thereon, as well, for all moneys
due and payable by him/her to the company in respe ct of that share or
for all moneys due and payable by him/her to the co mpany under the
prevailing law and recover such moneys by deducting the same from
the dividends.
53.
Payment of amount for shares: (1) An amount for a share shall be
paid up within the period of a call made in accorda nce with the articles
of association.
(2) In making a call pursuant to Sub-section (1), a company shall
send every shareholder a written notice, in the pre scribed format,
specifying a time-limit of at least thirty days and the installment
payable by him/her, the place and time for payment . A public
company shall also publish such notice, for at leas t three times, in a
daily newspaper with national circulation.
(3) If a shareholder fails to pay the sum called an d payable in
respect of the share within the period as referred to in Sub-section(2), a
notice shall be sent to the concerned shareholder, giving an additional
period of three months after the date of expiration of that period, and
specifying clearly that if payment is made within that period, it shall be
accepted, along with interest at the prescribed ra te and if that
shareholder fails to make payment even within that period, his/her
share shall be liable to be forfeited. In the case of a public company,
such notice shall also be published in a daily news paper with national
circulation for at least three times. In the instal lment called is not paid

54
even within the time-limit as mentioned in that notice , the company
may forfeit all or the remaining shares after retai ning the number of
shares as fully paid up to the extent of the amount paid up on the
shares in respect of which the company has given su ch notice or also to
the extent of the amount of dividends, if any, atta ched in respect of such
shares.
Provided, however, that where the company has alr eady undergone
liquidation or insolvency prior to the forfeiture o f shares, any amount
due and payable in respect of the shares liable to accordance with the
prevailing law.
(4) Where any share is forfeited under Sub-section (3), the board
of directors may refund the amount already paid up in respect of the
share so forfeited and the amount equal to the divi dends, if any
attached in respect of such share, or issue the sh are to the extent
covered by such amount; and where the amount is to be refunded, it
has to be refunded within three months after the fo rfeiture of share.
(5) In the event of failure to make refund within t hree months
pursuant to sub- section (4), interest chargeable o n such amount after
the expiration of that period shall also be paid.
(6) The shares forfeited under Sub-section (3) may be sold or
otherwise disposed of in such manner as the board o f directors may,
subject to the articles of association, thinks fit.
(7) A company which has been making profits for a p eriod of
three consecutive years or more may, by a special r esolution adopted at
its general meeting determines that a call may not be made in respect of
certain portion of its share capital not called on except in the case of
liquidation or insolvency of the company.

55
(8) After a special resolution has been adopted un der Sub-section
(6), a call may not be made on the amount of share capital that is yet to
be called on as mentioned in that resolution excep t where the general
meeting, by adopting another special resolution, de cides to make such
call and except in the case of liquidation or insol vency of the company.
54.
Payment of amount of shares held jointly : (1) Every partner shall
pay the amount of call on the shares held jointly i n proportion to his
/her ownership.
(2) Except where there exists a duly executed deed indicating
specific portion owned by each partner in the share s held pursuant to
Sub-section (1), all the holders of such shares sha ll be deemed to have
equal ownership there on .
55.
Ownership of shares and debentures : If a dispute arises about the
ownership of any share or debenture issued by any c ompany, the
person whose name is registered in the share or deb enture register
maintained by the company shall, unless otherwise p roved be regarded
as the owner of such share or debenture.
56.
Power of company to alter its share capital : (1) Subject to the
provisions contained in its articles of association , any company may, by
adopting a special resolution at its general meetin g, make alteration in
its share capital as follows:
(a) By increasing its authorized share capital by such
amount as it thinks expedient by issuing new shares ,
(b) By consolidating or dividing all or any of its shar e
capital into shares of larger or smaller amount,
(c) By canceling the shares which, at the date the
adopting of the resolution in that behalf, have not

56
been taken or agreed to be taken by any person or
the shares forfeited pursuant to Sub-section (3) of
Section 53 and diminishing the amount of its share
capital by the amount of the shares so canceled.
(2) When a special resolution for altering the capi tal pursuant to
sub- section (1) is adopted, the memorandum of asso ciation and articles
of association of the concerned company shall be de emed to have ……
µ
been amended to that extent.
(3) A submission, accompanied by the prescribed fee s shall be
made to the Office for the record of the resolution adopted pursuant to
Sub-section (1) and the amendment to the memorandum of association
and articles of association; and the Office shall a ccordingly record the
alteration made in the capital of the company and t he amendment made
to the memorandum of association and articles of as sociation and give
information thereof to the company within seven day s after such
submission.
(4) A cancellation of shares, if any, made in pursu ance of Clause
( c) of Sub-section (1) shall not be deemed to have been made for
purposes of the reduction of share capital of a com pany.
(5) If a company is required to increase its issued capital to the
extent of its authorized capital, it may increase s uch capital by adopting
an ordinary resolution at the general meeting.
(6) If a public company is required to increase its share capital
under Sub-section (5) and issue its shares publicly , it shall fulfill the
procedures specified in this Act and the prevailing law on securities.
µ Deleted by the Act Amendi ng Some Nepal Acts, 2064

57
Provided, however, that in so issuing bonus shares and right shares that
they may be subscribed by its existing shareholders and employees only
or issuing shares pursuant to Sub-section (9), such company shall not be
required to fulfill such procedures.
(7) A public company shall publish a notice on the issue of right
shares, which may be subscribed by the existing sha reholders only, in a
daily newspaper of national circulation for at leas t three consecutive
times prior to fifteen days of the issue of such sh ares.
(8) The existing shareholders shall have the first right to
subscribed the shares issued under Sub-section (7) in proportion to their
respective shareholding.
(9) Notwithstanding anything contained in Sub-secti on (8) , no
shareholder of a company existing for the time bei ng shall have the
first right over the following shares to be issued by the company:
(a) Shares issued by the company for any consideration
other than cash,
(b) Shares issued to any person under any right or
facility provided in accordance with the terms of a n
agreement concluded with the company,
(c) Shares issued under an employee share scheme,
(d) Shares issued in accordance with an agreement
concluded between the company and its creditors,
(e) Shares existed on converting preference shares into
ordinary shares or debentures into shares by the
company,
(f) Shares issued in accordance with an agreement
between the concerned parties in the course of

58
management of the company, restructuring of its
capital or loan or in the course of implementation of
a restructuring program agreed upon between the
relevant parties in accordance with the prevailing
law on insolvency or in the course of implementatio n
of a program of conversion of a public company into
another public company.
(10) No share capital shall be increased or bonus s hare issued by
revaluating the assets of a company other than from profits made by the
company or funds created out of profits.
(11) In issuing shares under this Section, a time l imit of at least
thirty-five days shall be given to the existing sha reholders to subscribe
the shares. If such shareholders fail either to sub scribe the shares or to
sell or transfer the right to subscribe shares to a ny one else within the
said time limit or, such shares may be sold in any other manner as
decided by the board of directors of the company.
57.
Reduction of share capital : (1) If a company intends to reduce its
share capital , it may, by adopting a special reso lution to that effect at
its general meeting, reduce its share capital by ob taining approval of the
Court and making necessary amendment to or alterati on in the
memorandum of association and articles of associati on, accordingly.
(2) On receipt of approval of the Court pursuant to Sub-section
(1), the company may reduce its share capital as fo llows:
(a) By reducing the capital to such amount as has been
paid up where calls for payment of amount on shares
are not fully paid up,
(b) By paying back any paid-up share capital,

59
(c) By devaluating the face value of shares where the
company has sustained a big loss or suffered a
natural calamity.
(3) Notwithstanding anything contained in subsectio n (2), a
company which has already become insolvent in accor dance with the
prevailing law shall not reduce its capital pursuan t to this Section.
58.
Procedures for obtaining approval of Court to reduc e share
capital : (1) Where a company has adopted a special resolutio n for
reducing its share capital pursuant to Section 57 , it shall make a
petition to the Court for an order confirming the reduction.
(2) Where a petition is made pursuant to Sub-sectio n (1), the
concerned company shall, prior to the hearing of su ch petition, publish
a public notice in a daily newspaper of national ci rculation for at least
three times, setting out the venue and date of hear ing on the reduction
of share capital of the company.
(3) Every person who is entitled to any debt or cla im under the
prevailing law at the time of commencement of the w inding up or
insolvency of a company shall be entitled to submit his claim and
objection to the reduction of share capital of the company.
(4) The director or company secretary of a company shall , as
ordered by the Court, submit to the Court a real an d true list of
creditors of the company, if any, setting out, int er alias, their names,
addresses and amount of debt repayable to each of t hem, at the
commencement of hearing of the petition for reducin g the capital of the
company .
(5) Irrespective of whether the creditors whose deb ts are yet to be
discharged or determined, out of the creditors whos e names are entered

60
on the list submitted pursuant to Sub-section(4), d o or do not consent to
the reduction of capital in the case where the comp any admits the full
amount of the debts or claims made by the creditors , or though not
admitting it, agrees to make provision of moneys re quired to pay such
amount and makes required provision for the same by executing a bond
undertaking to pay the full amount within a certain date, then the Court
may issue order confirming the reduction of the sha re capital .
(6) In taking action for approval on a proposed red uction of share
capital which involves either the diminution of any liability in respect of
unpaid share capital or the paying back to an share holder of any
amount paid for shares, the Court may, if, having r egard to the
circumstances and available evidence, it thinks pro per so to do, direct
that the provisions of Sub-section (3) or (4) shall not apply to any
specific creditor.
(7) If the list of creditors submitted pursuant to subsection (4) is
found to contain any false statement or omission, t he director of the
company who submits such list and the officer who s igns such list shall
be liable to punishment under this Act.
Provided, however, that if the officer who signs su ch list proves that
any omission or mistake was made without his/her kn owledge or
immediately when he/she knew such omission or mista ke, he gave
information to the Court for the rectification of s uch omission or
mistake, prior to the making of an order by the Cou rt under this Section
or he exercised all reasonable care to avoid such o mission or mistake, he
shall not be liable to that punishment.
(8) If the Court is satisfied, with respect to the creditors who
under Sub-section (1) are entitled to object to the resolution on
reduction of capital, that either their consent to the reduction has been

61
obtained or their debts or claim have been discharg ed or have been
determined and are at the state of discharge, or ha ve been secured, it
may make an order confirming the reduction, specify ing appropriate
alters and conditions.
(9) Where the Court makes an order pursuant to Sub- section (8),
it may, if it thinks proper so to do, order directi ng that the concerned
company, of which resolution to reduce capital has been co confirmed,
shall, for a specified periods, add to its names t he last words thereof the
words “ capital reduced” and publish necessary noti ce with a view to
giving information to the general public about the reasons and causes
for such reduction and other important information in regard thereto .
(10) Where, pursuant to Sub-section (9) , a compan y is ordered to
add to its name the words “capital reduced” ,those words shall, until
the expiration of the period specified by the Court ,be deemed to be an
integral part of the name of the company.
(11) The contents of the terms contained in an orde r issued by the
Court, pursuant to this Section, in the course of c onfirming a resolution
for the reduction of capital shall be deemed to hav e ipso facto been
incorporated in the memorandum of association and a rticles of
association of the company; and the memorandum of a ssociation and
articles of association shall be deemed to have bee n amended to that
extent.
(12) Any director who knowingly conceals, hides or holds back
the name of any creditor who, under this Section, is entitled to object
to the resolution for reducing capital or knowingly prepares or submits
a false statement on the amount of loan or clam or liability or conceals,
hides or holds back such loan or liability or prepa res or causes to

62
prepare a false statement or any officer or employe e of the company
who abets to such act shall be liable to punishment under this Act.
(13) Where the share capital of a company is reduce d pursuant to
this Section, the director or company secretary of that company shall
mention and authenticate that matter in each share certificate issued by
such company.
59.
Liability of shareholders in respect of reduced sha re capital:
Except as otherwise provided for in this Section, a shareholder of the
company, past or present, shall not be liable, in r espect of any share
mentioned in the order issue by the Court confirmin g the reduction of
share capital, to pay any amount exceeding the diff erence between the
amount actually paid on the share or the reduced am ount, id any,
which is deemed to have been paid thereon, as the c ase may be , and the
fixed amount of such share.
Provided, however, that where the list of creditors entitled to object to
the reduction of share capital submitted to the Cou rt omits any such
creditor and, after an order confirming the reduc tion of capital of the
company has been made, the company is unable to pa y the amount of
debt of such creditor, the shareholder of the compa ny shall be bound to
pay the amount as mentioned in Sub-section (3) or ( 4) .
(2) Notwithstanding anything contained in the provi so to Sub-
section (1), where the list submitted to the Court omits the name or any
claim of a creditor because of a fault or negligenc e of his own, the
shareholders shall not be bound to pay such amount.
(3) A person who was a shareholder of a company at the date of
issue by the Court of an order confirming the resol ution for reducing
the capital of the company shall be liable to pay a n amount not
exceeding the amount which he would have been liabl e to pay if the

63
company had undergone insolvency and commenced inso lvency
proceedings on the day immediately before the said date.
(4) If a company is insolvent, and where an applica tion is made
by a creditor whose name is said to be omitted from the list of creditors
submitted to the Court , along with the proof of om ission of his name,
the Court may, if it thinks fit, settle a list of s hareholders who are liable
to pay to the company the amount required for the r epayment of loan of
such creditor and issue an order to make calls on s hares held by the
shareholders settled on such list as if they were o rdinary contributors in
an insolvency process of the company.
(5) Notwithstanding anything contained elsewhere in this Section,
no share holder shall be liable to pay an amount in excess of the face
value of a share at the time of the subscription of such share by him.
60.
Directors to be responsible in the case o f loss of net worth of
company: (1) If the net worth of a public company is reduced to half
the paid–up capital or less than that the directors shall prepare an
appropriate strategy for the interest of the compan y and shareholders,
as well, within thirty five days of the knowledge o f this matter, and
present a separate resolution thereon at the genera l meeting toe held
immediately after the knowledge of such matter.
Provided, however, that where approval of the gener al meeting is
required to implement such strategy, the extra-ordi nary general
meeting shall be called promptly.
(2) The directors of company who fail to prepare st rategy or to
present a resolution at the general meeting pursuan t to Sub-section (1)
or who knowingly permit the existence of the situat ion where such
meeting is not called shall be liable to punishment under this Act.

64
(3) If it is held that the net worth of company has been reduced as
mentioned in Sub-section (1) as a result of mala fide intention or
malicious recklessness of any director, the directo r who commits such
act shall also be liable to pay compensation for th e same.
61.
Prohibition on purchase by company of its own share s: (1) No
company shall purchase its own shares (buy-back) or lend money
against security of its own shares.
(2) Notwithstanding anything contained in Sub-secti on (1), in the
following circumstances, a company may buy back its shares out of its
free reserves available for being distributed as di vidends, by giving
information to the Office:
(a) Where the shares issued by the company are fully
paid up;
(b) Where the shares issued by a public company have
been listed in the Securities Board;
(c) Where the buy-back of shares is authorized by the
articles of association of the concerned company;
(d) Where a special resolution has been adopted at the
general meeting of the concerned company
authorizing the buy-back;
(e) Where the ratio of the debt owed by the company is
not more than twice the capital and general reserve
fund after buy-back of shares;
Explanation
: For the purposes of this Clause, “debt”
means all amounts of secured or unsecured debts
borrowed by a company.

65
(f) where the value of shares to be bought back by a
company is not more than twenty percent of the tota l
paid up capital and general reserve fund of that
company;
(g) Where the buy-back of shares is not in contraventio n
of the directives issued by the Office in this resp ect.
(3) A resolution to be presented at the general mee ting pursuant
to Clause (d) of Sub-section (2) shall state the f ollowing matters:
(a) The reason and necessity for the buy-back of shares ;
(b) A statement of the evaluation of possible impacts o f
the financial situation of the concerned as a resul t of
the buy-back of shares,
(c) The class and number of shares intended to be
bought back;
(d) The maximum or minimum amount required to buy
back shares as referred to in Clause (c) and financ ial
source of such amount;
(e) The time limit for the buy-back of shares;
(f) The mode of the buy-back of shares;
(g) Such other necessary matters as specified by the
Office and as required to be disclosed under the
prevailing law, in respect of the buy-back of share s.
(4) Where a special resolution as referred to in Su b-section (3) is
adopted by the general meeting, the concerned compa ny may buy back
its shares in any of the following manners within a period of twelve
months of the adoption of that resolution:

66
(a) Purchasing from the stock exchange;
(b) Purchasing from the concerned employee of the
company the shares allotted to him/her,
(c) Purchasing from the existing shareholders on a
proportionate basis.
(5) where a company buys back its own shares pursua nt to Sub-
section (4),it shall file with the Office a return containing the number of
shares bought back, amount paid for the same and ot her necessary
details within thirty days of the date of such buy- back.
(6) There shall be established a separate capital r edemption
reserve fund, to which a sum equal to the nominal v alue of the shares
bought back pursuant to Sub-section (4) shall be tr ansferred; and the
amount of such fund shall be maintained as if it we re the paid-up
capital .
(7) Where a company buys back its shares pursuant t o Sub-
section (4),it shall cancel the shares so bought ba ck within one hundreds
twenty days of the date of such buy-back .
(8) Once a company buys back any class of shares pu rsuant to
this Section, the company shall not re-issue the sh ares of that class,
except for the issue of bonus shares or payment of its liability, prior to
the expiration of two years after such buy-back.
(9) Notwithstanding anything contained elsewhere in this Section,
no public company shall buy back its shares in a ma nner that such
minimum number of shareholders or minimum paid–up c apital as
required to be maintained by that company becomes l ess or lower.

67
(10) Other conditions where a company cannot buy back its
shares and other terms required to be complied with in the buying back
of its shares shall be as prescribed.
62.
Prohibition on providing loan or financial assista nce by
company to purchase its own shares : No company shall provide any
loan or financial assistance of any kind to any per son for purchasing its
own shares or the shares of its holding company or getting entitlement
too such shares in any manner.
Provided, however, that nothing contained in this S ection shall prevent
a company from providing loans to any employees of the company to
purchase the fully paid up shares of that company o r its holding
company or acquire ownership over such share s in a ny manner, under
a scheme of selling shares to its employees.
63.
To obtain approval for commencing business: (1) No public
company incorporated under this Act shall commence its business
without obtaining the approval to carry on its busi ness.
(2) A public company shall make an application, alo ng with the
evidence showing the full payment of calls on the s hares, out of the
amount of shares undertaken to be subscribed by its prompters , to the
office for getting approval pursuant to Sub-section (1)
(3) Where an application is made pursuant to Sub-s ection (2) and
it so proved that calls on the shares, out of the a mount of shares
undertaken to the Office shall grant approval for c arrying on the
business.
Provided, however, that if the amount paid up on sh ares is less than the
amount mentioned in Sub-section (1) of section 11, the Office shall not
grant such approval.

68
(4) without obtaining the approval to commence busi ness
pursuant to Sub-section(2), there shall not be carr ied out any act of
publishing the except those acts such as convening the extraordinary
general meeting, meeting of the board of directors and management of
the company.
(5) Notwithstanding anything contained in Sub-secti on (2), where
in the case of a company carrying on any specific b usiness, the
competent regulatory body empowered to regulate suc h business under
the prevailing law has , while granting a license, specified any terms
and conditions to be complied with prior to the com mencement of such
business, no approval to commence business shall be granted unless
and until an evidence showing the compliance with s uch terms and
conditions is submitted.
(6) Notwithstanding anything contained elsewhere in this Section,
a private company may commence its transactions imm ediately upon
receipt of the certificate of registration with the Office.
Provided, however, that where an approval is to be obtained from the
concerned body pursuant to the prevailing law to ca rry on any specific
transactions, the company shall commence its transa ctions only after
obtaining such approval.
64.
Prohibition on issue or sale of shares at a discoun t: (1) A company
shall not issue or sell its shares at a discount .
(2) Notwithstanding anything contained in Sub-secti on(1), a
company may, on the following conditions, issue or sell shares at a
discount by adopting a special resolution at the ge neral meeting to that
effect, not being less than the percentage specifie d in that resolution:

69
(a) In issuing or selling shares pursuant to a capital
restructuring scheme of the company,
(b) In issuing or selling shares pursuant to a scheme o f
converting loans borrowed by the company into
shares with the consent of creditors;
(c) In issuing or selling shares pursuant to an employe e
share scheme;
(d) In issuing shares on such other conditions as
approved by the Office .
65.
Preference shares : (1) A company may issue preference shares as
provided for in this Act , memorandum of associ ation or articles of
association.
(2) Except as provided in the articles of associati on, no shares
issued pursuant to Sub-section (1) shall be convert ed into ordinary
shares.
(3) In issuing preference shares pursuant to Sub-se ction (1), the
following maters, inter alia, shall be disclosed:
(a) Whether preference is given to receive dividends
against ordinary shares;
(b) Percentage of dividends receivable by preference
shareholders;
(c) Whether dividends get cumulated every year
(cumulative) or profits are distributed only in a y ear
wherein profit is made(non-cumulative);
(d) Whether preference is given while paying amount of
share in the event of liquidation of company;

70
(e) Whether voting right is attached there to; and if
voting right is attached, whether such right is
available only in the case of preference share or a lso
in other matters;
(f) Whether voting right is available also in other
matters pursuant to Clause (e) , the proportion to
which such right is exercisable;
(g) Whether preference shares can be converted into
ordinary shares;
(h) Whether the amount of preference shares can be
redeemed (redeemable ) or cannot be redeemed
(irredeemable) after a certain period;
(i) Whether, in redeeming preference shares, premium
is payable on redemption.
(4) Where any redeemable shares are issued, the sha res shall not
be redeemed unless they are fully paid.
(5) No amount of preference shares shall be redeeme d except out
of profits which would otherwise be available for dividend or out of
the proceeds of a fresh issue of shares made by the company for the
purposes of the redemption.
(6) Where a premium is payable on the redemption of any
redeemable preference shares, there shall be provid ed for a separate
fund out of the profits of the company or out of th e company’s shares
premium account, for the purposes of redemption of such shares.
(7) Except in cases where any redeemable preference shares are
redeemed out of the proceeds of a fresh issue of sh ares pursuant to sun-
section (5) , while redeeming preference shares pur suant to this Act, a

71
capital redemption reserve account shall be establi shed and a sum equal
to the nominal amount of the shares redeemed shall be transferred to
that account, out of profits which would otherwise have been available
for dividend.
(8) The capital redemption reserve account establis hed pursuant
to Sub-section (7) shall be maintained as if it wer e the paid –up capital .
(9) After the completion of the redemption of any p reference
shares redeemed pursuant to this Section, such shar es shall be deemed
to have, ipso facto, been cancelled.
(10) A company shall while redeeming any preference shares,
follow such terms and procedures as provided by th e articles of
association of the company, subject to this Section ; and such redemption
of preference shares shall not be taken as reducing the amount of
authorized share capital of the company.
(11) Where a company has redeemed or is about to re deem any
preference shares, it shall have power to issue new shares up to the
nominal amount of the shares so redeemed or to be r edeemed.
(12) Where a company has redeemed any preference sh ares, the
company shall give information thereof to the Offic e within one month
of such redemption; and on receipt of such informat ion, the Office shall
record such information in the company register.
(13) Notwithstanding anything contained elsewhere i n this
Section , a company may issue new shares to its sh areholders as fully
paid bonus shares, out of the capital redemption r eserve funds
established pursuant to Sub-section(7).
66.
Restriction on minor and person disqualified under law to make
contract to be promoter : (1) A minor who has not attained the age of

72
sixteen years and a person who is not qualified to make contract under
the law shall not be eligible to become the promote r of a company.
Provided, however, that this Section shall not be d eemed to prevent a
minor or a person who is disqualified under the law to make contract
from acquiring the title to the shares of a company subscribed by the
promoter, by virtue of succession or operation of l aw.
(2) Where any minor or any person who is disqualifi ed under the
law to make contract is to purchase or sell any sha res or debentures of
any company, the father, mother or husband or wife or legally
appointed protector or guardian of such person shal l do so.

Chapter 5
MEETINGS OF COMPANY
67. General meetings of company : (1) The general meetings of a
company shall be as follows.
(a) Annual general meeting, and
(b) Extra-ordinary general meeting.
(2) A public company shall send a notice specifying the place,
date and agenda of meeting to every shareholder at the address
supplied by that shareholder to the company, in adv ance of at least
twenty one days to hold the annual general meeting, and in advance of
at least fifteen days to hold the extra- ordinary g eneral meeting . A
notice thereof shall also be published at least twi ce in a national daily
newspaper.

73
Provided, however, that while calling any general m eeting which has
been adjourned, if such meeting is not transacting any new agenda, a
notice of that meeting published in a national dail y newspaper in
advance of at least seven days shall be deemed to h ave been duly given.
(3) No decision shall be taken in any general meeti ng on any
matter which has not been notified in advance pursu ant to Sub-
section(2), except in the following circumstances:
(a) Except as otherwise provided in the other sections of
this Act, If the shareholders representing sixty se ven
per cent of the total shares of the company who are
entitled to vote at the general meeting, attend in
person or by proxy and vote in favor of taking a
decision on any matter,
(b) If the matter was already notified for being
transacted in any general meeting which has been
adjourned.
(4) Except in cases where the Office gives prior ap proval to hold
the general meeting elsewhere, the general meeting of a public
company shall be held either at the district where the registered office
of such company is situated or at such place adjoi ning to the district of
registered office as is convenient to most sharehol ders .
(5) A list indicating the name, address of the exis ting
shareholders of the company and the number of share s held by them
shall be kept at the meeting venue for inspection b y the shareholders.
(6) The matters included in the agenda sent along w ith a notice of
the general meeting shall be discussed and decided first at that meeting.

74
(7) The person chairing the general meeting may adjourn the
meeting as required. Any matter which is notified, pursuant to this Act,
before or after the day of holding the adjourned ge neral meeting may
be discussed and decided in such adjourned meeting.
(8) The original meeting and the adjourned meeting shall have
the same powers. A resolution adopted at the adjour ned meeting shall
be deemed to be adopted on the date of holding that adjourned meeting.
(9) Where any corporate body has purchased shares i n a company,
a person appointed by such corporate body shall be entitled to
attended and vote at the general meeting of the com pany, on behalf of
such body.
(10) The proceedings at any general meeting shall n ot be void or
invalid merely for reason of the accidental omissio n to give notice to
any shareholders of any listed company or the non-r eceipt by any
shareholder of notice sent at the address which he has supplied to such
company.
(11) Notwithstanding anything contained elsewhere in this
Section, matters pertaining to the general meeting of a private company
and procedures thereof shall be as provided in the articles of association
or the consensus agreement. Failing such provision , the provisions of
this Act shall apply.
(12) Other provisions relating to the procedures of general
meeting shall be as contained in the articles of as sociation of a company.
68.
Directors required to be present : Every director of a company shall
be present in the general meeting as far as possibl e.
69.
Legality of meeting : Before every general meeting commences, the
shareholders present therein shall ascertain wheth er it has been

75
convened in accordance with this Act and the articl es of association;
and a general meeting shall be deemed to have been duly called even if
any other law has not been observed with respect th ereto, provided a
notice has been sent to all shareholders pursuant t o Sub-section(2) of
Section 67 and the meeting attended by the required quorum as referred
to in Section 73 agrees to hold it .
70.
Cases where attendance or voting in meeting is rest ricted : (1) No
person shall be entitled to attend and vote in any general meeting, in
the capacity of a shareholder, either in person or by proxy on any
discussion to be held in respect of any terms and c onditions entered
into or to be entered into between him/herself and the company.
(2) No director or his/her partner or his/her proxy shall be
entitled to vote on any discussion to be held at an y General Meeting in
respect of the responsibility for any act done or o mitted to be done or
done wrongfully by him/her or in respect of his/he r own appointment,
dismissal, transfer or confirmation, with respect t o the provision of , or
reduction or increment in remuneration, allowance o r bonus or in
respect of any agreement, contract or arrangement r egarding his
employment or anything in which his interest or con cern is involved.
(3) Any shareholder who has not paid calls on the s hares shall not
be entitled to attend and vote in the general meeti ng.
(4) W here any shareholder appoints a director of the con cerned
company as his proxy pursuant to Sub-section(2) of Section 71, such
director shall not be entitled to vote in the gener al meeting ,as a proxy
of any one , on any matter in which his/her interes t or concern is
involved or on the matter of his/her appointment.
(5) Notwithstanding anything contained in this Act or the
prevailing law, where a bank or financial instituti on incorporated under

76
the prevailing law, which institutes legal action a gainst a shareholder,
who has borrowed a loan from such bank or financial institution against
the pledge or security of the shares held by him, f or his default in
repaying the loan, writes to the concerned company to prevent him
from exercising voting right in respect of shares, then the company shall
prevent such shareholder from exercising voting ri ght in respect of the
shares held by him/her for a period until he/she re pays the loan.
71.
Right to vote in general meeting : (1) Except as otherwise provided
in this Act or the articles of association of a com pany, only the person
whose name is registered as a shareholder in the sh areholder register
shall, subject to Section 70, be entitled to attend the general meeting and
cast votes at the rate of one vote for each share held by him.
(2) Except in cases where the articles of associati on of a company
prohibit the proxy of a shareholder from exercisi ng the right to vote,
any shareholder may, subject to this Section , appo int another person as
his proxy to attend the general meeting and vote in stead of him/herself.
(3) Subject to Sub-section (1) or (2) , where a sha reholder who is
entitled to vote is not able to personally attend t he meeting, he/she may
appoint a proxy to vote in his/her stead, by an ins trument of proxy
executed in the prescribed format and signed by him /her and the proxy
so appointed shall be entitled to attend or vote in the meeting , subject
to the provisions contained in Section 72.
(4) where two or more persons jointly hold any shar es, only the
vote cast or instrument of proxy executed by the pa rtner appointed by
such partners or by the proxy appointed by that par tner pursuant to
Sub-section(2),and failing such appointment of any partner, by the
partner whose name appears first in the serial ord er, out of the

77
partners, in the shareholder register maintained pursuant to Section 46
shall be valid.
72.
Provision on voting in election of director : (1) Except as otherwise
provided in the articles of association, on a poll in election of directors,
every shareholder shall be entitled to cast such nu mber of votes as may
be set after multiplying the number of shares held by him/her by the
number of directors to be appointed; and the direc tor who casts such
votes may cast all his/her votes for a single candi date or may cast votes
in a manner that his/her votes are divided for more than one candidate
as indicated by him.
(2) A corporate body entitled to appoint a director pursuant to
this Act or articles of association may appoint di rectors in proportion
too its shareholding, and in such a case, it shall but be entitled to cast
vote in the election.
Provided, however, that a corporate body which is n ot able to appoint
even a single director in proportion to the number of shares and the
total number of directors or which fails to appoint a director in exercise
of the power conferred by this Sub-section may, lik e other shareholder,
take part in the election of directors representing shareholders, cast vote
or file candidacy up to the number of directors tha t can be elected in
proportion to the shares held by that body in such election.
73.
Quorum : (1) A quorum for the general meeting of a private company
shall be as specified in the articles of associatio n of such company.
(2) Unless the articles of association of a public company provides
for a larger number for the quorum, no proceedings of the meeting of
the public company shall be conducted unless at lea st three
shareholders of the total shareholders, representin g more than fifty per

78
cent of the total number of allotted shares of that company, are present
either in person or by proxy.
(3) Where a meeting cannot be held because of quoru m as
referred to in Sub-section (2), and the meeting is called next time by
giving a notice of at least seven days, nothing sha ll prevent the holding
of such a meeting if at least three shareholders, r epresenting twenty five
percent of the total number of allotted shares of t he company, are
present either in person or by proxy.
(4) Notwithstanding anything contained elsewhere in this
Section , in the case of a company incorporated und er the proviso to
Sub-section (2), of Section 3 or a company incorpor ated under Sub-
section(1) of Section 173, the presence of three sh areholders as
mentioned in Sub-section(2) or (3) shall not be man datory.
74.
Discussion and decision : (1) A general meeting shall be chaired by
the Chairperson of board of directors and, in his/h er absence, by the
person nominated by the directors from amongst them selves.
(2) Every matter to be discussed in a general meeti ng shall be
presented in the form of resolution. The chairperso n of the meeting
shall declare whether a resolution has been adopted or not .
(3) The opinion of majority of the shareholders pre sent in the
meeting shall be deemed to be the decision of th at meeting on every
matter put to the vote. Such voting may be taken in such manner
including a show of hands, voice voting, division o f shareholders in
groups or poll (use of ballet paper) as well as oth er appropriate method
as prescribed by the Chairperson.
Provided, however, that in the case of a special re solution, the
resolution shall be deemed to have been adopted by the meeting only if

79
the shareholders representing seventy five per cent shares out of the
shareholders present in the meeting vote in favour of the resolution.
(4) If the votes are evenly divided for and against at a general
meeting, the Chairperson of the meeting may exercis e the casting vote.
Provided, however, that the Chairperson shall not b e deprived of the
right to vote in the capacity of shareholder.
75.
Minutes to be kept : (1) Every company shall keep minutes of the
proceedings of general meeting, by making entries t hereof in a separate
book; and the minutes shall be signed by the chairp erson of the meeting
concerned and by the company secretary, if any . In the case of a
company which has no company secretary, the minutes shall be signed
by the Chairperson of the meeting concerned and by a representative of
shareholders appointed by a majority of the general meeting.
(2) While keeping the minutes as referred to in Sub -section (1),
matters such as the manner in which the notice of t he meeting was
issued, the number of shareholders present, the per centage of
representation of the total shares , the result of voting, if any, shall all be
set out in the minutes.
(3) The minutes set down pursuant to this Section s hall be sent to
the shareholders within thirty days of the holding of the general
meeting .
Provided, however, that if any company publishes th e minutes in a
national daily newspaper, it need not send the same to the shareholders.
(4) The minutes of proceedings of the general meeti ng kept
pursuant to Sub-section (1) shall be kept at the re gistered office of the
company. If any shareholder wishes to inspect such minutes during

80
office hours, the company secretary or such other e mployee as
designated by the company shall allow such inspecti on.
(5) If any shareholder wishes to get a copy of an y minutes of the
general meeting, the company shall provide such cop y by collecting
such fees as specified by its articles of associat ion.
76.
Annual general meeting : (1) Every public company shall hold its
first annual general meeting within one year after it is permitted to
commence its business, and thereafter it shall hold the annual general
meeting every year within six months after the expi ry if its financial
year.
(2) If any public company fails to call the annual general meeting
even within three months after the expiry of the ti me-limit referred to in
Sub-section(1), the office may give direction to ca ll the annual general
meeting of such company.
(3) If the company fails to ca;; the annual genera l meeting even
within three months after the receipt of the direct ion as referred to on
Sub-section(2), any shareholder may make a petition , setting out the
matter, to the court. Where such petition is made, the Court may either
cause to hold the annual general meeting or issue a ny other appropriate
order.
(4) Notwithstanding anything contained in Sub-secti ons (1) and
(2) of section 73, the shareholders present in the general meeting called
pursuant to the order of the court under Sub-sectio n (3) shall be deemed
to be a quorum.
77.
Matters to be presented and decided in annual gener al meeting :
(1) The directors shall present the annual financia l statements as

81
audited, auditor’s report and director’s report at the annual general
meeting of a public company.
(2) If the shareholder or shareholders representing at least five
per cent of the total number of votes shall so desi re, he/they may, by
submitting an application to the directors prior th e issue of a notice
under Sub-section (2) of Section 67, cause any matt er to be presented at
the annual general meeting for discussion and decis ion.
(3) At least twenty one days prior to the holding o f the annual
general meeting, every public company shall make ar rangement so that
the shareholders can inspect and obtain copies of t he annual financial
statement, directors’ report and auditors’ report a s referred to in Section
84 and publish a notice in a national daily newspa pers for information
thereof.
(4) Information of the statements and reports as re ferred to in
Sub-section (3) may also be disseminated through el ectronic
communication media, as per necessity.
(5) If any shareholder makes a request for a copy o f the annual
financial statement, directors’ report and auditor’ s report as referred to
in Sub-section (3), the company shall provide a cop y of such reports or
statements to such shareholder.
(6) Except as otherwise provided in this Act, matte rs of
distribution of dividends to shareholders, appointm ent pf directors and
their remuneration, appointment of auditor and his remuneration of
such other items as required by this Act or the art icles of association to
be decided by the annual general meeting of the com pany can be
presented at the decided by the annual general meet ing of the company
can be presented at and decided by that meeting.

82
Provided, however, that on the rate of dividends t o be distributed to
the shareholders shall be made in a manner to excee d the rate of such
dividends fixed by the board of directors.
78.
Report to be submitted to Office : Every public company shall
prepare a report indicating the following matters a nd submit the same
to the Office in advance of at least twenty one day s before the holding
of the annual general meeting. Such report has to b e approved by the
board of directors and certified by the audito r of the company.
(a) The total number of the shares allotted,
(b) Number of fully paid up and unpaid shared out of
the allotted shares out of the allotted shares,
(c) Particulars of director, managing director, aud itor,
executive chief and manager of the company, and
amount of remuneration, allowance and facility
paid to them,
(d) The names of individuals or corporate bodies
subscribing five percent of more of the paid up
capital of the company, and details of shares or
debentures held in their names,
(e) The total proceeds of the sale of shares, and
particulars of the new shares and debentures issued
and raised by the company in the financial year
concerned,
(f) The amount due and payable by the director or
substantial shareholder to his/her close relative t o
the company,

83
(g) The details of payment made or to be made against
the sale of shares or for any other matters,
(h) The amount of loans borrowed from banks and
financial institutions and of principal and interes t
due and payable,
(i) The amount claimed to be receivable by the company
or payable by the company to any other person to
details of, lawsuits, if any , ongoing in this resp ect,
(j) The number of expatriate employees engaged in the
management of the company and at other levels, and
remuneration, allowances and facilities paid to the m,
(k) The number of expatriate employees engaged in the
management of the company and at other levels,
and remuneration, allowances and facilities paid to
them,
(l) Where any agreement has been entered into between
the company and any foreign body or person on
investment, management or technical services or
other matter for a period of more than one year,
particulars thereof and the particulars of the
dividend, commission, fee, charge and royalty, as
well paid under such agreement in the financial ye ar
concerned,
(m) A statement of the management expenditures of the
company in a financial year,
(n) The amount of dividends yet to be claimed buy the
shareholders,

84
(o) A declaration that the company has fully observed
this Act and the prevailing law,
(p) Other necessary matters.
79.
Preparation of documents for annual general meeting : At least
twenty one days prior to the holding of the annual general meeting,
every public company shall prepare the annual finan cial statements,
directors report, auditor’s report to be discussed in the meeting, the
report prepared under Section 78 and the resolution s to be presented in
the meeting and arrange to so keep the same at its registered office that
the shareholders can inspect them; and if any shar eholder makes and
application for a copy thereof, a copy thereof shal l be provided to
him/her.
Provided, however, that the resolutions to be pres ented in the meeting
as special resolution shall be sent, along with a n otice of the meeting, at
the address of the shareholder.
80.
Return of annual general meeting to be forwarded to Office : (1)
Every public company shall, within thirty days of t he holding of the
annual general meeting, forward to the Office a ret urn indicating the
number of shareholders present in the meeting, a co py of the annual
financial statement, director’s report and auditor’ s report and resolution
adopted by the meeting.
(2) Except as otherwise provided in this Act, every private
company shall submit a copy of the annual financial statement certified
by the auditor to the Office within six months of t he completion of its
financial year.
81.
Fine to be imposed in case of failure to submit ret urns : (1) Any
return, notice or information required to be provid ed by the company

85
to this Office or information required to be provid ed by the officer or
shareholder to the company pursuant to this Act sha ll be provided by
the director of the company or the officer or share holder who has the
duty to provide such return, notice or informatio n to the Officer or the
company, as the case may be, within the timelimit, if any, prescribed by
this Act for the provision of such return, notice o r information.
(2) The following director of a company or its offi cer who is in
default in providing the return, notice, informatio n or reply as referred
to in Section
§51, 78, 80, 120, 131 or 156 within the time limit as referred
to in Sub-section (1) shall be punished by the Regi strar with fine, as
follows:
(a) a fine of one thousand rupees if the paid up capita l of
the company is up to two million five hundred
thousand rupees, a fine of two thousand rupees if t he
paid up capital of the capital is up to often milli on
rupees, and a fine of five thousand rupees if the p aid
up capital of the company is more than ten million
rupees, for a period not exceeding three months aft er
the expiry of the time limit;
(b) a fine of one thousand five hundred rupees if the
paid up capital of the company is up to two million
five hundred rupees, a fine of three thousand rupee s
if the paid up capital of the capital is up to ten
million rupees, and a fine of seen thousand rupees if
the paid up capital of the company is more than ten
million rupees, for and additional period not
§ Amended by the Act Amendi ng Some Nepal Acts, 2064

86
exceeding three months after the expiry of the time
limit as referred to in Clause (a);
(c) A fine of two thousand five hundred rupees if the
paid up capital of the company is up to two million
five hundred thousand rupees, a fine of five
thousand rupees if the paid up capital of the capit al
is up to ten million rupees, and a fine of ten
thousand rupees if the paid up capital of the
company is more than ten million rupees, for an
additional period not exceeding six months after th e
expiry of the time limit as referred to in Clause(b );
(d) A fine of five thousand rupees, for each year, if t he
paid up capital of the company is up to two million
five hundred thousand rupees, a fine of ten thousan d
rupees , for each year, if the paid up capital of t he
capital is up to ten million rupees, and a fine of
twenty thousand rupees, for each year, if the paid up
capital of the company is more than ten million
rupees, in cases where even the time limit as refer red
to in Clause (c) has also expired.
(3) In the case of a company not distributing profi ts which is in
default in providing such statement, in formation o r notice within the
time limit as referred to in Sub-section (1), the d irector or officer of such
company shall be liable to the same fine as is impo sable on a company
of which paid up capital is up to ten million rupee s.
(4)Any director, office or shareholder who is liabl e to pay the fine
as referred to in Sub-section (2) shall pay it too the Office and submit to

87
the Office or the concerned company such returns as required to be
forwarded.
(5) In calculating the period of expiration of the time limit
pursuant to Sub-section (2), it shall be calculated from the date of
commencement of this Act.
(6) Any director , officer or shareholder of a comp any who is in
default in providing such other statement, notice o r information as is
required to be forwarded to the Office pursuant to this Act shall be
punished with a fine of two hundred rupees for ever y month, after the
expiration of one month of the date of expiry of th e time limit within
which such statement, notice or information is requ ired to be provided.
82.
Extra-ordinary general meeting : (1) The board of directors of a
company may convene an extra-ordinary general meeti ng if it deems
necessary.
(2) If ,in the course of examining the account of a company, it is
deemed necessary to call an extra ordinary general meeting for any
reason, the auditor may request the board of direct ors to call such
meeting; and if the board of directors fails to cal l the meeting
accordingly, the auditor may make an application, s etting out the
matter , too the Office; and if an application is s o made, the Office may
call the extra-ordinary general meting of the compa ny.
(3) If the shareholders holding at least ten perce nt shares of the
paid–up capital of a company or at least twenty fiv e per cent
shareholders of the total number of shareholders ma ke an application,
setting out the reasons therefore, to the registere d office of the company
for calling an extra-ordinary general meeting of th e company.

88
(4) If the board of directors does not call the ext ra-ordinary
general meeting within thirty days from the date on which an
application is made pursuant to Sub-section (3), th e concerned
shareholders may make a petition to the Office sett ing out the matter;
and if a such petition’s made, the Office may cau se to call such
meeting.
(5) If the Office deems necessary to call an extra- ordinary general
meeting in view of the findings of any inspection o r investigation or for
any others reason, it any itself call or cause ther e board of directors to
call such meeting.
83.
Special resolutions to be presented : Special resolutions shall be
presented in the general meeting of a company for d ecision on the
following matters:
(a) Increasing the authorized capital of the company,
(b) Decreasing or altering the share capital of the
company,
(c) Altering the name or main objectives of the company ,
(d) Amalgamating one company into another company,
(e) Issuing bonus share,
(f) Buying back of own shares by the company,
(g) Selling shares at a discount,
(h) Converting a private company into a public
company or vice versa,
(i) Such other matter in respect of which the company i s
required by this Act or the articles of association to
adopt a special resolution.

89
84. Provisions on sending abstract of financial stateme nt to
shareholders : (1) Notwithstanding anything contained elsewhere in
this Act, a company listed in the stock exchange sh all not be required to
send the annual financial statement and director’s report to its
shareholders or debenture-holders
Provided, however, that an abstract of financial st atement prepared
pursuant to Sub-sections (2) and (3) shall be sent to every shareholder
along with the notice of annual general meeting.
(2) The abstract of financial statement required to be sent
pursuant to the proviso to Sub-section(10) shall be prepared on the basis
of the annual financial statement of the company an d the director’s
report. The format of such statement shall be as specified by the Office
based on the suggestions of the body specified to s et accounting
standards under the prevailing law.
(3) The abstract of financial statement shall conta in, inter alia , the
flowing matters:
(a) Matter indicating that the abstract of annual finan cial
statement is only an abstract of the annual financi al
statement of the company and their director’s repor t,
(b) An opinion of the company’s auditor as to whether
or not the abstract of annual financial statement i s in
consonance with the annual financial statement of
the company and the director’s report and whether
or not the abstract is consistent with the format
specified pursuant to this Section,
(c) Matter as to whether or not the auditor has made an y
remarks about the annual financial statement of the

90
company and, if such remarks have been made, full
details of such remarks and such materials as
required to understand such remarks,
(d) In cases where the auditor has mentioned in his
report anything about the inadequacy of the
accounts and accounting returns or about the
company’s accounts not being verifiable with the
records and returns maintained by the company or
about the non-receipt of any such information and
explanation as sought, full details thereof.
(4) Instead of sending the abstract of annual finan cial statement to
the shareholders at their personal addresses pursua nt to Sub-section (1),
the company many publish it at least twice in a nat ional daily
newspaper at the time of publishing the notice of m eeting.
(5) In the event of publication of the abstract of annual financial
statement pursuant to Sub-section (4), there shall not be required to
send the abstract at the personal addresses of shar eholders.
85.
Registration number to be mentioned : A company shall mention its
registration number in all such reports, statements , records or other
documents as required to be submitted by it to the Office for the
purposes of this Act.
Chapter 6
BOARD OF DIRECTORS
86. Board of directors and number of directors : (1) The appointment and
number of directors of a private company shall be a s provided in its
articles of association.

91
(2) Every public company shall have a board of dire ctors
consisting of a minimum of three and a maximum of e leven directors.
(3) In forming the board of directors pursuant to S ub-section (2),
at least one independent director, in the case of the number of
directors not exceeding seven, and at least two ind ependent directors,
in the case of the number of directors exceeding se ven, shall be
appointed from amongst the persons who have the kno wledge as
prescribed in the articles of association of the co mpany and gained
knowledge and experience in the subject related wit h the business of
the company concerned.
(4) Any one director selected by the directors from amongst
themselves shall be the Chairperson of the board of directors.
87.
Appointment of directors : (1) The directors of a company shall be
appointed by the general meeting of the company, su bject to the
provisions contained in Section 89 and the articles of association.
Provided however, that:
(1) The directors shall be appointed by the prom oters
pending the holding of the first annual genera l
meeting of the company.
(2) If the office of any director appointed by the annual
general meeting is vacated for any reason, the boar d of
directors shall appoint another director in that va cancy.
(2) Notwithstanding anything contained in Sub-secti on (1), in the
case of a company any shares in which a corporate b ody has subscribed,
the corporate body may appoint a director in propor tion of the total
number of directors of the company and the number o f shares
subscribed by such body and also an alternate dire ctor to attend and

92
vote in a meeting of the board of instead of every such director in cases
where such director will not be in a position to at tend the meeting of the
board for any reason.
(3) Where any director appointed pursuant to Sub-section (2) is
not able to attend a meeting of the board of direct ors, such director shall
give information thereof to his/her alternate direc tor and the board of
directors. In such case, the alternate director sha ll be entitled to attend,
and vote in, the meeting of the board of directors.
(4) Except in the case referred to in Sub-section ( 1), any alternate
director appointed pursuant to Sub-section (2) shal l not be entitled to
attend, and vote in , a meeting of the board of dir ectors.
88.
Shares qualification of director : If the articles of association of a
company specify any number of shares required to be held by a person
for his appointment as director of the company, the person who
becomes director shall hold such number of shares. Failing any
provision specifying such number of shares, any suc h person shall hold
at least one hundred shares.
Provided, however, that any director who is appoint ed pursuant to
Sub-section (3) of Section 86 and Sub-section (2) of Section 87 shall not
be required to hold such shares.
89.
Circumstances where one is disqualified to be appoi nted to, or
continue to hold, office of director: (1) Any of the following persons
shall not be eligible to be appointed to the office of director:
(a) Who is below Twenty one years of age, in the case of
a public company;
(b) Who is of unsound mind or is insane;

93
(c) Who is a declared insolvent and a period of five
years has not lapsed;
(d) Who is convicted of an offense of corruption or of an
offense involving moral turpitude.
Provided, that in the case of a private company, a
period of three years has not lapsed from the date of
such sentence,
(e) who is convicted of an offense of theft, fraud, for gery
or embezzlement or misuse of goods or funds entrust
to him/her, in an authorized manner, and sentenced
in respect thereof, a period of three year has not
elapsed from the expiry of the sentence;
(f) who has personal interest of any kind in the busine ss
or any contract or transaction of the concerned
company;
(g) who is already a director, substantial shareholder,
employee, auditor or adviser of another company
having similar objectives or has personal interest of
any kind in such company;
Provided, however, that such person of a private company may become a director of another private
company having similar objectives.
(h) who is a shareholder that is held to have failed to
pay any amount due and payable by him/her to the
concerned;
(i) In the case of a person who has been sentenced to
punishment pursuant to Section 160, a period of one

94
year is not lapsed from the date of sentence, or in the
case of a person who has been sentenced to
punishment pursuant to Section 161, a period of six
months has not lapsed after the date of sentence;
(j) In the event that the prevailing laws prescribed a ny
qualification or disqualification in the case of a
company carrying on any specific business, who
does not possess such qualification or suffers from
such disqualification;
(k) Who is already a director of any company which has
not submitted such reruns and reports as required to
be submitted to the Office under this Act, for any
continuous three financial years;
(l) Who is holding the office of director receiving fro m
another listed company any remuneration or facility ,
other than a meeting allowance and actual expenses
to be in curried in coming to, going from, and
staying in, the place of meeting.
(2) Any of the following persons shall not be eligi ble to be
appointed to the office of in independent director:
(a) Who is a person as referred to in Sub-section(1);
(b) Who is a shareholder of the concerned company;
(c) Who has not obtained at least bachelor degree in a
subject that is related to the business to be carri ed on
by the concerned company and gained at least ten
years of experience in the related field or in the
company management affairs or who has not

95
obtained at least bachelor degree in finance,
economics, management, accounts, statistics,
commerce, trade or law and gained at least ten year s
of experience in the related field;
(d) Who is an officer, auditor or employee of the
concerned company or a period of three years has
not lapsed after his/her retirement from any such
office;
(e) Who is the close relative of the office of the
concerned company;
(f) Who is an auditor of the concerned company or
his/her partner.
(3) No person shall continue to hold the office of a director in any
of the following circumstances;
(a) If one suffers from any disqualification for
appointment to the post of director as mentioned in
Sub-section (1) or (2);
(b) If the general meeting passes a resolution to remov e
him/her from the office of director,
(c) If the resignation tendered by the director is
accepted by the board of directors;
(d) If one is held by a court to have done any act
involving dishonesty or ulterior motive in the
activities of the company;
(e) If one is held by a court to have done any act
prohibited by this Act from being done by a directo r

96
or to have failed to do any act required to be done
under this Act;
(f) If one is blacklisted by a competent body pursuant
to the prevailing law for his/her default in repayi ng
a loan of any bank or financial institution, and th e
period of such black listing has not expired.
(4) Prior to holding any person to be disqualified for being
appointed to the office of a director or holding su ch office, the company
shall give information thereof to him/her and provi de him/her with a
reasonable opportunity to defend himself.
90.
Term of of ice of directors : (1) The tenure of office of a director of a
private company shall be as provided in its articl es of association
(2) The tenure of office of a director of a public company shall be
as specified in its articles of association, which shall not exceed four
years.
Provided that:
(1) A director appointed by the Government of Nepal or a
corporate body shall hold office so long as the
Government of Nepal or the appointing body desires.
(2) A director appointed pursuant to Clauses (1) and ( 2) of
the proviso to Section 87 shall hold office only un til the
holding of the annual general meeting.
(3) The term of office of a director appointed to the o ffice of
any director which has fallen vacant before the exp iry
of his/her term of office shall be only the remaind er of
the tenure of office of that director whose offi ce has
so fallen vacant and in whose place one is appointe d.

97
(3) Notwithstanding anything contained in the prevailing law or
articles of association , a person retired from the office of director on
expiry of his/her tenure of office shall be eligibl e for reappointment to
the office of director.
91.
Remuneration, allowance, reward etc. of directors: (1) The meeting
allowance to be receivable by the directors for att ending a meeting,
their monthly remuneration, daily allowance and tra veling allowance
or other facility shall be as determined by the gen eral meeting.
(2) The general meeting of any company may, by adop ting a
special resolution, grant a reward in a sum not exc eeding three per cent
of the net profits after payment of income tax to t he directors who work
full time for the company so as to encourage them.
Provided, however, that where, on final assessment of tax under the
prevailing law, the company has to pay additional i ncome tax, the
company shall recover the amount of such additional tax from the
directors, who have received such reward, on a prop ortional basis up to
the extent of the amount of reward received by them .
(3) Pending the holding of the first annual general meeting, the
board of directors may determine the remuneration a nd facilities of the
managing director or other directors who work full time for the
company.
(4) Except where the general meeting of a listed co mpany so
permits, in the event that any director of a listed company is retired
from or relieves of his/her office, the company sha ll not make any kind
of payment as compensation for such relief or retir ement.

98
92. Disclosure by directors : (1) A director shall, no later than seven days
after assuming the office of director, disclose in writing to the company
the following matters:
(a) If he/she or his/her close relative has direct
involvement or any kind of personal interest in any
kind of sale and purchase or other kind of contract
related with the transactions of the company;
Explanation
: For the purposes of this Clause, “direct
involvement” means and includes a situation where
the director or his/her close relative is a promote r of
or holds more that ten per cent shares of a company
or private firm or partnership firm or a director o f a
company involved in such transaction.
(b) If he/she has any kind of interest in the appointme nt
of the managing director, company secretary, office r
of the company;
(c) If he/she is a director of any other company;
(d) If he/she has made any dealing in the shares or
debentures of the company or of its holding or
subsidiary company, about matters of such dealing.
(2) In making disclosure pursuant to Sub-section(1) , a copy of the
written agreement, if any, concluded between the co mpany and the
director or his/she close relative shall be submitt ed, and failing such
agreement, substantial and necessary matters concer ning the
transaction or interest or involvement shall be set out.
(3) The company shall submit to the Office the info rmation as
referred to in Sub-section (1) within seven days of the receipt of such

99
information; and upon receipt of such information, the Office shall
record the same in a separate register maintained f or this purpose.
(4) If any director has an interest directly or ind irectly linked to
any kind of contract, lease, transaction or agreeme nt entered or to be
entered with the concerned company or its subsidiar y company or
comes to his/her knowledge that such interest will be so linked, that
director shall disclose that matter to the company promptly, setting out
the extent and kind of such interest.
(5) If any director gives written in formation to t he company that
he be considered to have his personal interest in a transaction with any
certain person, that director shall be deemed to ha ve disclosed his/her
personal interest in any transaction or contract t o be done or made with
such person.
93.
Transaction with company in which director is invol ved: (1)
Except as otherwise provided this Section, no publi c company shall,
without approval of the general meeting, do any sig nificant transaction
with its director or his/her close relative or subs tantial shareholder or
no subsidiary company shall, without approval of th e general meeting
of its holding company, do any significant transac tion with any
director or his/her close relative or substantial s hareholder of the
holding company.
Explanation
: For the purposes of this Section, “significant tr ansaction”
means a transaction of sale, purchase, exchange and contract the value
of which, at the time of doing the transaction, exc eeds one hundred
thousand rupees or five percent of the total asset s of the company,
whichever is the lesser, and this term also include s a rental transaction
amounting to one hundred twenty thousand rupees or more annually.

100
(2) If any transaction is done in contravention of Sub-section (1),
any amount or benefit derived from that transactio n directly or
indirectly shall be returned to the company; and if any loss or damage
is caused from such transaction to the company , th e person deriving
benefit from such transaction shall also pay compen sation for such loss
or damage.
(3) Notwithstanding anything contained elsewhere in this
Section , the provision of Sub-section (1) shall no t apply to the in-kind
property acquired as follows :
(a) While acquiring such property by a holding
company from its wholly owned subsidiary
company;
(b) While acquiring such property by a subsidiary
company wholly owned by a holding company from
another subsidiary company wholly owned by the
same holding company;
(c) While doing transaction at the prevailing market
price in the ordinary course of business transactio n
of the company.
94.
Directors to make disclosure in shares : (1) If a person, while
holding the office of director, acquires title to a ny shares or debentures
of the company or of a company which is a subsidiar y or holding
company of that company or of another subsidiary co mpany of the
holding company, in any manner, that person shall g ive information as
follows on that matter to the company:
(a) Details of his/her title;

101
(b) Number of shares of each class in the concerned
company or another company to or in which he/she
has title or interest while holding the office of
director and details of amount of debentures of eac h
class.
(2) If the following situation occurs, any director of a company
shall give written information thereof to the compa ny in which he/she
is a director no later than fifteen days after such situation comes to
his/her knowledge:
(a) If , for any reason, he/she is going to acquire tit le to
any shares or debentures of the company in which
he/she is a director or of a company which is a
subsidiary or holding company of that company or
of another subsidiary company of the holding
company, in any manner , or he/she is going to lose
his title;
(b) If he enters into an agreement to sell the shares o r
debentures, as referred to in Clause (a), held in h is
name;
(c) If he/she assigns to any other person the authority
granted by the company in which he is a director to
him/her to subscribe the shares or debentures of
such company;
(d) If a company which is a subsidiary or holding
company of the company in which he/she is a
director or another company which is a subsidiary o f
such company or other subsidiary of the holding

102
company grants authority to him to subscribe the
shareholders or debentures of such company;
(e) If he assigns to any other person the authority to
subscribe the shares or debentures or the company a s
referred to in Clause (d).
(3) While forwarding information to the company pur suant to
Sub-section (2), such information shall also clearl y setout the number of
shares or debentures, amount and class thereof.
(4) The company shall maintain a separate registe r to record the
information receive pursuant to Sub-section (2) and (3).
(5) The provisions contained in this Section shall also apply to the
close relative of a director as if such relative we re a director.
95.
Powers and duties of board of directors : (1) Subject to the
provisions contained in this Act and the articles o f association and the
decisions of the general meeting, the directors sha ll manage all
transaction, exercise of powers and perform duties of the company
through the board of directors collectively.
(2) Except in accordance with a decision of the gen eral meeting
no director of a public company shall do anything y ielding personal
benefit to him/her through the company.
Provided, however, that a private company may make a reasonable
provision on the benefit which the director may de rive thought the
company, as mentioned in the memorandum of associat ion and articles
of association or consensus agreement.
(3) Except as otherwise provided in this Act , the memorandum
of association and articles of association or the c onsensus agreements,
the case of a private company, the board of directo rs may appoint any

103
director from amongst themselves or any employee of the company as
its representative and so delegate to him/her any o r all of its powers,
inter alia , to do any act or thing, make correspondences or s ign bills of
exchange or cheques etc. On behalf of the company that such powers
are to be exercised individually or jointly. In so delegating the powers,
at least one director and their company secretary, if any, shall certify
such delegation, pursuant to a decision of the boa rd of directors.
(4) A company may recover damages from a person act ing in the
capacity of director or representative of the compa ny for any loss or
damage caused to the company from any act or action done by such
person beyond his jurisdiction.
(5) If any person enters into any transaction with the director or
with a representative as referred to in Sub-section (3) despite the
knowledge or having reason to believe that such d irector or
representative is dealing with any transaction for his/her personal
interest or for causing loss or damage to the compa ny, such person shall
not be entitled to make any claim against the compa ny in respect of
such transaction.
(6) Notwithstanding anything contained in Sub-secti on (3), the
board of directors shall not delegate the following powers conferred to
the company and shall exercise such powers only by means of
resolutions passed at meetings of the board of dire ctors :
(a) The power to make calls on shareholders in respect
of amount unpaid on their shares;
(b) The power to issue debentures;
(c) The power to borrow loans or amount otherwise
than on debentures;

104
(d) The power to invest the funds of the company;
(e) The power to make loans.
(7) The provision of Clause(e) of Sub-section(6) sh all not apply to
loans to be let and deposits to be received in the ordinary course of
business transaction by the companies carrying on b anking and
financial business.
(8) If the board of directors considers necessary t o form a sub-
committee for the discharge of any specific busines s, it may form one or
more than one sub-committee as required and get su ch business
discharged.
96.
Appointment of managing directors, and management o f
company : (1) The directors may, subject to the articles of association,
appoint one managing director from amongst themselv es.
(2) The functions, duties and powers of the managin g director
shall be as mentioned in the articles of associatio n or as prescribed by
the board of directors.
(3) While appoint a managing director and other dir ector talking
responsibility of the management of the company pur suant to Sub-
section(1), there shall be entered into an agreemen t in writing
stipulating the terms of appointment, remuneration and facilities; and
no facilities or payment other than the remuneratio n and facilities
specified in such agreement and any other facilitie s receivable as
specified by the general meeting shall be provided or made.
(4) The term of agreement as referred to in sub –se ction (3) shall
not exceed four years at a time.

105
(5) There shall be made such arrangement that the s hareholders
can inspect, free of charge, the agreement entered into with the directors
pursuant to Sub-section (3).
(6) A director who is receiving regular remuneratio n or facilities,
other than meeting allowances, from any one listed company shall not
be appointed to the post of managing director in an other listed
company, with entitlement to regular remuneration o r facilities.
97.
Meetings of board of directors : (1) Meetings of the board of directors
of a private company shall be held as mentioned in the articles of
association.
(2) Meetings of the board of directors of a public company shall
be held at least six times in a year.
Provided, however, that the interval between any tw o meetings shall
not exceed three months.
(3) The directors shall be present in personal meet ings of the
board of directors of a company. The presence of th e proxy of a director
in his/her stead shall not be held valid.
(4) No meeting of the board of directors shall be h eld unless it is
attended by at least fifty one per cent of the tota l number of directors of
the company.
Provided, however, that any director who is not ent itled to take parting
any matter to be discussed in a meeting of the boar d of directors under
this Act shall not be counted for the purposes of t his sub- section.
(5) If a meeting of the board of directors cannot b e held because
of the lack of presence of directors in the number mentioned in Sub-
section (4), another meeting may be called by givin g a notice of at least
three days. Even if such meting is not attended by the directors in the

106
number mentioned in Sub-section (4), the proceeding s and decisions
conducted and made by the attending directors shall be valid.
(6) The decision of a majority in a meeting of the board of
directors shall be binding, and in the event of a t ie, the Chairperson may
exercise the casting vote, in addition to a vote ca st by him/her as a
director.
Provided, however, that any director who has any pe rsonal concern or
interest in any matter to be discussed in a meeting of the board of
directors shall not be entitled to take part in suc h discussion and vote
on the matter.
(7) Minutes regarding the names of directors presen t in the
meeting of board of directors, the subjects discuss ed and the decisions
taken thereon shall be recorded in a separate book, and such minute
book shall be signed by at least fifty one per cent of the total directors
present in the meeting.
Provided, however, that, if any director puts forwa rd any opinion
opposed too or differing from the decision in the course of discussions
on any subject in a meeting, he/she may mention the same in the
minute book .
(8) Any decision shall not be deemed invalid merely for the
reason that there is no signature of any member.
(9) Notwithstanding anything contained in Sub-secti on (3), (4), (5)
and (6),except in the cases that are so expressly p rohibited by them
memorandum of association or articles of associatio n, if all the members
of the board of directors or a sub-committee of dir ectors so consent in
writing in regard to any act or resolution permitte d to be done or
adopted by the board of directors or such sub-commi ttee, such act may

107
be done even without holding a meeting by recording such consent in
the minute book.
(10) The consent referred to in Sub-section(9) shal l be deemed to
be a decision of a meeting of board of directors.
98.
Notice of meeting of board of directors : (1) Except as otherwise
provided in the articles of association of a compan y, the company
secretary or Chairperson of the board or chief exec utive of the company
shall call a meeting of the board of directors of t he company.
(2) Notwithstanding anything contained in Sub-secti on (1) if at
least twenty five per cent directors of the total n umber of directors
make written requisition, setting out the subject t o be discussed in the
meeting, for calling the meeting of the board of di rectors, the
Chairperson shall call the meeting of the board no later than seven days
of the receipt of such requisition. If the meeting of the board of directors
is not called within that period, such requisition making directors
themselves may call the meting of the board of dire ctors.
(3) The matters about the notice of a meeting of th e board of
directors shall be as provided in the articles of a ssociation of the
company. Failing such provision, a written notice o f the meeting of
board of directors and agenda thereof shall be sent to every directors at
the address supplied by him/her to the company; and such notice may
also be given through any electronic means of commu nication.
99.
Responsibilities and duties of directors : (1) No director or of a
company shall do any thing to derive personal benef it through the
company or in the course of conducting business of the company.
(2) If any person has derived personal benefit in t he course of
business of the company in contravention of Sub-sec tion(1), the

108
company shall recover the amount involved in the ma tter from such
director as if such amount were a loan.
(3) Any person appointed as a director of a public company shall,
prior to assuming the duties of his office, take an oath of secrecy and
honesty in a format as prescribed.
(4) Every director and officer of a company shall, in discharging
their duties, act honestly and in good faith, hav ing regard to the
interest and benefit of the company, and exercise s uch care, caution,
wisdom, diligence and efficiency as a reasonable and prudent person
exercises.
(5) The company may recover damages for any loss or damage
caused too the company from a director who does any act with ulterior
motive, causing such loss or damage to the company, in contravention
of Sub-section (4).
(6) It shall be the duty of every director to compl y with this Act,
memorandum of association, articles of association of the company and
the consensus agreement.
100.
Disclosure about securities : (1) In the event that the shares or
debentures of a company are listed in a body operat ing the stock
exchange, after the director has made disclosure to the company about
the shares or debentures of such company pursuant t o Section 94, the
company shall promptly give information thereof t o such body.
(2) Such body shall publish the information receive d pursuant to
Sub-section(10 in such manner as it thinks fit.
101.
Prohibition on loans to officers or shareholders: (1) No company
shall make any loan or provide any financial assist ance to its officer,
substantial shareholders or officer, shareholder of a holding company

109
or a close relative of such person nor shall it giv e any guarantee or
provide security in respect of any loan borrowed by such officer or
shareholder or close relative from any other person .
Provided, however, that this provision shall not a pply to any loan or
facility to be made or provided to any employee of a company in
accordance with the rules of the company or to any loan made or
guarantee given by any bank or financial instituti on in the ordinary
course of business transaction, except as prohibite d by the prevailing
law.
(2) Any person mentioned in Sub-section (1) shall r epay any loan,
which was borrowed by him/her prior to the commence ment of this
Act, no later than 22 Ashwin 2065 (8 December 2008 ).
102.
Prohibition on giving false statements by officers : If any officer,
knowingly giving false statements in a general meet ing of a company,
about the actual financial situation of the company , encourage to
distribute higher dividend to the shareholders of t he company than that
can be distributed from the profits, thereby affect ing the capital of the
company, the officer giving such false statements s hall be personally
liable for such act.
103. Transaction with other person and jurisdiction of c ompany
: (1) No
transaction done by a company with another person s hall be void or
invalid merely on the ground that such transaction is beyond
jurisdiction based on any matter contained in the m emorandum of
association of the company.
(2) It shall be the duty of every director and offi cer to do such
transaction within the ambit of jurisdiction specif ied in the
memorandum of association of the company

110
(3) Except in the case mentioned in Sub-section (1) , any act or
transaction done by a director beyond the authority conferred to
him/her may be rectified by the company by adopting a special
resolution in its general meeting.
(4) No director, officer or other person of the com pany shall be
deemed to have been released from any liability und er this Act for any
act done or action taken by him/her beyond jurisdic tion merely on the
ground that any act or transaction has been ratifie d by a special
resolution pursuant to Sub-section(3).
104.
Company to be bound : (1) Any act done or action taken by or
document signed by at least one director authorized by a company or
any person authorized to act for the company shall be valid and
binding for the company.
(2) where any person does any transaction with a c ompany in
good faith, such transaction shall be binding for t he company; and
nothing contained in memorandum of association, art icles of
association of the company or in any resolution ado pted by the general
meeting or in any agreement concluded between the c ompany and its
shareholder shall be deemed to have made any limita tion in or
restriction on the authority of the director or the authorized person to
do such transaction.
Provided, however, that if any officer does any act or transaction
mentioned in Sub-section (1) or (2) in excess of hi s/her authority, such
officer shall be personally liable for such act or transaction unless such
authority is ratified by the general meeting pursua nt to this Act ; and
the company may also recover from him/her the loss or damage, if any
caused to the company from such act or transaction.

111
105. Restrictions on authority of directors : (1) The board of directors of a
public company, or of a private company receiving loans from any
bank or financial institution, shall not, except wi th a special resolution
being adopted by the general meeting of shareholder s, do or cause to be
done the following act:
(a) selling, donating, gifting, leasing or otherwise
disposing of more than seventy per cent of one or
more undertakings being operated by it;
(b) borrowing moneys, where the moneys to be
borrowed will exceed the aggregate of the paid up
capital of the company and its free reserves, apart
from any loans and faculties with a term of less th an
six months obtained by it from a bank or financial
institution in the ordinary course of business
transaction;
(c) Making a contribution, donation or gift in a sum
exceeding fifty thousand rupees in one financial ye ar
or a sum exceeding one per cent of the average net
profits of the company during the last three financ ial
years, whichever is the lesser, except the contribu tion,
donation, gift etc. made for the welfare of its
employees or for the promotion of its business.
Provided, however, that:
(i) Nothing contained in Clause (a) shall affect the
title of a buyer who buys any property or
undertaking of a company on payment of the
prevailing market price from a company which

112
is solely engaged in the business of buying and
selling of movable and immovable properties.
(ii) The provision of Clause (b) shall not be
applicable to the acceptance by a company
carrying on banking or financial transaction or
insurance business of deposits or insurance
premium from the general public in the ordinary
course of its business transaction.
(2) The general meeting may specify appropriate ter ms and
conditions while giving approval for the purposes o f Sub-section (1).
106.
Validity of acts already done : If it is afterwards discovered that any
provision under this Act has not been complied with in respect of the
appointment of any director, acts already done by s uch director him
/herbefore the discovery of such fact shall not b e rendered invalid by
that fact.
107.
Registers of director and company secretary : (1) Every company
shall maintain a separate register of director and of company secretary,
if any.
(2) Every company shall record the name, surname, a ddress,
citizenship, profession, occupation of its director or secretary, and the
date of appointment as director or secretary as wel l as the date of
removal, if applicable, in the register maintained pursuant to Sub-
section, (1), and shall send a notice of the alter ation, if any, made in
such detail within fifteen days.

Chapter 7
ACCOUNTS AND RECORDS OF COMPANY

113
108. Accounts of company : (1) Every company shall duly maintain its
accounts in the Nepali or the English language.
(2) The accounts to be maintained under Sub-sectio n (1) shall be
maintained according to the double entry system of accounting and in
consonance with the accounting standards enforced by the competent
body under the prevailing law and with such other t erms and
provisions required to be observed pursuant to this Act, in such a
manner as to clearly reflect the actual affairs of the Company.
(3) The books of account of a company shall not be kept at any
place other than its registered office, except with the approval of the
Office.
(4) The cash balance of a company, other than the a mount
specified by the board of directors, shall be depos ited in a bank and
transaction shall be done through the bank.
(5) Subject to the provisions contained in this Cha pter, the
directors or other officers shall have the final re sponsibility to maintain
books of account and records of the company.
(6) Where there is a default in complying with the provisions
made in this Act in respect of the preparation of b ooks of account and
annual financial statements of a company, the direc tor or officer
him/herself, during whose tenure the annual financi al statements and
other reports have been prepared, shall be responsi ble under this Act.
109.
Annual financial statement and report of board of d irectors : (1)
The following annual financial statements shall be prepared by the
board of directors of a public company every year a t least thirty days
prior to the holding of its annual general meeting, and in the case of a
private company, within six months of the expiry of its financial year:

114
(a) Balance sheet as at the last date of the financial year.
(b) Profit and loss account of the financial year.
(c) Description of cash flow of the financial year.
(2) This annual financial statement to be prepared pursuant to
Sub-section(1) shall give true and fair view of th e state of affairs of the
company as at the last day of the financial year co ncerned and also state
the account of profit and loss and description of c ash flow made in that
financial year. Such financial statements shall be prepared in the format
prescribed by the prevailing law.
(3) The annual financial statements as referred to in Sub-section
(1)shall have to be approved by the board of direct ors and audited.
(4) The board of directors of every public company or every
private company with the paid –up capital of ten mi llion rupees or
more or with an annual turnover of ten million rupe es or more shall
also prepare a separate report of board of director s during that period
stating the following matters, in addition to the a nnual financial
statements required to be prepared pursuant to Sub- section (1):
(a) Review of the transactions of the previous year;
(b) Impacts, if any, caused on the transactions of the
company from national and international situation;
(c) Achievements in the current year as at the date of
report and opinions of the board of directors on
matters to be done in the future;
(d) Industrial or professional relations of the company ;
(e) Alterations in the board of directors and the reaso ns
therefore;

115
(f) Major things affecting the transactions;
(g) If there are any remarks in the audit report, the
comments of the board of directors on such remarks;
(h) Amount recommended for payment by way of
dividend;
(i) In the event of forfeiture of shares, details regar ding
the number of forfeited shares, face value of such
shares, total amount received by the company for
such shares prior to the forfeiture thereof, procee ds
of sale of such shares after the forfeiture thereo f, and
refund of amount ,if any, made for such forfeited
shares;
(j) Progress of transactions of the company and of its
subsidiary company in the previous financial year
and review of the situation existing at the end of that
financial year;
(k) Major transactions completed by the company and
its subsidiary company in the financial year and an y
material changes taken place in the transactions of
the company during that period;
(l) Disclosures made by the substantial shareholders of
the company to the company in the previous
financial year;
(m) Details of shareholding taken by the directors and
officers of the company in the previous financial y ear
and , in the event of their involvement in share

116
transaction of the company, details of information
received by the company from them in that respect;
(n) Details of disclosures made about the personal
interest of any director and his/her close relative in
any agreements related with the company during the
previous financial year;
(o) In the event that the company has bought its own
shares (buy-back), the reasons for such buy-
back ,number and face value of such shares, and
amount paid by the company for such buy-back;
(p) Whether there is an internal control system in pla ce
or not; and details of such system, if it is in pla ce;
(q) Details of total management expenses during the
previous financial year;
(r) Name-list of the members of audit committee,
remuneration, allowances and facilities received by
them, details of the functions performed by that
committee, and details of suggestions, if any, made
by that committee;
(s) Amount, if any, outstanding and payable to the
company by any director, managing director ,chief
executive, substantial shareholder or his/her close
relative or by any firm company, corporate body in
which he/she is involved;
(t) Amount of remuneration, allowances and faculties
paid to the director, managing director, chief
executive and officer;

117
(u) Amount of dividends remaining unclaimed by the
shareholders ;
(v) Details of sale and purchase of properties pursuant
to Section 141;
(w) Details of transactions carried on between the
associated companies pursuant to Section 175;
(x) Any other matters required to be set out in the rep ort
of board of directors under this Act and the
prevailing law;
(y) Other necessary matters.
(5) While preparing the annual financial statements pursuant to
Sub-section (1), such statement shall also contain , in the case of the year
of incorporation of the company, the accounts from the date of its
incorporation to the last day of that financial ye ar, and thereafter, the
accounts of the previous financial year.
(6) The annual financial statements prepared pur suant to this
Section shall be kept open for inspection by any sh areholder, if he/she
so desires.
(7) The annual financial statements and the report of board of
directors prepared pursuant to this Section sh all be approved by the
board of directors and signed by the Chairperson of the board of
directors and at least one director.
(8) The accounts and annual financial statements pr epared by a
company pursuant to this Chapter shall be kept safe ly for at least five
years after the date of expiry of the financial yea r concerned.
(9) The officers who prepare any false annual finan cial statements,
reports of board of directors and other returns an d reports required to

118
be prepared pursuant to this Act and the directors who approve the
same shall be liable to punishment under this Act.

Chapter 8
AUDIT
110. Company to appoint auditor : (1) Every company shall appoint an
auditor under this Act to have its accounts audited .
(2) In cases where any company has a branch office outside
Nepal , the auditor appointed pursuant to Sub-secti on (1) may also
audit the accounts of that branch office except as otherwise provide in
the prevailing law of the country where such branch office is situated.
111.
Appointment of auditor : (1) The auditor of accompany shall be
appointed, from amongst the auditors licensed to c arry out audit under
the prevailing law, by the general meting, subject to Chapter-18 ,in the
case of a public company, and, in accordance with the provision as
contained in the memorandum of association, article s of association or
consensus agreement, any failing such provision, by the general
meeting, in the case of a private company; and his/ her name shall be
forwarded to the Office within fifteen days from th e date of such
appointment.
Provided, however, that the board of directors may appoint the auditor
prior to the holding of the first annual general me eting,
(2) The auditor appointed pursuant to Sub-section ( 1) shall hold
office only until the next annual general meeting.
(3) No auditor or his/her partner or ex-partner or employee or
ex-employee shall be appointed as auditor for more than three
consecutive terms to perform the audit of a public company.

119
Provided, however, that this restriction shall not apply to any partner
who ended partnership or any employee who left the service of such
auditor three years before.
112.
Disqualifications of auditor : (1) None of the following persons or the
firms or companies in which such persons are partne rs shall be
qualified for appointment as auditor and shall, des pite appointment as
auditor, continue to hold office:
(a) A director, advisor appointed with entitlement to
regular remuneration or cash benefit, a person or
employee or worker involved in the management of
the company or a partner of any of them or and
employee of any of such partners or a close relativ e
of a director or partner, out of them, or and
employee of such relative;
(b) A debtor who has borrowed moneys from the
company in any manner, or a person who has failed
to pay any dues payable to the company within the
time limit and is in such arrears or close relative of
such person;
(c) A person who has been sentenced to punishment for
an offense pertaining to audit and a period of five
years has not elapsed thereafter;
(d) A person who has been declared insolvent;
(e) A substantial shareholder of the company or a
shareholder holding one percent or more of the paid
up capital of the company or his close relative;

120
(f) A person who has been sentenced to punishment for
an offense of corruption, fraud or a criminal offen se
involving moral turpitude and a period of five year s
has not elapsed thereafter;
(g) A person referred to in Sub-section (3) of Section 111;
(h) In the case of a public company , any person who
works, whether full time or part time , for any
governmental body or any body owned fully or
partly by the Government of Nepal or any other
company or a partner of such person or a person
who is working as an employee of such partner or a
person who is authorized to sign any documents or
reports to be prepared by the management of the
company;
(i) A company or corporate body with limited liability ;
(j) A person having interest in any transaction with th e
company or his/her close relative or a director,
officer or substantial shareholder of another
company having any interest in any transaction with
the company.
(2) The auditor shall, prior to his/her appointment ,give
information in writing to the company that he/she i s not disqualified
pursuant to Sub-section(1).
(3) Where any auditor becomes disqualified to audit the accounts
of a company or there arises a situation where he/s he becomes
disqualified for appointment or can no longer conti nue to act as an
auditor of the company, he/she shall immediately st op performing

121
audit which is required to be performed or is being performed by
him/her and give information thereof to the company in writing.
(4) The audit performed by an auditor who has been appointed in
contravention of this Section shall be invalid.
113.
Power of Office to appoint auditor : Where the annual general
meeting of a company fails to appoint an auditor fo r any reason or
where the annual general meeting itself cannot be h eld or where the
auditor appointed pursuant to this Act ceases to co ntinue his/her office
for any reason, the Office may, at the request of t he board of directors of
the company, appoint another auditor.
114.
Accounts and records to be furnished : The books of accounts and
records of a company shall on his/her demand, at an y time during
office hours be furnished to the auditor for the pu rposes of audit; and
the concerned director or employee shall also forth with give oral
explanations on such matter as may be asked by him/ her, within a
reasonable period of time.
115.
Functions and duties of auditor : (1) The auditor shall, addressing the
shareholders or the appointing authority, submit to the company
his/her report, certifying the balance sheet, profi t and loss account and
cash flow statement based on the books of account, records and
accounts audited by him/her.
(2) The audit report shall be prepared in accordanc e with the
prevailing law or in consonance with the audit stan dards prescribed by
the competent body; and such report shall state the matters to be set out
under this Act ,as per necessity.
(3) The audit report as referred to in Sub-section (2) shall also
indicate the following matters, inter alia:

122
(a) Whether such information and explanations have
been made available as were required for the
completion of audit;
(b) Whether the books of account as required by this Ac t
have been properly maintained by the company in a
manner to reflect the real affairs of its business;
(c) Whether the balance sheet, profit and loss account
and cash flow statements received have been
prepared in compliance with the accounting
standards prescribed under the prevailing law and
whether such statements are in agreement with the
books of account maintained by the company;
(d) Whether, in the opinion of the auditor based on the
explanations and information made available in the
course of auditing, the present balance sheet
properly reflects the financial situation of the
company, and the profit and loss account and cash
flow statement for the year ended on the same date
properly reflect the profit and loss, cash flow of the
company, respectively;
(e) Whether the board of directors or any representativ e
or any employee has acted contrary to law or
misappropriated any property of the company or
caused any loss or damage to the company or not;
(f) whether any accounting fraud has been committed
in the company
(g) Suggestion, if any.

123
116. Audit report to bear auditor’s signature : (1) An audit report
prepared by the auditor appointed by any company th is Act shall be
signed and dated by the auditor him/herself.
(2) Whether any company has appointed any accountin g
institution licensed under the prevailing law to ca rry out audit, the
member who has been authorized by a decision of the partners of a
such institution shall sign and date the audit repo rt.
117.
Information to be provided : The Company shall, subject to the
provisions contained in this Act, send a copy of th e report made by the
auditor to the shareholders. Whether there is a pro vision of formal trade
union in such company, the company shall, at the re quest in writing of
such trade union, provide one copy of such report t o that trade union.
118.
Remuneration of auditor : The remuneration of an auditor shall be as
prescribed by the appointing authority; and such re muneration shall be
borne by the company.
119.
Provision relating to removal of appointed auditor : (1) No auditor
appointed pursuant to this Chapter shall be removed pending the
completion of audit of accounts of any financial ye ar for which he/she
was appointed as the auditor.
(2) Notwithstanding anything contained in Sub-secti on (1) , if any
auditor breaches the code of conduct of auditors o r does any act against
the interest of the company which has appointed him as the auditor or
commits any act contrary to the prevailing law, suc h auditor may be
removed through the same process whereby he/she was appointed as
auditor, by giving prior information to the Nepal C hartered
Accountants Institute, and with the approval of t he regulatory
authority, if any authorized by the prevailing law for the regulation of

124
business of the company concerned , and failing such authority, with
the approval of the Office.
(3) While removing an auditor pursuant to Sub-secti on (2), the
auditor shall be provided with a reasonable opportu nity to defend
him/herself.
Chapter 9
CALL FOR EXPLANATION AND INVESTIGATION
120. Power of Office to call for explanation : (1) Where any matter is
unclear in the documents submitted by a company, an d such matter has
to be set out or any explanation is necessary in re spect of any matter,
the Office may call on the company to furnish expla nation on such
matter within such reasonable period of time as spe cified by it.
(2) The management of the company shall, within the specified
period of time, send proper replies the specified p eriod of time, sent
proper replies to the matters with respect to which explanation has been
called on pursuant to Sub-section(1).
(3) If, in the course of perusing explanation, the Office notices any
irregularity in the business of a company, it may g ive necessary
directive to the company to regularize, or cause to be regularized, it,
and it shall be the duty of the company to obey suc h directive.
121.
Power of Office to depute inspector : If the shareholders
representing not less than ten percent of the paid up capital or not less
than one –fourth of the total number of shareholder s of the company or
the concerning creditors make an application, accom panied by the
supporting evidence and reasonable grounds, stating that the company
has acted in contravention of this Act, the memoran dum of association,

125
articles of association, prospectus, consensus agre ement or prevailing
law, the Office may, as per necessity, depute one o r more inspectors.
Such inspector shall be an expert in any of the su bjects viz. accounts,
law, finance, management, commerce, industry or co mpany
administration or any business which a company carr ies on the
applicant shall deposit with the Office such amount of estimated cost
required for such investigation as specified by the Office.
(2) Notwithstanding anything contained in Sub-secti on (1),where
the Office is of opinion that the following circums tance does exist ,it
may, as per necessity, even if no application is m ade pursuant to Sub-
section (1), appoint an inspector in possession of the qualification
referred to in Sub-section (1) ,to investigate the transactions or business
of any company:
(a) on the receipt of information that the business or
transaction of the company is being carried on to
defraud the shareholders or creditors of the compan y
or otherwise for a fraudulent or illegal purpose or it
is carrying out acts against public interest; or
(b) any public company has not furnished such
information about its transactions as is required t o be
furnished.
122.
Functions, duties and powers of inspector : The functions, duties
and powers of the inspector deputed or appointed pu rsuant to Section
121 shall be as follows:
(a) in course of investigation, to require those office rs or
shareholders or the company, where existing or
former, whom he/she considers appropriate ,or any
other persons who are considered to have

126
information relevant to the matter into which
investigation is to be carried to appear before
him/her and to record their statements; to obtain
necessary information or other reasonable assistanc e;
(b) to inspect the documents which are relevant for th e
purposes of investigation, or to seize or control any
other things, or require any concerned person to
produce such documents or things to him, or to take
custody of such documents;
(c) To investigate, or cause to be investigated, into
whether the books of account of the company have
been kept proper.
(2) Notwithstanding anything contained in the peril ing law, any
matter or deposition expressed or made by any perso n before the
inspector in the course of investigation pursuant t o this Chapter shall be
admissible as an evidence against that person.
123.
Assistance to be rendered to inspector : (1) If any person makes a
false deposition, fails to produce such statements or documents or other
things as required to be submitted under Section 12 2 or fails to answer
any question asked which is put to him/her by the i nspector or fails to
provide such information as asked by the inspector for the purposes of
investigation, the inspector may file a compliant r eport in writing in the
Court.
(2) On receipt of a report under Sub-section(1), th e Court may, if,
on necessary inquiry made into the matter under the prevailing law,
any person is found guilty, impose such punishment on that person as
it considers appropriate under Section 162.

127
124. Report to be submitted : (1) The inspector appointed pursuant to this
Chapter shall, on conclusion of the investigation, submit a report,
accompanied by his/her opinions, to the Office. The Office shall give a
copy of such report to the applicant if any shareho lder makes an
application to get a copy of such report, the offic e shall issue a copy
thereof to him/her, by collecting the prescribed fe es.
(2) If, from any report made by the inspector under Sub-section(1),
It appears to the Office that any directors, managi ng directors ,
managers, employees or any other officers of the co mpany have
knowingly caused any loss or damage to the company or have
defrauded, cheated the shareholders or creditors or committed any
other illegal acts, the Office shall, notwithstandi ng anything contained
in the prevailing laws, order the company to file a lawsuit on behalf of
the company against them.
(3) Where the Office thinks that the company may suffer further
loss or damage if its business is left further in t he hand of directors,
managing directors, managers, employees or any othe r officers who
have committed any act as referred to in Sub-sectio n (2), the Office may
give necessary direction to the company to suspend such directors
managing directors, managers, employees or officers and carry on its
business through any other means.
(4) Notwithstanding anything contained in the preva iling law on
evidence, any matter contained in and any fact expr essed in a report
submitted by an inspector pursuant to Sub-section(1 ) shall be
admissible as an evidence.
125.
Expenses of investigation : (1) The expenses incurred in an
investigation carried out by the Office pursuant th ese Chapter shall be
borne by the concerned company.

128
Provided, however, that if, in the course of carryi ng out investigation,
any director, managing director, manager or officer of a company
appears to committed a malice, deception, fraud or cheating, such
director, managing director, manager or officer sha ll pay the expenses
of investigation no later than seven days of the co mpletion of
investigation.
(2) If the concerned director, managing director, manager or
officer does not pay the expenses of investigation pursuant to the
expenses of investigation pursuant to the proviso t o Sub-section(1), the
expenses shall be recovered as governmental dues.
(3) An inspector appointed pursuant to this Chapter may give
suggestion in his/her report as to the payment of e xpenses.
Chapter 10
VOLUNTARY LIQUIDATION OF COMPANY
126. Liquidation of company able to pay its debts : (1) Expect in case
where a company has become insolvent in accordance with the
prevailing law on insolvency, the shareholders of t he company may
liquidate the company either by adopting a special resolution in the
general meeting or memorandum of association, artic les of association
or consensus agreement.
(2) A company may be liquidated under this Act in t he following
circumstance:
(a) If the company is able to pay its debts or other
liabilities in full;
(b) If there exists no situation where an application f or
the review of insolvency of the company is pending

129
under the prevailing law on insolvency or where the
company would be in any manner subject to an
insolvency proceeding under the prevailing law on
insolvency;
(c) If the directors of the company, have, after due
inquiry, made a declaration in writing that the
company is able to pay its debts and other liabilit ies
in full and that the debts and liabilities to be pa id on
behalf of such company can be paid up or can be
fully settled in any other process within one year
from the date of the adoption of the resolution to
liquidate the company;
(d) If the written declaration made by the directors
pursuant to Clause (c) was presented in the general
meeting called to discuss the matter of liquidation of
the company or such declaration was made at the
time of discussions on that matter in the general
meeting.
(3) A copy of the special resolution adopted with respect to the
liquidation of a company pursuant to this Section a nd a written
declaration of directors shall be submitted to the Office in later than
seven days after the date of adoption of the resolu tion.
127.
Appointment of liquidator and auditor : (1) While adopting a
resolution to liquidate a company pursuant to Secti on 126, the company
shall appoint a liquidator.
(2) While appointing a liquidator pursuant to Sub-s ection (1), a
practitioner licensed under the prevailing law on i nsolvency shall be

130
appointed as liquidator to conduct the liquidation proceedings and fix
remuneration receivable by such liquidator .
(3) The company shall give information of the appoi ntment of a
liquidator pursuant to Sub-section (2) to the Offic e no later than seven
days after the date of such appointment.
(4) After a liquidator is appointed pursuant to Sub -section (2), the
directors and officers of the company shall relieve d of their office and
the liquidator shall exercise all such powers with respect to the
operation and management of company as may be exerc isable by the
directors and officers of the company.
(5) The service of employees of a company shall, ipso facto, be
terminated after the liquidator commences the opera tion and
management of the company pursuant to Sub –section (4).
Provided, however, that the liquidator may retain o r appoint necessary
employees for his/her support and assistance.
(6) The liquidator appointed pursuant to this Secti on shall
complete the liquidation proceedings of the company within the period
of time specified at the time of his/her appointmen t.
Provided, however , that in the case where the liqu idation proceedings
cannot be complete for any reason within the specif ied period of time, a
reasonable time limit may be extended by following the same
procedure as followed in his/her appointment.
(7) While appointing a liquidator pursuant to Sub-s ection (1), an
auditor shall also be appointed subject to provisio ns contained in this
Act.
128.
Application of prevailing law on insolvency : While liquidating a
company under this Chapter, the issue of whether an y person is a

131
creditor of a company in liquidation shall be deter mined in accordance
with the prevailing law on insolvency.
129.
Application to be made in the event of inability of company to
pay liabilities: If, after the liquidator has commenced proceedings of
liquidation of accompany under this Chapter, he/she is satisfied that
the company is insolvent and is not able to pay deb ts required to be
paid or discharge liabilities required to be discha rged in full he/she
shall make an application to have a review of insol vency of the
company in accordance with the prevailing law on in solvency.
130.
Power of liquidator too take into custody and under control
property of company : After a liquidator has commenced his act, the
liquidator shall take into his/her custody and unde r his/her control all
property, accounts and all records and documents of the company.
131.
Powers and duties of liquidator : (1) The liquidator appointed under
this Act shall, mutatis mutandis , exercise and perform all the powers and
duties which may be exercised and performed by a li quidators under
the prevailing law on insolvency.
(2) It shall be the duty of the liquidator to do the following acts,
without prejudice to the generality of Sub-section( 1):
(a) T0 prepare and submit to the office, the statem ents and
accounts of incomes and expenditures in the course of liquidation in
every six months after the appointment of the liqui dator .
(b) To inform the shareholders of the company about the progress
on the liquidation proceedings in every six months after the
appointment of the liquidator .

132
(c) To obtain and recover all properties or amounts required to be
obtained and recovered on behalf of the company and repay and
discharge the debts and other liabilities of all th e creditors of the
company;
(d) Following the completion of the act as referred to in Clause
(c) , to call the general meeting of shareholders a nd present therein a
proposed report and return on the distribution of t he remaining
properties of the company to the shareholders:
(e) If the shareholders holding at least seventy fi ve per cent of the
paid up share capital consent to the return as refe rred to in Clause (d),
to make payment of amounts to the shareholders acco rdingly:
(f) At the completion of liquidation proceedings, t o prepare a
report on the properties recovered, payments made t o the creditors and
distributions made to the shareholders, on behalf o f the company, and
submit such report, certifying that the company has been liquated,
accompanied by the auditor’s report, to the Office.
132.
Cancellation of registration of company : (1) Upon receipt by the
Office of a report on the liquidation of a company pursuant to Clause (f)
of Sub-section (2) of Section 131, the Office shal l strike the name of the
company off the company register and issue an order that the
registration of the company has been canceled.
(2) After the issue of an order on the cancellation of registration of
a company pursuant to Sub-section (1), the Office s hall strike the name
of such company off the company register and publis h in a national
daily newspaper a notice that such company has been dissolved.

133
Å(3) Notwithstanding contained anything in this sect ion,
liquidator appointed as per insolvency Act, 2063, s hall send to the office
regarding the information completion of cancellati on process of the
cancel such company.
Å (4) Upon receiving the information pursuant to Sub -section (3)
the office, shall keep record of cancellation such company and after
such record the company shall deemed to be cancelle d .
133.
Power of creditor and shareholder to make complaint : If any
creditor or shareholder of a company thinks that th ere is any
irregularity in respect of any act or action of th e liquidator, while
liquidating the company pursuant to this Chapter, s uch creditor or
shareholder may make a complaint to the court again st such act or
action within fifteen days of the receipt of inform ation thereof .
134.
Action to be taken in cases of fraud or deception : If a liquidator
thinks that any director, employee or shareholder o f a company has
committed a fraud or deception against the company, the liquidator
may take necessary legal action against such person in accordance with
the prevailing law.
135.
Right of secured creditors not to be affected : The commencement
of liquidation proceedings of a company pursuant to this Chapter shall
not be deemed to prejudice in any manner the right of the secured
creditors who have lent moneys against the security of any property of
the company to enforce or otherwise deal with such secured property
under the prevailing law.

Å Inserted by the Act Amending Some Nepal Acts, 2064

Å Inserted by the Act Amending Some Nepal Acts, 2064

134

Chapter 11
CANCELLATION OF REGISTRATION OF COMPANY
136. Power of Office to cancel registration : (1) The Office may cancel the
registration of a company in the following circumst ance:
(a) If the promoter of the company makes an application ,
showing a reason for the failure to commence the
business of the company, and accompanied by the
prescribed fees, for the cancellation of the
registration of the company:
(b) If the company is in default in submitting to the
Office the returns as referred to in Section 80 or fails
pay the fine as referred too in Section 81 for thre e
consecutive financial years; or
(c) If based on the proofs received in the course of
administration of the company, the Office has a
reasonable ground to believe that the company is no t
carrying on its business or the company is not in
operation.
(2) If it is required to cancel the registration of any company
pursuant to Sub-section (1), the Office shall, prio r to the cancellation of
registration, give a notice , accompanied by the re ason for such
registration , to the concerned company.

135
(3) while sending a notice to a company pursuant to Sub-section
(2), the notice shall be sent to the company at its registered office or to
any office or such company if the address of the re gistered office of such
company is not registered with the Office or if the office of the company
is not located at the address registered and to the memorandum of
association of the company if even address of such officer is not
available to the Office or is not known.
(4) A notice given pursuant to Sub-section (2) shal l also be
published in a national daily newspaper, as per necessity.
(5) If the company fails to make an application, s pecifying the
reasons that the registration of the company should not be canceled,
within two months from the date of receipt by the c ompany of a notice
pursuant to Sub-section (2) or, despite the making of such application,
the reasons specified are not found reasonable, the registration of such
company may be canceled.
(6) If the registration of a company is canceled pu rsuant to Sub-
section (5), information thereof shall be given to the concerned directors
and shall also be published in a national daily ne wspaper.
(7) If the registration of a company is canceled pu rsuant to Sub-
section (5), if there exists any kind of liability of the company, the
liability of the officer or shareholder of the comp any shall continue to
exist;; and nothing contained in this Section shall be deemed to bar the
instituting of necessary legal action against them to have such liability
fulfilled.
(8) The assets, rights, benefits or liabilities hel d in the name of the
company at the tine of cancellation of its registra tion pursuant to Sub-
section (5) shall devolve on its shareholders in th e proportion of their
shareholding.

136
Provided, however, that the title and ownership of any property which
a has been held by the company as a trustee in favo r of any other
person shall to devolve on the shareholders.
(9) If any debt to be repaid by or any liability t o be
performed/discharged by the company of which regist ration has been
canceled pursuant to this Section cannot be settled from the assets,
rights, or benefits devolved on the shareholders pu rsuant to Sub-section
(8), the shareholders, directors or officers who we re involved in the
management of such company and responsible for givi ng rise to the
situation as referred to in Sub-section (1) shall p ersonally bear such
remaining loan or liability.
(10) A company of which registration is canceled pu rsuant to this
Section shall not be allowed to carry on any busine ss by the name of the
same company.
(11) Following the cancellation of registration of any company
pursuant to this Section, the Office shall return t o the shareholders only
such property, if any, remaining after deducting th erefrom the expenses
incurred in the cancellation of the registration of that company.
137.
Restoration of registration of company of which reg istration was
canceled: (1) In the case of cancellation of the registration of a company
pursuant to Sub-section (5) of Section 136, where t he company or its
shareholder or creditor makes a petition , setting out the reasons, to the
Court to have the company restored, no later than f ive years after the
date of publication of the notice of cancellation o f registration of the
company, the Court may, if the following circumstan ce, order to restore
the company and restore its name in the company reg ister:

137
(a) If it appears that the registration of the company was
canceled while such company was carrying on its
business;
(b) If the Court considers it to be just to restore the name
of the company for the proper management of the
assets and liabilities of such company.
(2) In the event of restoration of a company by vir tue of an order
of the Court pursuant to Sub-section (1), the compa ny shall be
considered to have been in existence from the date of its registration.
(3) In issuing an order pursuant to Sub-section (1) , the court may
issue such orders and make an order to make such ar rangements as it
may consider appropriate and necessary for restorin g the company and
all other persons into the status quo ante as if the registration of the
company were not canceled.
(4) Where a company is restored pursuant to Sub-sec tion (1) and
any fine as referred to in Section 81 is to be paid , the company shall be
restored and its name reentered in the company regi ster only after such
fine is paid to the Office.
(5) Where a company of which registration has been canceled
pursuant to Section 136 is restored pursuant to thi s Section, such
company shall have the following property reverted to it:
(a) Any property received by its shareholders in such
capacity pursuant to Sub-section (8) of Section 136 by
virtue of the cancellation of registration of the
company;

138
(b) Where the property as referred to in Clause (a) has
already been sold and disposed of, the proceeds of
such sale and disposal.
Provided, however, that no property or amount
already employed in the payment of debt or liabilit y
of a creditor shall be returned.
Chapter 12
PROTECTION OF SHAREHOLDERS

138. Power to prevent directors and officers from doing unauthorized
act: (1) If, on behalf of a company, any director or officer of the
company does any act beyond his jurisdiction, any s hareholder of such
company may make a petition to the Court to prevent such act.
Provided, however, that no petition may be made und er this Section in
connection with any act or action done or taken or intended to be done
or taken for the fulfillment of any liability creat ed from any act or action
already done or taken by the company.
(2) If , based on the report received by the Office pursuant to
Section 124 in respect of any company, the Office t hinks that the
business of such company could be carried on or is being carried on in
such a manners to be prejudicial to the rights and interests of any of or
all shareholders of the company or any specific cla ss or group of its
shareholders or that any act done or intended to be done by the
company or the failure of the company to do any act required to be
done has resulted in or would result in a prejudice to the interests of
such shareholders, the Office may make a complaint/ petition to the
Court against such company or its directors or offi cers.

139
(3) On receipt of a petition as referred to in Sub- section (1) or
(2) ,the Court may inquire into the concerned compa ny or its directors
or officers and issue an appropriate order.
139.
Remedy for act done against rights and interests of shareholders :
(1) Based on the ground that the business of a comp any is carried on or
is likely to be carried on in such a manner as to b e prejudicial to the
rights and interests of any shareholder of the comp any or that any act
done or intended to be done on behalf of the compan y or the failure of
the company to do any act required to be done has r esulted in or would
result in a prejudice to the rights and interests o f any shareholder, such
shareholder may make a complaint/ petition to the C ourt for an
appropriate order.
(2) A shareholder who makes a petition pursuant to Sub-section(1)
shall prove that the director, managing director, m anager or any officer
who manages and controls the company has done or in tends to do any
act with ulterior motive or made or intends to make undue
discrimination, in contravention of the memorandum of association or
articles of association or consensus agreement.
(3) On receipt of a petition as referred to in Sub- section(1) , the
court may if , upon inquiring into the concerned co mpany, director or
officer, the claim set forth in the petition appear s to have aresean, issue
such order in the name of the company as it thinks appropriate for
providing remedy thereto.
(4) In issuing an order pursuant to Sub-section (3) ,
notwithstanding anything contained in the memorandu m of association,
articles of association or consensus agreement, the Court may, without
prejudice to the generality of the said Sub-section , also issue the
following order, namely:

140
(a) Preventing the act and action done and taken agains t
the rights and interests of any or all shareholders and
carrying of the business of the company in the futu re
in a due manner;
(b) Preventing any act and action being done and taken
or requiring to do any act not done or intended not
to be done by the company;
(c) Requiring to institute, on behalf of the company a
civil case against any one, in pursuance of a direc tion
given by the court;
(d) Requiring to buy back the shares of any shareholder
in accordance with the procedures set forth in this
Act, by reducing the capital of the company, and to
return the amount of such shares;
(e) In the event of any loss and damage being suffered
any shareholder from a discrimination made against
him/her, requiring the company or the person
making such discrimination to pay compensation to
the shareholder for the same;
(f) Liquidating the company;
(g) Requiring the company itself or any other
shareholder of the company to purchase the shares
held in the name of any shareholder;
(h) Recovering the loss and damage caused to the
company or its shareholders from the director or
officer who has caused such loss and damage;

141
(i) Where the company is to buy back its own shares,
issuing an order to reduce the share capital of suc h
company as if the share capital of such company
were reduced by it by adopting a special resolution
on reduction of share capital; where the
memorandum and articles of association of the
company is to be amended by virtue of such order,
issuing other appropriate order also to make
necessary amendment thereto.
(5) Notwithstanding anything contained in Sub-secti on (1) or (2),
the remedy available to a person who suffers any lo ss or damage
because of the fact that a company or its director or any person
responsible for the management or control of the co mpany or its
employee has failed to do any act required to be do ne or done any act
required not to be done or otherwise done a discrim inatory treatment
shall not be deemed to be limited to this Section o nly; and such person
may institute an action, whether individually or jo intly, on behalf of
him/herself or other shareholder, as well, to have any remedy available
under other prevailing law.
(6) Where a collective remedy is demanded pursuant to Sub-
section (5), the court may issue appropriate order with or without
making necessary inquiry into some or all sharehol ders of that class.
(7) Notwithstanding anything contained elsewhere in this Act,
where the court has issued an order in a manner tha t the company shall
not make any amendment to its memorandum of associa tion or articles
of association or shall make an amendment to any sp ecific matter for
the protection of the rights and interests of any o r all shareholders, in
such a case, no amendment shall be made to the memo randum of

142
association or articles of association without obta ining prior approval of
the Court.
(8) If a company makes any amendment to its memoran dum of
association or articles of association by or pursua nt to an order of the
Court under Sub-section (7), such amendments shall be deemed to be
an amendment adopted by a special resolution in the general meeting
of the company.
(9) The Office shall make entry of the following or ders issued by
the court pursuant to this Section in the company r egister:
(a) An order issued for the reduction of share capital of
a company;
(b) An order issued requiring any amendment to the
memorandum of association or articles of associatio n
of the company.
(10) The provisions of this Section shall also appl y to any person
who has not yet been registered as a shareholder of a company but the
shares have already been transmitted to his/her nam e through legal
procedures as if such person were a shareholder of the company.
140.
Right to shareholder to institute case on behalf of company : (1) A
company may file in the Court a case against any di rector, office or
shareholders or any person having control over the company pursuant
to the consensus agreement to have any rights and i nterests of the
company enforced.
(2) If the company concerned fails to institute a c ase under Sub-
section(1),any share holder holding two and half pe rcent or more of the
shares in the paid-up capital of the company separa tely or jointly with
two or more shareholders holding five percent share s may, on behalf of

143
the company, file in the Court a case against any s uch director or officer
or the person having control over the company or an y other person.
(3) while filing a case by a shareholder pursuant t o Sub-section (2),
he/she shall state about what sort of effort he/she has made to
persuade the company to institute the case by itse lf.
(4) where a case is filed pursuant to Sub-section ( 2), the Court
may decide whether it would be appropriate to keep on the case being
run by the shareholder or to get the company to tak e over the case, and
if it is found appropriate to get the company to ta ke over the case, it
may order the company to take over the case.
(5) Any case once filed pursuant to Sub-section (1) or (2) shall not
be capable of being dismissed or being compromised except in cases
where such compromise contains such terms ad condit ions as specified
by the Court.
(6) where a case file pursuant to Sub-section (2) i s adjudged
sustaining the claim made by the claimant sharehold er, the expenses
incurred by him/her in the institution of such case and reasonable
expenses made for the services of legal practitione r shall be reimbursed
by the company. Where such claim is not sustained, such amount out of
the expenses incurred by the defendant in defending such case as the
Court thinks appropriate shall be reimbursed from t he complainant
shareholder.
141.
Acquisition or sale of property : (1) A public company or its
subsidiary company shall, if the purchase or sale o f any property by it
results in the following situation, give informatio n thereof to the Office:
(a) If the purchase of any property results in an incre ase
in the value of its property or the value of

144
consolidated property mentioned in the audited
latest annual financial statement, by more than
fifteen per cent ;
(b) If the income to be earned from the property sold o r
intended to be sold exceeds by more than fifteen pe r
cent of the consolidated income before making
payment for tax as mentioned in the audited latest
books of account of the company.
(2) any information to be given to the Office pursu ant to Sub-
section(1) shall set out the following matters; and where such matters
are also applicable in the case of transaction of t he company, such
matters shall also be stated in the report of board of directors:
(a) date of, and parties involved in, the transaction;
(b) Details about the nature of property, and if that
property includes, wholly or partly, any shares
issued by any other company, the name of company
issuing such shares and the nature of business to b e
carried on by that company;
(c) Value of the transaction , and other terms and
conditions of the transaction;
(d) The ground pursued for the valuation of property,
while buying or selling any property;
(e) In the event of sale of any property, matter whethe r
the proceeds of such sale is more or less than the
book value of such property as shown in the records
thereof.
Chapter 13

145
HOLDING AND SUBSIDIARY
COMPANIES
142. Control over subsidiary company : (1) A holding company may
control its subsidiary company as follows:
(a) By holding direct or indirect control over the
formation of the board of directors;
(b) By holding majority shares of the company.
(2) If any company becomes a subsidiary company of any other
subsidiary company, the former company shall also b e a subsidiary
company of the holding company controlling the late r company.
(3) Despite that the shares of a company are subscr ibed by any
agent on behalf of the holding company or its subsi diary company or
that the right to appoint directors of such company is exercised by any
person nominated on behalf of the holding company o r its subsidiary
company, the conditions mentioned in Sub-section (1 ) shall be deemed
to have been fulfilled.
Provided, however, that while determining a holding company and a
subsidiary company, the shares possessed in the fol lowing
circumstances shall not be recognized for this purp ose:
(a) In cases where any company is entitled to exer cise any
power on the basis of holding debentures or a trus t deed
on the issue of debentures or having subscribed sha res;
(b) In cases where a company lending credit has ac cepted the
shares by way of security.
143.
Documents to be enclosed : (1) Any holding company shall enclose
the following documents of its subsidiary company i n its balance sheet:

146
(a) One copy of the annual accounts of the subsidiary
company for the immediately expired financial year
and the report of its board of directors during th at
period;
(b) Auditor’s report;
(c) Details of the investment of the holding company in
the subsidiary company at he end of the financial
year;
(d) In cases where the financial year of the holding
company and that of the subsidiary company are
different, the matter of change, if any, in any man ner,
of the right of the holding company over the
subsidiary company during such different periods.
(2) The details as referred to in Clause (b) of Sub -section (1) shall
also contain the net profits derived after deductin g the loss suffered in
the concerned financial year of the subsidiary comp any and the profit
and loss as well which has not been mentioned in th e accounts of the
company after it has become the subsidiary company but which may be
the concern of the shareholders of the holding comp any.
(3) In cases where the board of directors of the ho lding company
fails to obtain the information as mentioned in Cla use (b) of Sub-section
(1) ,and Sub-section (2) due to any reason, the bal ance sheet of the
holding company shall contain a written report ther eof.
(4) The details as referred to in Clause (c) of Sub -section (1) shall
also show the loans borrowed against the mortgage o f any immovable
property of the subsidiary company or the loans bor rowed for any
purpose other than discharging the existing liabili ties.

147
144. Prohibition on investment in holding company : No subsidiary
company; shall purchase these shares or debentures of the holding
company or make investment in the holding company i n any other
manner.
Chapter 14
SPECIAL PROVISIONS RELATING TO PRIVATE COMPANY
145. Consensus agreement : (1) Except as otherwise provided in this Act,
the following matters may be provided for in a cons ensus agreement of
a private company:
(a) Management, business and transaction of the
company;
(b) Restriction, if any, on the transfer of shares;
(c) Power of one or more shareholders to liquidate the
company owing to any specific or incidental event o r
voluntarily;
(d) Division or use of voting right;
(e) Terms of appointment of officers, employees ,
workers of the company,
(f) Matter as to who will be the directors, officers, o r the
persons bearing the ultimate responsibility or the
chief executive, of the company;
(g) Mode of payment or distribution of dividends;
(h) Matter that there shall be no board of directors;

148
(i) Matter that , if there shall be no board of directo rs,
who shall perform such functions as required to be
performed by the board of directors under this Act;
(j) If the annual general meeting is not required to be
held, provisions pertaining thereto;
(k) Types of shares and the provision of shares with
different right, if any.
(2) The consensus agreement may be amended with the consent
in writing of all parties to the agreement.
(3) The shareholders who, after the conclusion of a consensus
agreement, have obtained the shares as follows shal l be deemed to have
consented to the agreement and become party thereof :
(a) where the shares have been obtained by way of
donation or gift;
(b) Where the shares have been obtained in any other
manner, with the knowledge of the existence of such
agreement at the time of obtaining the shares.
146.
Power of shareholder to inspect books of account : (1) Any
shareholder of a private company or his/her proxy may inspect the
following documents or records related with the tra nsactions of the
company during office hours:
(a) Minute books of the general meeting and board of
directors;
(b) Annual financial statements;
(c) Share register; and
(d) Accounts of the company.

149
(2) The director or officer of a private company s hall make
adequate arrangement so that the shareholders could inspect the
documents and records as referred to in Sub-section (1).
147.
Return of transactions : (1) Any shareholder of a private company
may demand the company for a return of transactions of the company
for any financial year.
(2) The director, managing director or officer carr ying on the
transactions of the company shall provide a return accompanied by the
certified annual financial statement no later than fifteen days of the
demand of return pursuant to Sub-section (1).
148.
Holding of annual general meeting not required : (1)
Notwithstanding anything contained elsewhere in thi s Act, where a
consensus agreement concluded between the sharehold ers of a private
company has a provision that the annual general mee ting of the
company shall not be held, such private company sha ll not be required
to hold its annual general meeting during the perio d of such agreement.
(2) Where a consensus agreement is concluded with a provision
that the annual general meeting shall not be held p ursuant to Sub-
section (1), the company shall also make provisions on the procedure of
making decision on such matters as required to be d ecided by the
general meeting under this Act and on the authority of making such
decision
149.
Adoption of written resolution by private company : (1)
Notw ithstanding anything contained elsew her e in thi s Act, ex cept as
otherw ise pr ovided in the ar ticles of association
,any act which can be
done by adopting a resolution including a special r esolution in the
general meeting of a private company or by adopting a resolution in the
meeting of any particular class of shareholders can be done by a written

150
resolution executed and signed by all shareholders representing at least
seventy five percent shares, who are entitled to vo te in holding
discussion on such resolution on the same date on w hich such
resolution is deemed to have been adopted.
(2) where separate written resolutions have been re corded for any
reason for the purposes of a Sub-section (1) and al l such documents
have the same contents, it shall not be necessary t hat all shareholders
sign the same document;; and despite the fact that every shareholder
has signed a separate document, such document shall be valid as if one
written resolution were signed.
(3) Every shareholder signing a written resolution pursuant to
this Section shall date the same; and the last date on which the
resolution is signed by the shareholder shall be de emed to be the date
on which the resolution has been adopted.
(4) Any document attached to any written resolution shall be
deemed to have been presented in a meeting of share holders signing
the resolution.
(5) Any resolution accepted pursuant to this sectio n shall be
recognized for any purpose whatsoever as it were a decision adopted
by a general meeting of a company or a meeting of a ny specific class of
shareholders.
150.
Deemed participation in general meeting : (1) Notwithstanding
anything contained elsewhere in this Act, if, excep t, as otherwise
provided in the articles of association of a privat e company, any
shareholder of the company makes communication cont act with all
shareholders through any communication means and ta kes part in
communication contact with other shareholders in su ch a manner that
the other shareholders can hear or read whatever is spoken by every

151
shareholder, every shareholder who so takes part in such
communication contact shall be deemed to have taken part in the
general meeting along with other shareholders.
(2) Notwithstanding anything contained elsewhere in this Section,
where any shareholder makes a complaint/petition ac companied by the
prescribed fees , to the Office no later than three months after the
holding of a general meeting, mentioning that he/sh e has not taken
part in the general meeting, the Office shall inqui re into the concerned
company; and, in holding such inquiry, where the co mpany fails to
prove that the complainant shareholder has taken pa rt in such meeting,
the decision made by that meeting shall not be vali d.
(3) A meeting of shareholders conducted pursuant to Sub-section
(1) shall be deemed to have been conducted in the p lace where the
chairperson of the meeting is present.
(4) The provisions of Sub-section (1), (2) or (3) a pplicable to the
general meeting of a company shall also apply, mutatis mutandis, to the
meeting of directors or a sub-committee of director s of the company.
(5) After the completion of the general meeting pur suant to Sub-
section (1), the chairperson of the meeting shall p repare minutes of the
proceedings and decisions conducted and taken in th e meeting
annually and authenticate the same.
151.
Special exemption companies carrying on prescribed transaction :
The Government of Nepal may, by a notification in t he Nepal Gazette,
exempt the private company having turnover within t he prescribed
limit from the provisions contained in Chapter-8.
Chapter 15

152
PROVISIONS RELATING TO SINGLE
SHAREHOLDER COMPANY
152. Single shareholder company not required to call mee ting of the
board of director and general meeting : Notwithstanding anything
contained elsewhere in this Act, except as otherwis e provided in the
articles of association of a single shareholder com pany, all acts and
decisions required to be done and made by the board of directors or
general meeting of the company shall be as decided in writing by such
shareholder; and no meeting of the board of directo rs or general
meeting shall be required to be called.
153.
Transfer and transmission of shares of single share holder
company: (1) In the event of death of the shareholder of a single
shareholder company, his/her heir or the person acq uiring the title to
his shares shall acquire the right of shareholder, and such heir or person
shall do all such acts inclusive of the transfer an d transmissions of
shares as the single shareholder can do under this Act. While making a
decision to transfer and transmit shares, the perso n so acquiring the title
shall make such decision in writing.
Provided, however, that if no heir to such sharehol der is found, the
Office shall appoint a liquidator and liquidate the company in
accordance with the prevailing law.
(2) A person acquiring the title to shares pursuant to Sub-section
(1) shall give information thereof, accompanied by the evidence of such
title, to the Office no later than one month after the acquisition of such
title.
(3) On receipt of the information as referred to in Sub-section (1),
the Office shall record the information by collecti ng the prescribed fees

153
and give information thereof to the person who acqu ires the title to
shares.
(4) Where the number of person acquiring the title to sh ares
pursuant to Sub-section (1) is more than one, they shall be considered to
be the directors of company for the time being, exc ept where the other
heirs transfer the title to only one heir, and the memorandum of
association and articles of association of the comp any shall be amended
on that basis.
Provided, however , that where there arises a quest ion of entitlement,
such matter shall be governed by a judgment of the competent court.
Chapter 16
PROVISIONS RELATING TO FOREIGN COMPANIES
154. Registration of foreign company : (1) No foreign company shall carry
on any business or transaction in the Nepal without having a branch
office of such company registered with the office o f such company
registered with the office pursuant to this Section or establishes such
office without having a liaison office registered.
Provided, however, that making investment in shares in any company
established pursuant to law, lending moneys to such company or
participating in the operation or management of su ch company, with
the approval of the competent body, shall not be de emed to be the
carrying on of a business or transaction for the p urposes of this
Chapter .
Explanation : Where any foreign company carries on any transact ion for
a period of one month or more through an office est ablished in Nepal or
used therefor or appoints any person for regular co ntact or avails its

154
service, such company shall be deemed to have done a transaction or
established an office in Nepal for the purpose of t his Chapter.
(2) A foreign company desiring to have its branch o ffice
registered pursuant to Sub-section (1) shall make t o the Office an
application, accompanied by the permission obtained from the
concerned body pursuant to the prevailing law, and the prescribed fees
and in such format as prescribed, for the registrat ion of such company.
(3) A foreign company desiring to have its liaison office
registered pursuant to Sub-section (1) shall make t o the Office an
application, accompanied by the permission, if any, required to be
obtained from the concerned body pursuant to the pr evailing law for
the registration of such office, and the prescribed fees and in such
format as prescribed, for the registration of such company.
Explanation
: where any foreign company is selected by any comp etent
body pursuant to the prevailing law o r enters into contract with any
competent body, for any business in Nepal, the maki ng of such
selection entering into such contract shall, for th e purposes of Sub-
sections (1) and (2) , be deemed to be the permissi on given by the
concerned body.
(4) On receipt of an application made for the regis tration of a
foreign company pursuant to Sub-section (2) or (3), the Office shall
make necessary inquiry, register such company and g ive the
registration certificate, as prescribed, no later t han thirty days after the
making of the application for carrying on a busines s or transaction in or
establishing a liaison office in the Nepal.
(5) Where a foreign company cannot be registered pu rsuant to an
application made under Sub-section (2) or (3), the Office shall give

155
information thereof, setting out the reasons for th e same, to the
concerned applicant within thirty days.
(6) A foreign company registered pursuant to Sub-se ction (4) may
open its branch office and carry on the concerned b usiness or
transaction in or open its liaison office in the Ne pal.
Provided, however, that a foreign company registere d as a liaison office
shall not be entitled to do any income earning acti vity in Nepal.
(7) Where the name of a foreign company making appl ication
pursuant to Sub-section (2) or (3) or the objective to be implemented by
such company is of such a nature that it cannot be registered pursuant
to this Act, such foreign company shall not be regi stered in Nepal.
(8) A foreign company registered pursuant to Sub-se ction (4)
shall be deemed to have been registered to carry on only the same type
of business or transaction as is being carried on b y it in the country
where its registered office is situated or it has b een incorporated.
(9) A foreign company registered pursuant to this S ection shall
put its name board in the place of its business in a manner conspicuous
to all,, and the name of country where the company has been
established and the registration number of the comp any registered in
Nepal shall be clearly mentioned in such board and bills, receipts ,
invoices, etc or letter head to be used by the comp any.
(10) The office shall maintain a separate register for the
registration of foreign companies registered pursua nt to this Section
and make arrangements for the inspection of such re gister by the
general public and for getting a copy thereof by pa ying the prescribed
fees.

156
(11) Notwithstanding anything contained elsewhere i n this Act, a
foreign company registered pursuant to this Section shall not issue
shares or debentures within the Nepal.
(12) Notwithstanding anything contained elsewhere i n this Act , a
foreign company which is carrying on a business or transaction or
which has established its liaison office in the Ne pal without having
been registered at the time of commencement of this Act shall get it
registered with the Office pursuant to this Act no later than six months
after the date of commencement of this Act.
155.
Submission of documents by foreign companies : (1) A foreign
company which makes an application for its registra tion or for the
establishment of its liaison office pursuant to Sec tion 154 shall submit to
the Office the following details, along with the ap plication:
(a) Permission obtained by the foreign company from
the competent authority to carry on its business or
transaction in Nepal;
(b) Copies of the charter, certificate of incorporation ,
memorandum of association, articles of associatio n
of the company, and Nepalese translation thereof;
(c) Full name, address of the registered office and
principal place of business of the company, date of
incorporation of the company, description of the
paid up capital and major objectives of such
company;
(d) Names, addresses of directors, manage, company
secretaries or main officers of the company and
description of their citizenship;

157
(e) Name and address of the person residing or staying
in the Nepal ,who is authorized by the company to
receive, on its behalf, any summons, notice etc.
issued in the name of the company;
(f) Full address of the principal place where the
company carries on its transaction or business in
Nepal and of the office of the company situated in
that place;
(g) Where the company is to carry on any transaction or
business in the State of Nepal, details of the
proposed investment and transaction;
(h) Where the company is to commence its transaction in
Nepal, the proposed date thereof;
(i) A declaration made by a director of the company or
his/her representative, on behalf of the company,
that the matters contained in the returns submitted
by the company are true and correct;
(j) Power of attorney as referred to in Section 157.
(2) Where any amendment or alteration is made to or in the
contents of any document submitted by any foreign c ompany pursuant
to Sub-section (1), a notice, accompanied by the de tails of such
amendment or alteration, shall be given to the Offi ce no later than thirty
five days.
(3) While submitting any such documents issued outs ide Nepal
or copies thereof as required to be submitted pursu ant to Sub-section (1),
they have to be certified pursuant to the law of th e country of
registration of the foreign company.

158
156. Books of account, audit and annual report of foreig n company : (1)
Every foreign company registered pursuant to Sectio n 154 shall prepare
an annual financial statement, along with the balan ce sheet and profit
and loss account, in such a manner as to reflect th e real situation of its
transaction in Nepal, get it audited and submit the same to the Office no
later than six months after the expiration of a fin ancial year as if such
company were a company incorporated under this Act.
(2) Every foreign company shall submit to the Offic e a copy of the
annual financial statement, audit report and report of board of directors
prepared for every financial year pursuant to the l aw of the country
where its registered office is situated no later th an three months after
such statement and reports have been finally prepar ed.
(3) The annual financial statement to be prepared b y a foreign
company pursuant to Sub-section(1) shall include th e following details:
(a) Statements prepared in a manner to show classifying
the particulars of the fixed, running and other
properties held in the name of the foreign company
within Nepal;
(b) clear details of cash held in the name of the forei gn
company with a bank and financial institution
situated in Nepal;
(c) Clear details of cash held in the name of the forei gn
company with a bank and financial institution
situated in Nepal;
(d) Total amount of loans and liabilities, if any, due and
payable by the foreign company to any person who

159
is a resident of Nepal or a Nepalese company
registered under this Act.
(4) Where any report and statement required to be s ubmitted to
the Office pursuant to Sub-section (2), and any doc ument required to be
attached therewith, are in a language other than th e Nepali or English
language, a copy of authentic translation of such d ocument into the
Nepali or English language shall also be attached t herewith.
(5) A foreign company which has got its liaison off ice registered
in Nepal pursuant to Section 154 shall get certifie d by an auditor the
statements of salary, allowance and amounts paid t o the employees,
consultants or liaison persons serving in such offi ce, statements of
deduction of tax from such payment pursuant to the prevailing law,
payment of rental and expenses for the operation of such office and
statements of deduction of tax from such payment p ursuant to the
prevailing law, and submit the same to the Office n o later than three
months after the expiration of a financial year.
157.
Power of attorney: (1) A foreign company to be registered pursuant to
Section 154 shall submit office copy of a power of attorney executed in
the specified format in accordance with the legal r equirements of the
country where the company has been incorporated or its registered
office is situated, hereby appointing a person resi ding in Nepal as its
authorized representative for the purposes of the service of any
summons or notice or authorizing such person to rec eive any other
lawful notices on a lawsuit or legal action instit uted on behalf or legal
against the company .
(2) A power of attorney executed pursuant to Sub-se ction (1) shall
state, inter alias that where any summons or notice on a lawsuit
instituted on behalf of or against the company or o ther legal notice is

160
delivered to the authorized representative, it shal l be binding on the
company for any purpose whatsoever.
158.
Cancellation of registration and liquidation of a f oreign
company : (1) Where a foreign company registered pursuant to Section
54 wishes to close down the transaction which it is carrying on in
Nepal and get its registration canceled or where th e competent
authority, acting in accordance with the prevailing law, prohibits such
company from carrying on the transaction or busines s within Nepal,
such company shall make an application, accompanied by the
prescribed fees, o the Office for the cancellation of its registration.
(2) A foreign company which makes an application p ursuant to
Sub-section (1) shall also submit, along with the application, an
evidence and proof confirming that there is no liab ility due and payable
by such company too any person, organization or go vernmental or
non-governmental body in Nepal.
(3) In order to inquire whether the evidence and pr oof as referred
to in Sub-section (2) are true or not, the Office s hall publish at least
twice in a national daily newspaper a notice inviti ng a claim,
accompanied by evidence, on any liability, if any d ue and payable by
the company to any one, within a period of twenty o ne days .
(4) Where any person makes a claim in pursuance of the notice
published pursuant to Sub-section (3), the concerne d company shall
submit to the Office evidence or proof showing the settlement of such
claim. Where the claim made against such company p ursuant to Sub-
section (1) cannot be settled from the assets of su ch company situated in
Nepal , such company shall settle the same from its assets situated
outside Nepal.

161
(5) Where no claim is made by any one within the ti me limit as
referred to in Sub-section (3) or a proof is submit ted showing than the
claim made has been settled pursuant to Sub-section (4), the Office shall
strike the name of such company off the foreign co mpany register and
give information thereof to the concerned company.
(6) Where an insolvency process is initiated in res pect of a foreign
company, which has been registered in Nepal pursuan t to this Chapter,
in accordance with the law of any country out of th e countries where
such company has been carrying on its transaction, the representative
authorized by such foreign company pursuant to Sect ion 157 shall
promptly give a notice in writing thereof to the Of fice, and he/she shall
also publish such notice in a national daily newspa per to be published
from Nepal for the information of the general publ ic.
Provided, however, that where an order for the canc ellation of
registration of such company has already been issue d, such foreign
company shall close its transaction or business in Nepal.
(7) Where any foreign company closes its transactio n or business
pursuant to the proviso to Sub-section (6) , the pr evailing law on
insolvency shall govern the transaction or business carried on by such
company in the State of Nepal .
Chapter- 17
PROCEEDING OF LAWSUITS AND PUNISHMENTS
159. Complaints and proceedings relating to cases under this Act : (1)
In respect of any matter under this Act, a case may be filed and
proceedings taken only with a complaint made by the Office or the

162
director, officer, shareholder or member or credito r of a company or
any other concerned person.
(2) Except in cases where jurisdiction is expressly given to the
Office on any matter under this Act, the Court shal l have power to hear
and settle the cases on offenses punishable under t his Act, the mattes on
which a complaint or application can be made to the Court as
mentioned in various Sections of this Act and matte rs of compensation
for amounts in controversy.
(3) In hearing and settling cases under this Act, t he Court shall
follow the procedures as referred to in the Summary Procedures Act,

2028
(1971) .
(4) An appeal against any decision or order made or issued by the
Office of Court under Sub-section (2) may be made t o the Court as
specified by the Government of Nepal with the conse nt of the Supreme
Court, within thirty-five days.
(5) Notwithstanding anything contained in Sub-secti on(2),
pending the specification of the Court by the Gover nment of Nepal by a
notification in the Nepal Gazette for hearing cases , suits and taking
other actions pursuant to this Act, the Company Boa rd formed
pursuant to Section 1691 shall assume the jurisdi ction of the concerned
Court.
160.
Punishment with fine not exceeding fifty thousand r upees or
with imprisonment for a term not exceeding two years or with
both : The following person who commits the following offe nse shall be
punished with a fine from twenty thousand rupees to fifty thousand
rupees or with imprisonment for a term not exceedin g two years or
with both punishments:

163
(a) where any director or officer of a company has
caused any loss or damage to the company or any
person by mentioning any false matter in any
document of the Company, with mala fide intention
or malicious recklessness, such director or employe e;
(b) where any director or officer of a company fails to
maintain, or cause to be maintained, hides or
conceals or damage such books of account or
accounts as required to be maintained pursuant to
this Act, such person;
(c) where the auditor of a company states a false matt er
in his/her report in the course of carrying out
his/her duty or omits necessary comments while
making audit, with mala fide intention or malicious
recklessness, such auditor;
(d) where, a liquidator does not convene the meting of
creditors, or makes payment of loans or liabilities
contrary to the order of priority or fails to maint ain
such books of account and accounts as required to b e
maintained under this Act or fails to take over suc h
books of accounts and documents as required to be
taken over, or maintains false accounts, or fails t o
submit any report required to be submitted or fails to
hand over cash, goods in-kind or books to be handed
over by him/her on the termination of his/her
assignment, with ulterior motive, recklessness or
mala fide intention, such liquidator;

164
(e) where any director or officer or employee fails to
hand over the documents, accounts, cash goods in –
kind in this charge on the termination of his/her
office or on receipt of a order to liquidate the
company, to the successor or where the successor
fails to take over them pursuant to this Act, such
director, officer and employee who do not hand over
or take over them;
(f) any director or officer who issues the prospectus o f a
company prior to its being registered with the Offi ce
who gives false details in the prospectus;
(g) Where any act is done beyond the jurisdiction of th e
board of directors or beyond the scope of work of t he
company, any director or officer who does or orders
to do such act;
(h) Any shareholder who does not provide any returns
pursuant to this Act or gives false returns;
(i) Any director or officer or employee who
misappropriates or embezzles cash or goods in-kind
of the company or uses the cash or goods in-kind of
the company for his/her personal use without the
approval of the board of directors or the general
meeting or does not settle advances according to th e
rules of the company or does not abide by any order
issued by the Office or fails to submit any returns of
the company;
(j) Where any director or officer who has the duty to
give any statements or information to the company,

165
Office, Court or other body pursuant to this Act fa ils
to give such statements of information, such direct or
or officer;
(k) An auditor who knowingly carries out auditing of
the concerned company even after that he/she is not
qualified to carry out auditing of any company;
(l) An director or officer who exercises the powers not
conferred to him/her or acts beyond the authority
conferred to him/her;
(m) An director or officer who maintains account in
contravention of this Act;
(n) Any director of officer who fails to provide such
extracts of financial statement, annual financial
statement or report as required to be provided to t he
shareholders pursuant to this Act;
(o) Any director or substantial shareholder or company
who receive or give any loan facility or remunerati on
from the company in a manner to be contrary to the
provisions contained in this Act;
(p) An company, officer, employee or any other person
who, in seeking approval of the Court to reduce the
share capital of the company, lies or hides the nam e
of any creditor or gives false statements as to the
loans borrowed by the company;
(q) An private company which sells shares or
debentures in contravention of this Act, directors and
shareholders of such company;

166
(r) An foreign company which carries on business or
transaction in Nepal in contravention of this Act,
directors, employees or representatives of such
company;
(s) A debenture trustee who acts contrary to the intere st
of the holders of debenture, directors or officers of
such trustee;
(t) A person who acts contrary to Sub-section (7) of
Section 26;
(u) An director or officer who fails to do any act
required to be done pursuant to Section 60;
(v) An person who carries on transaction by using the
word “company” without getting a company
registered pursuant to this Act;
(w) An company, director or officer who fails to provid e
the information or notice as referred to in Section 141
or Section 175;
(x) An shareholder of a company who does not provide
such information as demanded pursuant to Section
47 or the company, director and officer who does no t
submit to the Office the information received from
the shareholder pursuant to that Section;
(y) An director or officer who acts contrary to Section
105;
(z) The managing director, director or officer of a
company who fails to provide the address of
registered office of the company despite the issuan ce

167
of written order by the Office at various times or
giving of such notice through communication media,
where such issuance was not possible;
(z1) An company, director, substantial shareholder and
officer who acts contrary to Section 50.
161.
Punishment with fine not exceeding fifty thousand r upees : The
following person who commits the following offense shall be punished
with a fine from ten thousand rupees to fifty thous and rupees:
(a) Where any shares are allotted in contravention of t he
provisions of this Act, the officer or person who
makes such allotment;
(b) Where a company purchases, out of the company’s
capital in stock, its own shares or the shares of i ts
holding company contrary to this Act or makes
investment in contravention this Act, every directo r
of that company;
(c) In the event of failure to show or provide the book s if
account to the auditor as and when so required, the
officer or person who has the duty to do so or
provide the same;
(d) An auditor who does not present a report as
specified in the Act;
(e) An director, manager and officer who does not
make arrangements as referred to in Sub-section(3)
of Section; 172;
(f) An director and officer who violates the provisions
of Section 146 or 147 or who does not maintain such

168
records books or returns as required to be
maintained pursuant to this Act;
(g) An company, director, auditor, officer and employee
who violate the provision contained in Chapter-18 o r
who fail to fulfill the duty and obligations specif ied
in that Chapter;
(h) In the event of failure to call the general meeting or a
meeting of the board of directors required to be
called pursuant to this Act or failure to send a no tice
of the general meeting or a meeting of the board of
directors or failure to prepare the documents to be
made available to the shareholders before the
holding or the general meeting or failure to presen t
in the general meeting such documents as required
to be presented, the director, officer or person w ho
has the duty to maintain or do such act or to call the
meeting or to send such notice;
(i) An officer who sets down any false deed or content
of document stating that any matter which was
neither done or happened to have been done or
happened and vice versa in the minutes as referred to
in Sub-section(1) of Section 75 and Sub-section (7) of
Section 97 or such other return or report as requir ed
to be prepared an submitted to the company or
Officer in such notice or information as required t o
be provided pursuant to this Act;
(j) In the event that an declaration made by the
directors pursuant to Sub-section(2) of Section 136 is

169
held to be false, the director who makes such false
statement;
(k) An person who does false or wrong translation of
any deed or document required to be submitted by a
foreign company to the Office pursuant to this Act or
any person who certifies the same.
162.
Punishment with fine not exceeding twenty thousand rupees :
Except in matters contained in Sections 160 and 16 1, the Court may
impose a fine of five thousand rupees to twenty tho usand rupees on
any company or every concerned director, managing d irector, manger,
company secretary or employee of the company who fa ils to perform
any act which he/she is required to perform under t his Act or commits
any act prohibited by this Act, or fails to perfor m his/her duty, or
performs even any permissible act upon the expiry o f the time-limit or
without following the procedures, or fails to give such information to
the Office as required to be given, or fails to sub mit such returns to the
Office as required to be submitted.
163.
Realization of amount of loss : If a director, officer of an company or
a person causes any loss or damage to the company o r shareholder or
creditor or any other person by committing an offen se punishable
under this Act or by violating any provision contai ns in this Act or the
memorandum of association or articles of associatio n or consensus
agreement, the aggrieved company, shareholder, cred itor or any person
shall be entitled to have realized the amount of su ch loss or damage. He
/She shall personally bear the amount of such loss or damage.
Chapter 18
AUDIT COMMITTEE

170
164. Audit Committee : (1) A listed capital with paid up capital of thir ty
million rupees or more or a company which is fully or partly owned by
the Government of Nepal shall form an audit committ ee under the
Chairpersonship of a director who is not involved i n the day-to –day
operations of the company and consisting of a least three members .
(2) An person who is a close relative of the chief executive of a
company shall not be eligible to be a member of the audit committee
formed pursuant to Sub-section (1) .
(3) At least one member of the audit committee shal l be an
experienced person having obtained professional cer tificate on
accounting or a person having gained experience in accounting and
financial field after having obtained at least bach elor’s degree in
accounts, commerce, management, finance or economic s.
(4) The report of board of directors required to be prepared by a
company shall set out a short description of the ac tivities of the audit
committee, working policies adopted by the board of directors to
implement the suggestions ,if any ,given by the aud it committee, the
allowances or facilities ,if any, received by the m embers or the audit
committee and the names of the members of audit com mittee.
(5) The audit committee may, for inquiring into any matter, notify
the managing director of the company, chief executi ve or the company
or other director, auditor, internal auditor and ac counts chief involved
in the day-to-day operations of the company to atte nd its meeting; and
it shall be their duty to be present in the meeting of that committee if
they are so notified.
(6) The board of directors shall implement the sugg estions given
by the audit committee in respect of the accounts a nd financial
management the company; and where any suggestion ca nnot be

171
implemented, the board of directors shall also ment ion the reasons for
the same in its report.
(7) An company shall arrange for such means and res ources as
may be adequate for the fulfillment of responsibili ties of the audit
committee; and the audit committee may fix its inte rnal rules of
procedures on its own.
(8) The chairperson of the audit committee shall b e present in the
annual general meeting of the company.
(9) The audit committee shall meet as per necessity.
165.
Functions, duties and powers of audit committee : The functions,
duties and powers of the audit committee formed pur suant to Sub-
section (1) of Section 164 shall be as follows:
(a) To review the accounts and financial statements of
the company and ascertain the truth of the facts
mentioned in such statements;
(b) To review the internal financial control system and
the risk management system of the company;
(c) To supervise and review the internal auditing
activity or the company;
(d) To recommend the names of potential auditors for
the appointment of the auditor of the company, fix
the remuneration and terms and conditions of
appointment of the auditor and present the same in
the general meeting for the ratification thereof;
(e) To review and supervise as to whether the auditor o f
the company has observed such conduct, standards
and directives determined by the competent body

172
pursuant to the prevailing law as required to be
observed in the course of doing auditing work;
(f) Based on the conduct, standard and directives
determined by the competent body pursuant to the
prevailing law, to formulate the polices required t o
be observed by the company in respect of the
appointment and selection of the auditor;
(g) To prepare the accounts related policy of the
company and enforce, or cause to be enforced, the
same;
(h) Where any regulator body has provided for the long
term audit report to be set out in the audit repor t o f
the company, to comply with the terms required to
prepare such report;
(i) To perform such other terms as prescribed by the
board of directors in respect of the accounts, fina ncial
management and audit of the company.

Chapter- 19
PROVISIONS RELATING TO
COMPANY NOT DISTRIBUTING PROFITS
166. Establishment of company not distributing profits : (1)
Notwithstanding anything contained elsewhere in thi s Act, any
company may be incorporated to develop and promote any profession
or occupation or to protect the collective rights a nd interests of the
persons engaged in any specific profession or occu pation or to carry on

173
any enterprise for the attainment of any scientific , academic, social,
benevolent or public utility or welfare objective on the condition of not
distributing dividends.
(2) Any person or trustee of a public trust registe red pursuant to
the prevailing law or any other corporate body inco rporated pursuant
to the prevailing law who wishes to register a com pany for the
attainment or the objective mentioned din Sub-secti on(1) may make an
application to the Office pursuant to Section 4.
(3) The number of promoters promoting a company pur suant to
sub- section (1) shall be at least five; and af ter the incorporation
such company, it may have any number of its mem bers, with a
minimum of five members.
(4) The membership of a company incorporated pursua nt to Sub-
section (1) shall not be transferable in any manner . The membership of
any person or body shall ipso facto be terminated in the event of death,
cancellation of registration or dissolution of such member or
amalgamation of such member with another body or co mpany.
(5) Except with the prior approval of the Office , a company
incorporated pursuant to Sub-section (1) shall not add words such
“company : , “ limited “’ or “private limited” at t he end of its name.
(6) A company registered pursuant to Sub-section (1 ) shall obtain
approval of the Office to expand its branch.
167.
Special provisions relating to company not distribu ting profits:
(1) Notwithstanding anything contained in this Act or the prevailing
law, the following matters of a company incorporate d pursuant to
Section 166 shall be as follows:

174
(a) There shall not be required share capital to
incorporate a company not distributing profits.
Provided, however, that the company may receive
membership fees from its members and receive any
donation, gift pursuant to law for the
accomplishment of its objectives.
(b) No member of the company shall be liable for the
debts and liabilities of the company except in the
case where any member accepts such liability in
writing the liability of the company, with
specification of the limit of such liability; his/h er
liability shall be limited to the extent of that li mit.
(c) All the provisions of this Act as applicable to the
listed company, other than those provisions which
may be applicable only to the company with share
capital, shall also apply to the company, its direc tor,
officer, auditor and employee.
(d) The company shall not distribute dividend, bonus or
any other amount, from the profits earned by it, to its
members or employees; and the profits earned by the
company shall be used to increase the capital of t he
company or for the attainment of its objectives.
(e) The company shall obtain prior approval of t he
Office to change objectives.
(f) Any company not distributing profits shall not be
merged with any company distributing profits.

175
(g) The members of a company incorporated under this
Chapter shall elect the directors from amongst
themselves in such number as fixed in the articles of
association, on the basis of one member one vote.
(h) The meeting allowance, salary, facility receivable by
the officers or a company incorporated under this
Chapter and the incorporation and operational
expenses of the company shall not exceed the
amount as specified by the Office; and in so
specifying expenses, the Office shall have regard to
the capital situation and profits of such company.
(i) In the event of liquidation of or cancellation of
registration of a company incorporated under this
Chapter ,the assets of the company, if any ,
remaining after the settlement of the debts and
liabilities of the company shall be dealt with as per
the provision, if any, contained in its articles of
association, and failing such provision, such asset s
shall devolve on the Government of Nepal .
Provided, however, that such assets shall, in no wa y,
devolve on any body or company where a promoter
or member of such company or his/her close relative
or close relative of such relative is a promoter or
member.
(2) In the event of violation of any provision con tained in Sub-
section (1),the Office may cancel the registration of the company
committing such violation.

176
Provided , however, that the company shall be provi ded with an
opportunity to defend itself, prior to such cancell ation of registration.
(3) A person who is not satisfied with a decision o n cancellation
of registration made by the Office pursuant to Sub- section (2) may file a
complaint in the Court within thirty five days afte r the receipt of
information of such decision.
(4) While canceling the registration pursuant to Su b-section (2),
the Office shall appoint a liquidator and an audito r to complete the
liquidation proceedings of such company, specifyin g the period for
completion of such liquidation proceedings.
(5) The liquidator and auditor appointed pursuant t o Sub-section
(4) shall discharge their functions in accordance w ith the provisions
contained in this Act and the prevailing law.

Chapter- 20
INTERIM PROVISIONS RELATING TO COMPANY ADVISORY BOARD AND COMPANY BOARD
168. Formation of Company Advisory Board : (1) The Government of
Nepal shall, by a notification published in the Nep al Gazette, form a
Company Advisory Board comprising a maximum of nine members
consisting of one person from each of the fields of law, accounting
profession, tax administration, commerce or trade a dministration, from
amongst those who have done at least master’s degre e in the respective
fields and gained expertise after having served fo r at least seven years

177
in such fields in the government and private sectors, as well as a
representative of the Federation of Nepalese Chamb er of Commerce
and Industries, so as to study the practical proble ms coming across in
the field of implementation of this Act and prevail ing law relating to
company administration and give advice, as required , to the
Government of Nepal on timely reforms to be made in the prevailing
companies law and reforms in the company administra tion. The
Registrar shall be the member secretary of the Comp any Advisory
Board.
(2) While forming the Company Advisory Board pursua nt to sub
–section (1), the notification shall designate any one of the members of
the Board also to act as its chairperson .
(3) The Company Advisory Board shall submit to the concerned
Ministry of the Government of Nepal, an annual repo rt on the activities
carried out by it pursuant to Sub-section (1) .
(4) The concerned Ministry shall publish the report submitted
pursuant to Sub-section (3) and make arrangement so that the general
public can obtain a copy of such report at a reaso nable price.
169.
Provisions relating to Company Board : (1) Pending the designation
of a court by the Government of Nepal pursuant to t he provisions
contained in this Act, the Government of Nepal shal l, by a notification
published in the Nepal Gazette, form a three –membe r Company Board,
consisting the Chairperson and member, as follows:
(a) A person who is a District Judge or who
has already been a District Judge or who is
qualified for appointment as District Judge,
with each such person, having done

178
bachelor degree in law and gained
experience in commercial law -Chairperson
(b) A person who, after being registered as an
advocate pursuant to the prevailing law,
has done legal practice in the field of
commercial law for a least ten years or
who has served in the post of Gazetted
Class Two of Nepal Judicial Service for at
least four years -Member
(c) A person who has done bachelor degree in
management, commerce or accounting and
worked in the field of company
management, tax administration or
accounting for at least ten years or an
accounting professional who has obtained
a professional certificate in accounting and
gained at least five years of experience in
accounting profession -Member
(2) Notwithstanding anything contained in Clauses ( a) , (b), (c), or
(d) of Sub-section (1), the Government of Nepal may , by a notification
published in the Nepal Gazette , designate any mem ber, out of the
members of the Company Advisory Board formed pursua nt to Section
168, who has the qualification as mentioned in the said Clauses, also to
act as the Chairperson or a member of the Company Board to be
formed pursuant to this Section.
(3) The Board formed pursuant to Sub-section (1) or (2) shall
exercise the jurisdiction conferred to the Court pu rsuant to this Act.

179
(4) The company Board formed pursuant to Sub-sectio n (1) or (2)
shall, while hearing and settling the cases pursuan t to Sub-section
(3) ,exercise its jurisdiction as follows:
(a) Three members shall jointly exercise their
jurisdiction.
Provided, however, that, where the Chairperson and
another one member are present, the case may be
heard and settled, and where other two members
except the Chairperson are present, the case may b e
heard.
(b) In the event of the presence of all the three membe rs,
the unanimous opinion of all the three members or
the majority opinion of two members shall be
deemed to be the decision of the Company Board.
(c) In the event of the presence of two members only,
where the two members have the same opinion, that
opinion shall be the decision of the Company Board.
(d) In the event of the presence of two members, where
they lack unanimity in opinion, the opinion of the
Chairperson, where the Chairperson as well is
present, and where the other members except the
Chairperson are present, the opinion of the senior
member shall prevail in the matters of proceedings;
and in the case of judgment or final order, it shal l be
submitted to the member who was absent earlier on
the opinion supported by him/her shall be deemed
to be the decision of the Company Board.

180
(e) Where all the three members are present and each
has a different opinion or where majority cannot be
established even after making submission to the
member who was absent earlier pursuant to Clause
(d), the opinion of the Chairperson shall prevail i n
the case of proceedings, and in the case of the
judgment or final order, a reference shall be made to
the Court hearing appeal.
(5) The Company Board may, considering the workloa d of cases,
locate itself in any other place in Nepal for any specific period and hear
and settle the cases.
(6) The Company Board shall follow the procedures r eferred to
in the Summary Procedures Act, 2028
(1971 ) while hearing and settling
the cases.
(7) A party who is not satisfied with a decision ma de by the
Company Board on any case pursuant to this Section may make an
appeal to the concerned Appellate Court within thir ty five days after
the date of the receipt of information of such deci sion.
(8) The remuneration, facilities and other terms an d conditions of
service of the Chairperson and member appointed or designated
pursuant to this Section shall be as prescribed.
Provided, however, that the terms and conditions of service shall not be
prescribed in manner to reduce the remuneration and facilities once
already provided.
(9) Notwithstanding anything contained in Sub-sect ion (1), the
company board formed pursuant to the Companies Act , 2053
(1996) an
existing at the time of the commencement of this Ac t shall continue to

181
exist pending the formation of the Company Board as referred to in this
Act.
(10) The cases, and petitions related thereto, file d in and under
consideration of or yet to be decided by the compan y board as referred
to in Sub-section(9) at the time of commencement of this Act shall , after
the commencement of this Act, be transferred to the Company Board as
referred to in this Section; and such cases shall b e heard and settled by
such Board.
170.
Provisions relating to secretariat and employee of Company
Advisory Board and Company Board : (1) The secretariat of the
Company Advisory Board to be formed pursuant to Sec tion 168 shall be
situated in the Company Register’s Office.
(2) The secretariat o the Company Board to be forme d pursuant
to Section 169 shall be situated in the Ministry of Industries.
(3) The secretariat of the Company Board shall have such number
of employees as specified by the Government of Nepa l.
171.
Dissolution of Company Board : (1) The Company Board formed
pursuant to Section 169 shall ipso facto be dissolved on the date on
which the Government of Nepal designates the Court as referred to in
this Act, by a notification published in the Nepal Gazette.
(2) On the dissolution of the Company Board pursuan t to Sub-
section (1), the appointment of the Chairperson, me mbers and other
employees serving in the Board shall ipso facto be terminated; and no
compensation or additional amount shall be paid to them for such
termination where any employee were desputed by oth er offices to the
Board, their deputation shall ipso facto be terminated.

182
(3) On the dissolution of the Company Board pursuan t to Sub-
section (1), all cases, and petitions related there to, filed in and under
consideration of or yet to be decided by the Board under this Act shall
be transferred to the Court .

Chapter- 21
MISCELLENOUS
172. Record of company and use of computer : (1) The records of any
minute book, shareholders or debenture holders regi ster, index of
shareholders, books of account, accounts etc. requi red to be maintained
by a company pursuant to this Act may be maintained either by making
entries thereof in separate books or by recording t he same by any
electronic communication device and computer in a n on-legible form or
in any other manner, without prejudice to the provi sions contained in
this section.
(2) In case where the records of any minute books, shareholder or
debenture holder register index of shareholder, boo ks of account,
accounts etc. have not been maintained by making en tries thereof in a
record book but maintained in any other manner, the following
provisions shall be applicable.

183
(a) If it is easily accessible to the place where the r ecords
of such minute book shareholder or debenture
register index of shareholder books of account,
accounts, etc. are maintained and where such record s
can be inspected or copes thereof can be obtained,
such records shall be deemed to have been
maintained in any specific place.
(b) The company shall make adequate arrangements
that no one can destroy or alter the records as
referred to in Clause (a) and that the matters
recorded therein can be easily traced and inspected
and copies thereof can be obtained .
(c) Where any matter has been so recorded that it is no t
legible, the matter shall be capable of being
reproduced in a legible form .
(3) Where the records of any minute book , sharehol der or
debenture-holder register, index of shareholders , books of account,
accounts etc. are put in an web site by using any e lectronic
communication device or computer pursuant to this s ection,
arrangements shall be made so that the date of such preparation of
documents as well as the date of amendment thereto can be easily seen .
(4) Where a company has maintained the records of a ny minute
book , register, index , books of account, accounts etc. maintained
pursuant to this Act in a non-legible form and any law establishes the
obligation of the company to allow such records for inspection or to
submit copies thereof , then it shall be the obliga tion of the company to
make such arrangements that the relevant portions o f such records can

184
be inspected and that copies thereof can be submitted in a visible or
legible form.
173.
Conversion of corporation owned by government of Ne pal into
Company: (1) If the Government of Nepal wishes to convert a public
corporation incorporated under the prevailing law, fully or partly
owned by the Government of Nepal, or a development board formed
under the Development Board Act, 2013 (1956)
into a company ,such
corporation or board can be converted into a public company and
incorporated under this Act.
(2) Not withstanding anything contained elsewhere i n this Act,
there shall be no restriction on the number of prom oter, shareholders, in
the incorporation of a company as referred to in Su b-section (1).
(3) The movable and the immovable properties of the corporation
or board as referred to in Sub-section (1) may be v aluated and
converted into the share capital of the company to be incorporate d
pursuant to Sub-section (1), and where such convers ion is made, all
assets and liabilities of such corporation or board shall devolve on such
company, except as otherwise provided in the articl es of associations.
(4) Not withstanding anything contained elsewhere i n this Act,
the number of directors of a company incorporated u nder this section
shall be as specified in the articles of associatio n of the company; and no
such directors shall be required to subscribe any s hares to become a
director.
(5) A company as referred to in this section may se ll its shares in
bulk to the private sector through the stock exchan ge or directly by
negotiations.

185
174. Predecessor to handover charge to successor : Any director or any
other officer or employ of a company shall, on the expiry of his/her
term of office, hand over the documents in his/her charge to the
successor director or officer or employ who is appo inted to replace
him/her to perform his/her functions, within thirty days from the date
of such expiry; and if such predecessor hands over such documents, the
successor shall take charge thereof accordingly.
175.
Transactions between associated companies : (1) Where an
agreement or arrangement is made between the follow ing companies
whereby any company directly or indirectly provides loan or other
kinds of financial assistance, pays any liability, provides guarantee or
any other kind of security to another company or an y other transactions
other than an ordinary business transaction is done between them, it
shall be deemed to be a transaction between the ass ociated companies:
(a) Any company and its holding company;
(b) Any company and any subsidiary company of its
holding company;
(c) A subsidiary company of any company and the
holding company of such company;
(d) A subsidiary company of any company and another
subsidiary company of its holding company.
(2) Where any transactions as referred to in sub se ction (1) is
carried on , the associated company shall give a no tice on such
transactions, also setting out a following details to its shareholders and
the Office as soon as possible:
(a) Date of transaction and the parties involved in the
transactions;

186
(b) Nature of transaction, and where transaction such a s
provision of a loan ,provision of financial assista nce
and furnishing security has taken place under such
transaction, the amount or the value thereof.
176.
Restriction on transaction between companies : (1) No company
shall, where directly or indirectly, lend money to another company in
excess of an amount that is sixty percent of its p aid-up capital and free
reserves or an amount to be set by hundred percent of its free reserves,
which ever is the higher, give guarantee for a loan borrowed by another
company or make investment in the securities of ano ther company in
excess of the said amount .
(2) Provided, however, that this provision shall not apply
to a company carrying on banking or financial trans action, insurance
company, company with main objective to buy and s ell securities,
private company which has not borrowed any loan fro m a bank or
financial intuitions, company with objective to pro vide infrastructure
facility, and investment made by the holding compan y in its fully
owned subsidiary company, money lent by such holdi ng company to
such subsidiary and guarantee given by such holdin g company for a
loan borrowed by such subsidiary and investment ma de in right shares
issued under this Act.
(3) Subject to Sub-section(1) , a company shall mai ntain the
details, as prescribed, on the moneys lent by it to another company,
investment made by it in such company or guarantee given by it for a
loan borrowed by such another company.
177.
Merger of a company : (1) A public company may, by adopting a
special resolutions in its general meeting to that effect, be merged with
another company subject to Sub-section (3).

187
Provided, however, that, in the case of a private company it shall be as
provided in its memorandum of association, articles of association or
consensus agreement.
(2) A public company, upon merging into a private c ompany or a
private company, upon merging into a public company shall stand as a
public company.
(3) If a resolution for merger is adopted pursuant to Sub-
section(1),such company shall, within thirty days , make an application,
setting out the following matters to the Office for approval:
(a) In the case of a public company, a copy of the
decision of the general meeting as referred to in s ub-
section (1) ,and in the case of private company ,
copies of the related provisions contained in the
memorandum of the associations, articles of the
associations, or consensus agreement authorizing th e
merger;
(b) Last balance sheet and auditors report of the
merging company;
(c) A copy of the letter of consent in writing, of the
creditors of the merging company and of the merged
company;
(d) Valuation of the movable and immovable properties
of , and actual details of the assets and liabiliti es of,
the merging company;
(e) If the merging company and merged company have
made a decision as to the creditors and employees

188
and workers of the merging company, a copy of such
decision;
(f) The scheme of arrangement concluded between the
companies for merger with each other.
(4) W here the information as referred to in Sub-section( 3) is given
to the Office, it shall study the matter given info rmation and give its
decision within three months .
(5) On receipt of an approval from the Officer for merger
pursuant to Sub-section (4) , all the assets and li abilities of the merging
company shall be deemed to have been transferred to the merged
company.
(6) The office shall maintain separate records of t he merging
company in the company registration book.
(7) Except as otherwise provided in the memorandum of
association, articles of association or consensus a greement of the
company, a shareholder who does not express his/he r consent in
writing to the unification or merger or alteration in, or transfer of,
shares of the company or the sale of entire assets of the company shall
be entitled to get the company’s assets valuated p rior to such
unification, merger or alteration in or transfer of shares or sale of assets
and get return of the amount in proportion to the s hares held by
him/her from the merging company.
(8) Notwithstanding anything contained elsewhere in this Section,
the Office shall not give approval for the merger o f a company if such
merger appears to create a monopoly or unfair trade restriction or to be
contrary to public interest.

189
178. Power to give directive : If the office receives information through any
source that any company, its director or officer or other employee has
not done any such act as required to be done pursua nt to this Act or the
memorandum of association or articles of associatio n or the consensus
agreement, in the case of a private company, or has committed or is
going to commit any act in contravention of this Ac t or the articles of
association of the company, the Office may ,by maki ng or causing to be
made an inquiry into the matter, give necessary dir ective to the
concerned company , its director, officer or employ ee to do, or cause to
be done, any act required to be done accordingly or to refrain from
doing any prohibited act; and it shall be the duty of the concerned
person to comply with such directive .
179.
Bonus share : (1) A company may, by adopting a special resoluti on in
the general meeting, issue bonus shares to its shar eholders, out of the
amount available for the distribution as dividend.
(2) Where a company is to issue bonus shares pursua nt to Sub-
section (1), the company shall give information the reof to the Office
before issuing such shares.
180.
Act done or action taken in contravention of this A ct or the
articles of association to be void : Except as otherwise provided in
this Act or the memorandum of association or articl es of association,
where any act or action required to be done or take n under this Act or
the memorandum of association or articles of associ ation has not been
done or taken or any act or action prohibited the u nder has been done
or taken by any company or in respect of such compa ny, such act or
action shall be void.
181.
Notice on business of company : (1) Where any notice is required to
be given pursuant to this Act, memorandum of associ ation, and the

190
person entitled to such notice expresses, before or after the specified
time, in writing that the notice is not necessary, the notice shall be
deemed to have been received.
(2) If any shareholder is present in any Meeting in person or by
proxy, he shall be deemed to have given up his/her right to receive a
notice required to be given to him/her pursuant to this Act, the
memorandum of association or articles of associatio n.
182.
Dividend: (1) Except in the following circumstance, dividend shall be
distributed to the shareholders within forty five d ays of the decision
made to provide dividend:
(a) If any law prohibits the distribution of dividend;
(b) If the right to receive dividend is subject to any
dispute;
(c) If, in a circumstance beyond control of the company
or for any reason, dividend cannot be distributed
within the said time-limit .
(2) A company fully or partly owned by the Governm ent of
Nepal may distribute dividend only after obtain in prior approval of
the Government of Nepal; and the Government of Nepa l may give
necessary directive on the matter of dividend to be distributed by such
company.
(3) In the event of failure to distribute a dividen d within the tine
limit as referred to in Sub-section(1), the divide nd shall be distributed
together with the interest thereon at such rate as may be prescribed.
(4) The person whose name is maintained in the shar eholder
register at the time of declaration of a dividend o r his legal heir shall be
entitled to such dividend.

191
(5) A company shall not pay or distribute a dividen d in any other
manner except out of the amount of profits set asid e for the distribution
of dividend.
(6) Before paying or declaring a dividend out of th e profits for
any financial year, a company shall have fully ded ucted the pre
operation expenses, the amount required to be depr eciated in
accordance with the accounting standards fixed by t he competent
authority under the prevailing law, any amount requ ired to be paid or
set aside out of the profits under the prevailing l aw or the amount or
accumulated loss in previous financial years.
Provided, however, that if the prevailing law requi res the establishment
of a reserve or consolidated fund of any amount pri or to distributing
dividend, any company which is required to comply w ith such legal
requirement shall not distribute divided without es tablishing such
reserve or consolidated fund.
(7) Subject to the various provisions contained in this Section, the
board of directors of any company may, in the follo wing circumstance,
distribute interim dividend out of the profits for the previous financial
year:
(a) where the articles of association contain a provisi on
on the distribution of interim dividend;
(b) where the annual financial statement for the financ ial
year out of the profits of which year interim
dividend is to be distributed has already been
certified by the auditor and approved by the board
of directors.

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(8) No company shall pay or distribute any amount i n cash or
kind, chargeable on its funds, to its shareholders, except a dividend
approved by the general meeting.
(9) The amount of dividend not claimed/received by any
shareholder even after the empery of a period of fi ve years after the
date of resolution adopted by the company in its ge neral meeting to
distribute dividend shall be credited to the invest or protection fund to
be established under Section 183.
(10) In crediting the amount as referred to compan y shall, prior
to the expiry of the period mentioned in that Sub-s ection, publish a
notice in a national daily newspaper inviting the c oncerned to receive
the dividend, within the tie limit of at least on m onth.
(11) A company shall credit the amount of a dividen d to be
distributed to its shareholders pursuant to this Ac t to a separate account
within forty five days after the date of approval b y the general meeting
and pay the amount of dividend out of that a accoun t; and the company
shall not use such amount for any other purpose.
183.
Investor protection fund : (1) Where any investor does not present a
claim to have refunded the amount invested in the s hares of a company
even within five years, there shall be established an investor protection
fund to which such amount shall be credited.
(2) The amount credited to the fund established pur suant to Sub-
section (1) may be spent for the improvement in the capital market,
investment policy, companies law or law relating to trade, business
and profession, training to the employees of the Of fice or the company
or in any other activity relating to the company ad ministration.

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(3) The management an operation of the fund establi shed
pursuant to Sub-section (1) shall be as decided by a committee
consisting of the Registrar, the Chairperson of the Securities Board or
his/her representative and one representative appoi nted by the
Securities Board from amongst the organization ope rating the stock
exchange.
(4) The Office shall maintain the records of expens es made out of
the fund established pursuant to Sub-section (1) an d have the fund
audited.
(5) Any amount obtained from the Government of Nep al ,any
donor agency or any person or body may also be cred ited to the fund
established pursuant to Sub-section (1).
(6) Where any investor does not present a claim pur suant to Sub-
section(1) ,prior to crediting the amount to the in vestor protection fund,
a notice shall be published in a national daily new spaper inviting the
concerned to receive such amount, within the time l imit of at least one
month.
184.
Office of company : (1) Every company shall place a signboard
containing its name and address in the Nepali langu age outside its
registered office in a manner conspicuous to all .
(2) Every company shall have the address of its reg istered office
registered with the Office within three months of i ts incorporation.
(3) A company may change the address of its registe red office by
giving a prior notice to the Office.
(4) A company shall, after its registration, shall give information
of its contact address such as telephone, fax, emai l, etc. to the Office;

194
and where such address is changed, the changed address shall be made
available to the Office promptly.
(5) The Office may gradually prepare an index of ad dresses of the
registered offices of companies and addresses as re ferred to in Sub-
section (4) and keep such index open for inspection by the general
public.
185.
Appointment of company secretary : (1) A public company with the
paid –up capital of ten million rupees or more shal l appoint to the pot
of company secretary a Nepalese citizen who has the qualification
mentioned in Sub-section (2).
(2) A Nepalese citizen who has worked in the relate d field for at
least two years after obtaining the professional ce rtificate of company
secretary issued by a native or foreign body author ized to issue the
professional certificate of company secretary pursu ant to the prevailing
law or who has worked in the related field or in th e field of company
management for at least three years after doing at least bachelor degree
in law, management ,commerce or economics may be ap pointed to the
post of company secretary.
Provided, however, that this provision shall not ap ply to the company
secretary who is incumbent at the time of commencem ent of this Act for
three years after the date of commencement of this Act .
(3) No director of the concerned company shall be e ligible to be
appointed as the company secretary of such company.
(4) A person shall not be appointed to the post of company
secretary of more than one company at the same time .

195
Provided, however, that this provision shall not ba r the appointing of
the company secretary of any principal company to t he post of
company secretary of the subsidiary company of such company.
(5) Where it is provided by this Act, the prevailin g law or articles
of association that any act has to be done by or th rough the company
secretary, and the post of company secretary remai ns vacant in the
company or any reason the incumbent company secreta ry fails to do
such act or shows has inability to do such act, th en any such employee
of the company, who has the qualification referred to in this Act, as
designated by the board of directors to do such act may perform such
act in the capacity of company secretary.
186.
Functions, duties and powers of company secretary : (1) It shall be
the duty of the company secretary to implement, or cause to be
implemented, the decisions made by the board of dir ectors and the
general meeting ad the matters directed by the Offi ce or the concerned
bodies and to submit such returns, documents, decis ions etc. as
required to be submitted by the company to the Offi ce or any other
body pursuant to this Act or the prevailing law wi thin the specified
period.
(2) Subject to this Act, the memorandum of associa tion and
articles of association, the company secretary shal l perform the
following functions:
(a) To call the meeting of the board of directors or th e
general meeting;
(b) To prepare the agenda to be discussed in the meetin g
of the board of directors or the general meeting an d
send it to the concerned directors or shareholders ;

196
(c) To maintain the records of, authenticate and take
charge of, the decisions of the meeting of the boar d
of directors or the general meeting;
(d) To send a notice of the allotment of shares and a c all
on shares pursuant to the decision of the board of
directors;
(e) To accurately an properly maintain, take charge
of ,and authenticate, the shareholder register and the
records of shareholders and debenture-holders;
(f) To refer the matter to the board of directors or th e
chief executive to record the pledge or mortgage of ,
and execute the transferal or transmission of any
shares or debentures;
(g) In cases where a claim, petition, grievance,
suggestion, advice etc. has been made by any
shareholder or debenture-holder in writing ,to
transmit such matter to the board of directors or
chief executive or Office or other bodies; and to
inform in writing the concerned shareholder or
debenture-holder of the results of any act and acti on
done and taken in regard thereto;
(h) To perform such other functions as specified to be
performed by the company secretary under the
prevailing law or such other functions as prescribe d.
(3) Except as per the decision of the general meeti ng, the
company secretary shall not do, or cause to be done , any such act from
or through the company as is to yield benefits to h im .

197
(4) The company secretary shall observe the code of conduct as
prescribed.
187.
Validity of agreement between shareholders : (1) An agreement
entered into between the shareholders of a company in respect of the
management, operation of the company and the use of voting right
conferred to them shall be binding on them.
Provided, however, that if any provision of such ag reement is
prejudicial to the interest of the company or its m inority shareholders,
such provision shall ipso facto be invalid to the extent.
(2) The concerned shareholder shall submit two copi es of the
agreement entered into under Sub-section (1) to the company within
fifteen days after the date on which such agreement was entered into.
The company shall submit a copy of the agreement so received from the
shareholder to the Office within fifteen days after the receipt of the
same.
188.
Effect of inoperativeness of the Companies Ordinanc e,
2062(2005 ): With the Companies Ordinance, 2062 (2005) being
inoperative, unless a different intention appears, the inoperativeness
shall not:
(a) revive anything not in force or existing at the tim e at
which the Ordinance became inoperative;
(b) affect the matter in operation as per the Ordinance or
anything duly done or any punishment suffered
thereunder.
(c) affect any right, privilege, obligation or liabilit y
acquired ,accrued or incurred under the Ordinance;

198
(d) affect any penalty, punishment or forfeiture incurr ed
under the Ordinance;
(e) affect any action or remedy made or taken in respec t
of any such right, privilege, obligation, liability ,
penalty or punishment as aforesaid; and any such
legal proceeding or remedy may be instituted,
continued or enforced as if the Ordinance were in
force.