You are on page 1of 15

The legal environment of a business refers to

the relevant laws and regulations under


which the business operates.
In every country, the government regulates
business activities. These regulations of govt
are considered as legal environment.
The limits for business operations are
decided by regulatory environment which is
also called legal environment.
The legal environment of a business refers to
the relevant laws and regulations under
which the business operates.
The legislative framework thus creates both
opportunities and threats for business. For
eg: the new legal framework of deregulation
and privatization created challenges for
organizations and their managers.
Company Act promulgated in 1936 was the
first law to regulate the management and
other affairs of joint-stock companies in
Nepal.
Muluki Ain, adopted in 1963.
The laws relating to business or economic
activities in Nepal can be broadly classified
as follows:
1. General Business Legislation
includes laws relating to the
registration, organization, and
management of the business firms.
2. Mines and Natural Resources Legislation
includes laws relating to mines, minerals
and other natural resources.

3. Labour Legislation
includes laws relating to wages, hours of
work, payment of bonus, dispute
settlement, unionism and labour
relations
4. Financial and Investment Legislation:
includes laws relating to investment,
taxation, foreign exchange, subsidies,
stock exchange, and technology transfer.

5. Social Legislation:
includes laws relating to trademark,
copyright, consumer rights, consumer
interest and environment protection.
6. Sectorial Legislation:
includes laws relating to sectorial
management like tourism, railways, civil
aviation, forest, motor vehicles and
transportation, electricity and water
resources.
From the point of view of legal system, there
are four types of business firms:
1. Sole Proprietorship
2. Partnership
3. Joint Stock Company
4. Co-operative Society
It is a private firm.
The private firms registration Act,1958
requires these private firms to be registered
with the concerned dept. of the govt.
In the eyes of law, a sole trading concern and
its proprietor are both one and the same.
Thus not considered a legal person.
Partnership firms are governed by the
Partnership Act 1964.
This form of business organization does not
have its own distinct legal personality and
hence the owners-the partners-have
unlimited personal liability both jointly and
severally.
A company is defined as an association of
many persons who contribute moneys worth
to a common stock and employ it for a
common purpose.
In Nepal, the joint stock companies are
governed by the Company Act,2006(rules and
procedures covering formation,
management, operation, and liquidation of
the company.)
A private limited company is one where there
is at least one but not more than fifty
shareholders. Such a company cannot invite
the public to subscribe shares.
A public limited company, does not have any
of there restriction, except that it should
have a minimum of 7 members.
Documents: MOA, AOA, Prospectus
Formed and registered under Cooperative
Act, 1960. Amended in 1991.
A cooperative organization is an association
of persons, usually of limited means, who
have voluntarily joined together to achieve a
common economic end through the
formation of a democratically controlled
organization, making equitable contributions
to the capital required and accepting a fair
share of risks and benefits of the
undertaking.
Act was enacted in 1992.
Purpose of this Act is to faciliate productivity
of the industrial units by making the
environment of industrial investment more
congenial, straight forward and encouraging.
This act classifies industries into following:
a) Cottage Industry
an enterprise which utilizes specific
skills or local raw materials and
resources, and which is labour intensive
and is related with national traditions,
art and culture.
b) Small Industry:
An enterprises in which fixed assets do
not exceed Rs 30 million.
c) Medium Industry:
is an enterprise in which fixed assets
investment exceeds Rs 30 million but does not
exceed Rs100 million.
d) Large Industry:
Is an enterprise in which fixed assets exceeds Rs
100 million.