SHARES

SHAREHOLDERS Sec 27 Face Value of Shares

Sec 27 Application
Sec 28 Allotment
Sec 29 Issue @ Premium
Sec 30 Differential Rights
Sec 31 Return of Allotment
Sec 32 Dealing
Sec 33 Certificate
Fixed Value Of Share Pvt : AOA
Min : 5% Max 50 %
Authority : BOD/ BOD delegated
Market Exists + AOA provision : X Prior Appro

30 d of allotment Paid up in non cash : Title Deed + Contract of Sa

Public: to General Public : only through recognized Securities Dealer b4 offer :
 Public : 50 or above 50, multiple of 10 + MOA / AOA
N/A to Co : In operation + Publish Audited FS of 3 years ago: at time of prospectus

Conditions : Listed Public = As per Securities Act; Unlisted Public/ Pvt Co = -ve N/w X + GM a

Paid up in non cash : Title Deed + Contract of Sale/ Services + No, Face value, extent of paid up
Dealing agreement : to OCR : 7 d of agreement
Non Cash consideration (Public) : Evaluate + report 1m of issue

Securities Premium Account : Open + Deposit Utilization of Premium : P B C D E P

Actual cash receive vayepachi matra alloted vanne

 Sec 17 Pre- Incorporation
Sec 18, 19 MoA Amendments
Sec 20 AoA Publish

who can Incorporate

COMPANY
Process for Incorporation
Minor restrictions

Prospect

Sec 23
Sec 24
Sec 25
us

SHARES SHAREHOLDERS
SHAREHOLDERS

Mininum No of SH
Sec 27 Application Information on title to shares
Sec 28 Allotment Address of SH
Sec 29 Issue @ Premium Index of SH
Sec 30 Differential Rights Substantial SH
Sec 31 Return of Allotment Lien on Shares
Sec 32 Dealing Payment on Amount for Shares
Sec 33 Certificate Shares Held Jointly

Sec 34 Basic
DEBENTUREHOLDERS

Sec 35 Procedures
Sec 36 Dtrustee: Agreement
Sec 37 Dtrustee: Inquiry + Demand
Sec 38 Dtrustee: Periodic Statements
Sec 39 Dtrustee: Rights, liabilities
Sec 40 Dtrustee: Service charges
Sec 41 Dtrustee: Representation Rights

FORMATION, POWERS, (DIS)/QUALIFICATIONS Meetings of BOD

Sec 86 BoD , Number of Directors Meetings of BOD
Sec 87 Appointment of Directors Notice of Meeting of BOD
Sec 95 Powers + Duties of BOD
Sec 105 Restrictions on Authority of Directors Disclosures
DIRECTORS

Sec 99 Responsibilities + Duties Disclosures by Directors

Sec 88 Qualification Disclosures wrt Shares
Sec 89 Disqualification Disclosure about Securities
Sec 90 Term of BoD
Sec 91 Remuneration, Allowance, Rewards Restriction on certain acts
Prohibition on loans
Sec 96 Appointment of MD + Management of Company Prohibition on false statements
 DIR Sec 93 Transaction with Co related to Director Jurisdiction of transactions
Company to be bound
Sec 107 Register of Directors + C/S Validity of acts already done

APPOINTEMENT OF AUDITOR
AuditoSec 110 Mandatory Requirement
Sec 111 Process of Appointment
Sec 112 Disqualification
Sec 113 Power of CRO to appoint auditor
Sec 114 Accounts & Records
Sec 115 Functions, Duties
Sec 116 Audit Report
Sec 117 Information from Auditor
Sec 118 Remuneration
Sec 119 Removal

9
6
5
6
 Sec 15 Summons, Notice
Sec 21 Sec 16 Functions
Sec 22

Registration Procedure
Sec 3
OCR
Sec 4 Sec 5
Sec 66

LDERS SHARE CAPITAL

Sec 9 Alteration Sec 56
Sec 47 Reduction Sec 57
Sec 48 Approval from court for reduction Sec 58
Sec 49 Liabilty of SH for reduced capital Sec 59
Sec 50 Buy-Back of Own Shares Sec 61
Sec 52 Loan against collateral of own shares Sec 62
Sec 53 Restriction : Issue @ Discount Sec 64
Sec 54 Preference Shares Sec 65
Minor restrictions Sec 66

SHARES + DEBENTURES
Sale/ Pledge Sec 42
Transmission Sec 43
Refusal to Register Sec 44
Other circumstance of transmission Sec 45
Register of Holders Sec 46
Inventory of Shares, Debenture, Loans Sec 51
Ownership Sec 55

of BOD ACCOUNTS AND RECORDS

Sec 97 Accounts of Company Sec 108
Sec 98 Annual FS + Board Report Sec 109

ures
Sec 92
Sec 94
Sec 100

certain acts
Sec 101
Sec 102
Sec 103
Sec 104
Sec 106
Cancellation of Registration Sec 6
Body Corporate Sec 7
Registration Effect of Registration Limited Liability Sec 8
Terms Sec 10
Approval for Commencement Sec 63

MEETING OF SHAREHOLDERS
AGM Sec 76
General Meetings Sec 67 Matters in AGM Sec 77
EGM Sec 82

Directors to be present Sec 68

Legality of Meeting Sec 69
Restriction in Attendance/ Voting Sec 70
Presence, Attendance, Voting
Right to vote in GM Sec 71
Voting in election of Directors Sec 72
Quorom Sec 73

Discussions & Decisions Sec 74

Decision, Discussions Minutes Sec 75
Cases for Special Resolution Sec 83

Report to OCR Sec 78

Preparation of Docs for AGM Sec 79
Return of AGM to OCR Sec 80
Reports, Returns, Documents
Fine : Failure of returns Sec 81
Abstract of FS Sec 84
Registration No. to be mentioned Sec 85
Negative Ne
Sec 60
Min Paid uSec 11
MandatorySec 12
ConversionSec 13
ConversionSec 14
 Section 142 -144
Holding/ Subsidiary
Majority Shares
Control Over Subsidiary
Direct/ indirect control over formation of BOD
- Shares are subscribed by Agent on behalf of Holding/ Subs.
Also considered for
Holding/ Subs. Relation - Right to appoint directors is exercised by any person
nominated on behalf of Holding/ Subs.
Creditor company accepted shares as Security
Exceptions Company exercises power on basis of holding :
▪ Debentures
(Not Holding Company) ▪ Trust Deed (Debenture/ Shares)
Subsidiary not allowed to …...... In Holding
▪ Purchase Shares
Restriction
▪ Purchase Debentures
▪ Make any Investment
- Auditors Report
- Details : Investment by Holding in it
- Report of BOD Latest Expired F/Y
- Copy of Annual A/c of Subs.
- Loans borrowed against immovable property of Subsid.
Enslosure in B/S of
Booksof Holding - Loans borrowed for other than discharging liabilities
- If their FY is different, matter of change : of holding's right
- NP after deducting losses of Subs
- P/L not mentioned in A/cs after it has become Subsid
That may be of concern for SH of Holding Company
If Any Info Cant be obtained : Written report in BS of Holding
 Section 152 -153
Single Shareholder Company
All acts/decisions :
Acts / Which was required to be done by BOD/ GM
Decisions Can be decided in writing by him
Not required to call BOD/ GM
Death : Transfer of shares to legal heir
Trf to Legal
Heir Decision : In writing by acquiree
Info + Evidence + fees : to CRO : 1 months
If they trf to only one : No problem
If they do not trf to only one :
Heir > 1 All shall be directors
Entitlement : Competent Court Judgement
Amend MOA & AOA
No heir Liquidator by CRO + Liquidate
 Section 154 -158
Foreign Companies

Mandatory Branch/ Lialson office to

do Business/ Transaction in Nepal

Registration Procedure

Acceptance
Inquiry
Register + Regn Certificate
30 days

Objective (of Biz/ Transn)

Restriction on Income
Restriction on Shares/ Debentures

Name Board

Documents

Annual Financial Statements

Submission by Lialson Office

Foreign Financial Statements

Power Of Attorney
Power Of Attorney

Cancellation of Registration
(Voluntary / Regulatory)

If No-one Claims within 21 days

Cancellation due to Insolvency

 Section 154 -158
Foreign Companies
Branch Office/ Lialson Office
to do biz/ Transaction in Nepal
Not deemed as Biz/ Transaction :
(Approval of Competent Body required)
▪ Making Investment
▪ Lending Money
▪ Participating in Operation/ Mgmt
Deemed as Transaction/Office In Nepal :
▪ Transaction for Period > 1 Month
▪ Appoints person for regular contact
In existence b4 this Act : register within 6m
Application in prescribed format
Prescribed Fees
Permission obtained from concerned body

Refusal
Name is of nature that it cant be
Objective registered
30 days

Same as that of its main registered Office

No income earning activity by Lialson office
Not issue share/ debenture in Nepal
Name Board : in Biz Place : Conspicious manner
▪ Name of Country (of its establishment)
▪ Registration Number in Nepal
Use : Bill, receipts, Invoices, Letter Heads
AFS (with B/S + P/L) to reflect real situation of tranz.
Audited + Submit : 6 months of FY Expiry
Following Details :
- Classification : Fixed, Running & Other Properties held in its name
- Clear details of cash held by such Co. with BFI in Nepal
- Total Amount of Loans/ Liab. Payable by it to Nepalese Person/ Company
Auditor Certified + Submit within 3m after FY expiry
Statement of:
- Salary + Allowance + Amts = Paid to Employees, Consultants
- Payment of rental + Operational Expenses
- Deduction of taxes from above both payments
Copy of AFS + AR + BOD Report : for every FY
Pursuant to Law of country of its main office
3 months after its preparation
In specified format as per requirements of its home country laws
Appointing person residing in Nepal :
As Authorized representative (on its Behalf + Binding on it)
▪ For purpose of Service of Summons/ Notices
▪ To receive Lawful notices, lawsuit , legal action
Voluntary : Closure of Biz/ Transaction in Nepal
Competent Authority : Prohibition on its biz/ transaction
Application + Prescribed Fees + Evidence that no liability is due to anyone
To inquire whether above evidence is true; -- CRO Publishes in daily newspaper twice
Notice inviting claim + evidence : to claim within 21days

If Anyone Claims :
Foreign Company should show settlement of such claim
If claim could not be settled from assets inside nepal then, settle from assets outside Nepal

Settled
+ Proof of Settlement

CRO : Strike Name of Such Company from Register

Insolvency process in initiated as per law of any country where it is carrying on its transaction,
Its authorized representative (POA wala) : Publish in newspaper in Nepal + Inform CRO
If order for cancellation has already been issued, it shall close its Biz/ Transaction in Nepal
 Section 166 -167
Company Not Distributing Profit
Develop Profession/ Occupation
Protect rights of persons in above
Purpose /
Objective Scientific, Academic, Social, Benevolent Obj.
Public Utility/ welfare
Change in Objectives : Prior Approval
Condition Not distributing dividends
By any person
Registration Trustee of Public Trust
Corporate Body
Restriction Not add " Company", "Limited", "Pvt. Ltd."
Promoters Atleast 5
No SH but only Members; Atleast 5
Members Not liable for Debts/ Liabilities
(Except accepted in writing)
Number = as fixed in AOA
Directors elected from amongst members
1 Member = 1 Vote
Non-Transferable
Ipso facto terminated :
Membership Death
Cancellation of Registration
of Member
Dissolution/ Amalgamation
Share Capital Not Required
Allowed to Membership Fees, Donations, Gifts
receive (For achievement of its objectives)
Admin Exp : Not exceed : 25% of Total Expenses
Meeting allowance, Salary, Facility Not exceed:
Expenses Specified by
Incorporational expense CRO
Operational expense
Profit earned : utilize to increase its capital
Out of it, Should not give :
Profit earning Members/
Dividend
Employees
Bonus
Debts settle with liabilities;
Remaining assets : as per AOA
If No provision in AOA; trf to GON
Liquidation/ But, Not to be trf to :
Cancellation of ▪ Anybody
Registration ▪ Company whose promoter/ member is :
Promoter/ member Of Company
Close relative not distributing
Profit
Close relative
Amalgamation Not to be Merged with Co. Distributing Profits
By CRO :
Cancel registration
Violation
Appoint : Liquidator + Auditor
Specify : Period to complete proceedings
Provisions All provisions of Listed Co. applicable to it
 Section 145 -151
Private Companies

Consensus Agreement

Inspection of Documents
/ Records by SH

Power to demand for

return of Transactions

Exemptions from Audit

Written Resolution

AGM not required

Deemed Participation in
GM through
Communication Means
Deemed Participation in
GM through
Communication Means
 Section 145 -151
Private Companies
- Management, Operation, Business, transaction
- Restriction (if any) on transfer of shares
- Power of shareholders to liquidate owing to specific event/ voluntarily
- Division/ Use of Voting right; Concessions, Rights between Shareholders
- Terms of appointment of Officers, employees, workers
- Who will be directors, officers, persons for ultimate responsibilty, chief executive
- Dividend distribution + Mode of Payment
- That there will be no BOD
- If no BOD, then who performs such functions of BOD
- If no AGM required , then provisions regarding it
- Types of Shares + provision of shares with different rights
Amended : Consent of all parties + In writing
Shareholders obtaining shares after consensus agreement : Deemed to agree upon it
Through donation/ Gifts
In any other manner (knowing that such agreement was in existence)
Power to : Any Shareholder + His Proxy
During : Office Hours + Adequate Arrangement : by Director/ Officer
Documents/ records :
Minute books of GM + BOD
Annual AFS
Share Register
Accounts of Company
Power to : Any Shareholder
Return of Transactions for ANY F/Y :
Provide such Return by: Director / MD/ Officer + Certified AFS -- 15 days of demand
Power of : GoN via Notification in Nepal Gazette
Criteria : Private companies within prescribed turnover limit
Any act that can be done by adopting Resolution, including
- Special resolution in its GM
- Resolution in Meeting of any particular class of shareholders
Can be done by a Written Resolution : Executed + Signed : by ALL Shareholders
- representing 75% shares
- entitled to vote in holding discussion on such resolution
- on the same date on which such resolution is deemed to have been adopted
If provision in Consensus Agreement that AGM not required to be held ;
Then not required to hold AGM during the period of such agreement
Also make provisions on:
- Procedure of making decision on such matters that was required by GM
- Authority of making such decision
If any SH (makes + takes part ) in communication contact with all SH through any communication means
In such a manner that other SH can hear/ read whatever is spoken by every SH
Deemed participation of every SH in GM with other SH
Place (deemed) : Where chairperson if meeting is present
Chaiperson = Prepare + Authenticate : Minutes, Decisions
If any SH complains + fees within 3m : that he has not taken part in such meeting;
OCR enquires into such company
If company fails to prove that such SH has taken part , then
Decision of such meeting : INVALID
Above provisions also applicable to Meetings of : Directors, Subcommittee of directors
 Company Advisory Board
Study Practical problems in implementation of :
this Act + Laws prevailing to Company Administration
Purpose /
Objective Give Advice to GoN : on Timely reforms to be made in :
Existing Company Acts/ Laws
Laws prevailing to Company Administration
Formation By GoN : via Notification in Nepal Gazette
1 Person each : Fields - Law, Accounting, Tax, Commerce
Atleast Bachelors Degree + 7 yrs expertise in such fields in Govn/ Pvt Sector
Members (9
Members) Representative of FNCCI
CRO : Member Secretary
Chairperson : Anyone from Board: via above Notification
Annual Report on activities carried out pursuant to its objectives
Annual
report Submit - to Concerned ministry of GoN
Publish - By Ministry + Arrange for general public to obtain its copy
Secreteriat Situated in - CRO
 Section 169 - 170
Company Board
Purpose / Objective
Formation

Members (3 Members)

Secreteriat
Employees

Working Process
Dissolution
 Section 169 - 170
Company Board
Hearing & Settling cases until GoN has designated a Court
By GoN : via Notification in Nepal Gazette
Chairperson : District Judge (Already been/ Qualified to be) - Bachelors + Experience in Commercial Law
Member : Registered Advocate - Legal Practice in 10 yrs commercial Law + Gazetted 2nd class Nepal Judicial Service 4 yrs
Member : Bachelors Degree in Mgmt/ Commerce/ Acc + Worked in Co Mgmt/ Tax Admin/ Acc - 10yrs
Or : Professional Certificate in Acc + 5yrs Experience in Accounting Profession
Situated in - Ministry of Industries
In Secreteriat : As specified by GoN
3 members Jointly exercise their Jurisdiction

Chairperson No Chairperson
+ +
Another 1 Member All Present
Other 2 Members

Case Heard Case Heard Case Heard

+ Settled only + Settled

Unanimous
/ Majority Decision

Same Opinion Different Opinion

(Unanimity) (Lack in Unanimity)

Their same Opinion Chairperson : Chairperson :

Present Not Present

Opinion of Opinion of
Chairperson Senior Member

Submitted to Member who was

absent earlier + His Opinion

If Majority couldn't If each opinion is

be established Different
 Proceedings Judgement/ Final Order
Opinion of Chaiperson Reference to Court
Hearing Appeal

Ipso Facto : Once GoN designates Court via Notification In Nepal Gazette
Ipso Facto : Termination of Chairperson + Members + Employees -- No additional Amount / Compensation
All pending Cases, Petitions : Transferred to Court
 Section 164 - 165
Audit Committee

Objectives

Mandatory
Formation

Members (>
3)

In BOD
Report

Suggestions

Meetings

For Inquiry
into any
matter
 Section 164 - 165
Audit Committee
- Prepare Accounts related Policy + Enforce it
- Review Accounts & FS
- Review Internal Financial Control System + Risk Mgmt System
- Supervise + Review Internal Audit Activity
- Formulate Policies reqd to be observed for auditor's appointment + Selection
- Recommend Potential Name of Auditors for Statutory Audit
- Fix Renumeration + Terms/ Conditions of appointment
- Present above in GM for ratification
- Review whether Auditors Code of conduct are followed
- Comply with terms required to prepare LFAR (if any mentioned by Regulatory Body)
- Other Terms prescribed by BOD wrt A/C, FM, Audit
Listed Company - Paid Up Capital - 30 mio or more
Company Fully/ Partly owned by GoN
Chairperson : Director not involved in day-day activities
(Mandatory present in AGM)
One Member : Professional Certificate on Accounting or Bachelors + Experience in A/c
Disqualified : Close relative of CEO
Short description of :
- Activities of Audit Committee
- Working policies adopted by BOD to implement their suggestions
- Names of Members of Audit Committee
- Allowances/ Facilities by members
Audit Committee gives suggestions wrt Accounts and FM
BOD shall implement its suggestions
If suggestion cant be implemented; BOD to mention reasons for same in its report
As per Necessity
Notify - to Attend its Meeting :
- Managing Director
- CEO or other director
- Auditor
- Internal Auditor
- Accounts Chief
 Section
Fines : 10,000 to 50,000
A Invalid Allotment
A Audit Report X
A AGM not conducted
A Audit Committee X
B Buy Back Provision - contravention
B Books of Account maintained X
C Non-Co-operation to Auditor
C Access to Computer Records
D Docs : False : Made/ Submitted
D Declaration : False : Made/ Submitted
T Translation (of Foreign Co Records) : False
 Characteristics of Company Types of Company
1 Separate Legal Entity Size Public Private
2 Perpetual Succession Unlimited Limited
3 Transferable Shares Liability By Shares
4 Limited Liability By Guarantee
5 Separate Assets/ Liabilities Listing Listed Unlisted
6 Professional Management Holding
Holding
7 Not a Citizen Subsidiary Associate
8 Common Seal Foreign Government
Others
9 Enter into Contract Not for Profit Statutory
10 Capacity to sue and be sued
11 Separate Finance
Shareholders Contravention

Petition
Creditors
COMPANY OCR

INSPECTOR
Call for Explanation
Call for Documents
Inspect : Books + A/cs.
OCR Self
Fradulent
Not Filed required return
 PROPERLY CALLED

VALID NOTICE PROPER AUTHORITY

Publish 2wice : Daily National Newspaper

+
If Abstracts, then
only Publish Send Notice - Total No : 25%
To every SH @ Regd Address AGM - Total Amt : 10% EGM
Within
21 days : AGM 1st : 1 yr of Commencement Permission BY BOD
15 days : EGM Next : 6 mnths of FY Expiry By SH Self
7 days : Adjorned Meeting By Auditor On Request
+ Not called, Apply for extension (3 months)
Send Documents Not called : Auditor/ SH : Apply to Court
Listed Co Can send Annual FS If not called, CRO direction to call AGM
ABSTRACTS Board Report Court orders to Call /
Audit Report Again not called : Any SH : Apply to Court Court Call self (In case of Investigation)
Other Agendas
Court orders to Call AGM/ Other Orders
Format : Specified by CRO (Quorom not Relevant)
Contents :
Wordings : "Only an Abstract" PRIVATE CO.
Abstract is as per Format and
Auditor's Opinion :
Consistent with whole FS As per Consensus Agreement
Auditor's Remarks (if any) in AFS
Full Details : AGM to be Held AGM not to be Held
If Auditor had mentioned anything about
Accounts, Records
All above Provisions : Applicable - Provision of Alternative Procedures
Time of Meeting : AOA - Authority of Such decision
- For matters requiring SR;
Written resolution
signed by > 75% SH
 PROPERLY CONVENED PROPERLY CONDUCTED

QUOROM CHAIRED BY AGENDAS to be Discussed DECISION

- Pvt Co. : AOA - Chaiperson of BOD or - Notice sent along with Agenda - Majority Decision
- Called by Court : Not relevant - As nominated by Directors - Other Agendas cannot be discussed , EXCEPT - Tie : Decisive Vote by Chairperson
- Adjorned Meeting : > 3 SHs - Agenda of Adjorned Meeting - Decision : Via Resolution
( > 25% of Total No. of SH) PLACE OF GM - Voted (to discuss) by > 67% of Total SH - Voting Methods :
- Public Co : > 3 SHs - Registered Office (Entitled to Vote) - Show Hands
( > 50% of Total No. of SH) - District where regd office is located - Voice Voting
- Govt. Owned : (Full/ Partial) - Adjoining District : OCR approval required - Poll/ Ballet
> 3 SHs not
- Development Board : required (Convenient to most SH i.e > 90%) Matters to be PRESENTED in AGM - Other Methods
- Public by another public : Audited FS - By directors
( But > 50% of Total No. of SH) Can be rejected by 10% SH + Audit Report - Publish before 21d VOTING ELIGIBILITY
Notify to CRO prior to 14 days Board Report - Any matters applied by SH - SH whose name is in SH register
- Proxies (SH can apply b4 Notice) > 5% of Total No of SH - Attend + Vote (Proxy of SH allowed)
- Not allowed for Directors Court may Direct to hold - 1 Share = 1 Vote
- Only Natural Person GM in its registered office/ district - Restrictions to ATTEND + VOTE
- Appointed by SH with Voting Rights Matters to be DECIDED in AGM
- Appointed in writing Such period will not be included to - Appointment and Remuneration of :
Count time limit for GM - Directors
- Auditor - Restrictions to VOTE
- Directors - Dividend
- Proxies Not allowed (Should not be > rate proposed by BO
- Should be present in every AGM Adjorned Meeting : Same powers as of AGM - Other Matters
- via Video Conference Also - Chaired by : Chairperson of BOD - Required by Act / AOA