Company incorporation and

Management
Meaning of company
• 1. Meaning of company
• The term 'Company' is derived from company means a group of person association to
achieve some common objectives such as business charity etc. The company is a
voluntary association of person formed to run business activities for fulfilling the
objective of earning profits by collecting capital and selling share.
• The company is an association incorporated by a person or some persons interested to
carry on any business or industrial or mercantile activities or other lawful trade with the
motivation of earning profit by using money or money worth to the company.
• The company Act 2063 Section 2 (a) has define "Any company incorporated under this
act"
• Erons Graff- A Company is a legal person or entity separate from and capable of
surviving beyond the lives of the members
• American Chief Justice Marshal's definition - "A person, artificial, invisible intangible and
existing only in the eyes of law (is company) It possess only these properties which the
charter of its creation confers upon it, either expressly or identical to its very existence."
 Characteristics
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• 1.Voluntary Association: - A company is an association of some persons with the formation. It
is formed upon choice and consent of members and not by compulsion.
• 2. Independent corporate Body - A company is a person in the eyes of law. The promoters are
the persons who constitute it. It is different from its promoters and shareholders.
• (Salomon Vs Salmon Company Co.Ltd.1897)
• 3. Limited Liability - A Company being a legal person is the owner of its assets and is liable to its
all debts. The shareholder are eligible to take benefit in acc. to investment directors and
company board is liable to pay tax for the work done according to using mask of company.
•  4.Perpetual succession - The life of death of the company does not depend upon that of the
members. These members go/come/ die but the company goes forever.
• 5. Separate Property - company is capable of acquiring possessing selling, disposing off or
dealing with in any other manner of its movable or immovable property in its own name.
• 6. Transferable shares-
• 7. Capacity to sue and be sued
• 8. Capital
• 9. Common seal (authorized signature)
•  10.Professional management- A company gives sample room to the qualified and professional
managers indulged therein. (Shareholders take part in only general meeting)
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 Types: - company
1.Chartered Company -Company incorporated under the consent of the king or queen or head
of the state through a specific charter
2.Registered company
3.Statutory company
4.Foreign Company
5.Guarantee company - Investors are members and are not bound to invest before loss occurs or
at the competent position of company to satisfy debt.
6.Government Company -Government secures majority of shares.
7.Limited company - Liability of shareholder is limited only up to their share.
8.Unlimited company- Shareholders commit to bear unlimited liability.
9.Public company - 7 promoters, share and debentures are put into public for sole in open
market.
10.Private company - (Maximum 50 members)
11.Holding /Private Company- "Holding company's means a company having control over
subsiding company" (M. Board)
12.Subsidiary company- Company controlled by holding company (who buy 51% shares)
13.Listed company - Listed with the stock exchange market
14.Company not distributing profits
15.One man company
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 Incorporation of Company

• Incorporation of Company means the combination of

promoter's decision to establish company and the
authority decision for the registration of the company.
• To form business into legal organization is called
incorporation
• Registration is a person which gives legal status to the
company f anybody want to enter in any business
through private firm or partnership firm or company
out of these three option people like to enter in a
company because it provides multifarious facilities in
the field of liability, Legal  
 Con…
• status personality, continuation , acquisition of property and the
like.
• A company is a legal institution, which is incorporation according
to company law.
• Section 3(1) of the companies Act 2063 that the single promoter is
adequate for establishing a private company in which the no. of
shareholder should not be more than 50 - (in a private company)
• Likewise as stated in section 3 (2) at least 7 promoters are required
to incorporate a public company and such no. of promoters are
not required to establish a public company by a another public
company. In public, company no limitation of shareholders.
 Procedures for Incorporation

• To increase company the promoters should

follow the following process:-
• Application - The person interested to
incorporate a company are firstly required to
apply. The person desirous to incorporate a
company, whether private or public must
submit an application in prescribed format to
the office. The following document must be
presented along with the application -
 Con…
1. The memorandum and articles
2. Copy of agreement (promoters) (public)
3. A copy of the unanimous agreement (private)
4. Prior approved/ license/a permission
5. A certified citizenship
6. Permission of concerned authority to run business
7. Evidentially proofs of citizenship of foreign etc.
8.  Registration -At the time of submitting application, necessary fees must
be submitted to the office along with the application (Gazette Publics)
9. Inquiry and refusal to registration- (15 days) (crime)
10.Certified of incorporation/ registration- After necessary inquiry
11.Commencement of business
 Legal Importance Formalities of Meetings

• 1. Meaning of company meeting

• Role of company meeting is most important in management of the
company. Meeting of a company is that assembly in which the persons
relating to company gather and makes decision by discussing the
matter in respect of given agenda, plan and policy of the company. In
addition, company follows decisions passed by the meeting in its
transaction.
• P.K.Ghosh "A meeting is a gathering assembly or coming together of
two or more persons for the transactions of some lawful business of
common concern"
• "A meeting is a gathering of some person of the company for the
purpose of having discussion in any matter of common interest.
• Such meeting of a company is split up on the following:-
 A. General meeting

• General meeting is the supreme authority of the company, which held to form policies, forming
board, examining the further and instructing the board, issuing guidelines and so on.
• It is the meeting of the shareholders
• Such shareholders meeting has recognized under the following four types by Indian company
act 1956
• Statutory meeting
• Annual general meeting
• Extra- ordinary general meeting
• Class meeting
• But Nepalese contract act 2063 has arranged only two types of general meeting. They are-
• First Annual General Meeting (FAGM)
• This meeting is also called as a statutory or preliminary annual general meeting it held only one
time in the life of company. It should be called once within the 1 st year from the date of
receiving certificates of commencement of business. It held to discuss on the report of
directions.
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 Annual General Meeting (AGM)

• Annual general meeting is such a time bound meeting, which is

held after holding the FAGM. It should hold within a fixed
period. It should be called within 6 months from the date of
expiry of its fiscal years. (Mostly at the mid of fiscal year, Poush)
However, until the FAGM held it cannot be hold. To view the
overall progress of the company it held. Shareholders gather
together to get information on the forthcoming progress of the
company.
• If any public company does not call AGM, ask to the expiry of
time and three-month lapse, the company register's office can
give instruction.
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 Extra-ordinary General meeting(EGM)

• Extra-ordinary ordinary general meeting is also called

special general meeting. All general meeting other
than the annual meeting are called EGM: the
company may call such meeting at any time. It is
called in a special situation when an urgent decision
has to be taken.
• Boards of director, auditor, shareholders 25% (CRO)
office of company registration etc are the person
who can call EGM.
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 Formulation of Meeting

1. Notice of the GM
2. 21 days FAGM, AGM, and 15 days EGM
3. It should be published twice in a national daily
4. Adjourned meeting 7 days
5.  Venue of holding GM
6. GM must hold at the distance where its registered office is situated or any place convenient to
substantial number of shareholders adjoining to such direction.
7.  List being available at the venue of GM
8. For existing shareholder
9.  Priority in discussion and decision -
10.Agenda listed in the notice sent to the shareholder must be discussed and decided first in the
GM.
11. Role of cooperate body in GM
12.In case any corporate body has purchased shares in a company, any person appointed by such a
body may take part and cast vote in GM.
13. Proceeding not becoming void:-
If any notice was omitted due to mistake
If any shareholders failed to get notice and address
 
 Con…
• Quorum -
• Three shareholder caring 50% shares or
• Presence of director in GM
• Chairman of the GM
• Discussion and decision
• As a resolution (Hands show, voice vote,
ballot)
• Minute
 Resolution / Agenda

• All the activities of the company are conducted by resolutions passed in the
various meetings. The term resolution is a decision taken at a meeting of the
company. All matters to be presented in the form of agenda. The word
resolution is also used to refer the agenda.
• M C Sukla - "A resolution is a motion seconded and approved or adopted by
the requisite majority of votes cast at a properly constituted meeting.
• RC Chawala and K.C Gary - "A resolution may be defined as a formal decision
of a meeting on any matter before it"
• To sum up we can say that resolution is that which the requisite majority of
the votes of the shareholders accept. It is a formal decision of a meeting on
any proposal presented for discussion and decision before it.
• All the matters to be discussed in GM must be presented in the form of
resolution. Nepalese company act 2063 has made provision of two kinds of
resolutions:-
 I. Ordinary resolution
• All the resolution except special resolutions are called ordinary
resolution such resolution does not required special majority to
pass by GM. Simple majority is sufficient. This means majority of
shareholders presented in the meeting and not the majority of
whole shareholders (51%) Some examples of ordinary resolutions:-
• Audited profit and loss account and balance sheet of the previous
year
• Declaration of dividends
• Appointment of directors and auditors
• Other matters
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 II. Special resolution:-
• A resolution, which requires special support of the shareholders, is called a special
resolution. Therefore, a resolution requiring special majority to be passed in the
GM is a special resolution. 75% of share representation is required. 21 and15 days
notice must be given to shareholders some of the special resolutions:-
• Incensement of authorized capital
• Reduction of share capital or alteration of share capital
• Change of name or main objectives of the company
• Merger of one company with another company
• Issue or role of bonus shares
• Conversion of public company into private and vice versa
• Amendment to Memorandum, reward, approval of deeds, Authorization of deeds
of BD, liquidation
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 Minute of Company Meeting

• A. Meaning
• The term 'minute' literally means a note preserve the memory of an event or
transaction. It is known as the record of the proceeding and decision of a meeting. It
also known as written official record of the business related with the company
meeting. It is clear concise, accurate and permanent record of the decision of
meeting. For this, a separate book is made essential and loose-leaf paper is avoided.
It must be hand written since typed minute is not allowed.
• The page number must also be given to the minute consecutively. It must contain a
fair and true picture of the GM incorporating the clear-cut summarized version of the
meeting.
• It is an official record of the matters considered and decision taken at a meeting.
Every company is bound to record the proceeding in a minute book. Because on the
time being, it can be shown at court of law as an evidence against culprit.
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 B. Process for keeping minute

• It has a historical importance in a company, every company has to

keep minute of business done at a meeting properly. Section 75 of
Nepalese Companies Act has made some legal provision in respect of
keeping minute Like:-
• Every company has to keep it
• It should be in a separate book
• It must be signed by the chairman and company secretary
• It must contains manner of informing the shareholder
• It must contains number of shareholder
• It must contains number of shareholder present in meeting
• It must be kept out registered office of the company
• Shareholder should get every approach in it.
• Board's Report
• Board of director is the supreme executive body of the company. Who should
manage all the affairs of the company, exercise power and perform duties
within the area of company act and so on.
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• Shareholder
• Selects Board of Director
• Board of Director Appoints
• Chief Executive/MD
• Production Marketing Fanance Personal Law Function
• Manager Manager Manager Manager Manager
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 Form of Company Management

• Shareholders are the true investors of the

company. That is why they should have full
information about transaction, profit, loss and
financial position etc. of the company. The
authorized body to keep all these information
is Board of directors. Board of directors should
prepare annual report of company's
transaction, it has to prepare the following
reports:-
 Con…
• I. Report for office - Every public company has to prepare an submit a report to the office and should submit
it in office 21 days before to the holding of annual general meeting which board of directors must approve
and company's auditor must certify. Such report must include the following particulars:-
• Numbers of allotted shares
• Paid and fully not paid share out of allotted.
• Remuneration, allowances and facilities given to directors ,MD auditor executive chief and managers of
company
• Name of the individual and body corporate shareholders securing at least 5% shares and debentures
• Total amount collected
• Amount due
• The commission paid or to be paid
• The loan
• Any amount obtain by company
• Number of foreign citizen working under company
• Service charges
• Total management expenditure (fiscal year)
• Unclaimed amount by shareholders
• Conformation of the act done for overall company
 Con…
• II. Annual Financial Statement for AGM
• Public company must prepare annual financial statement along with report of the BD every year at
least 30 days before the AGM. Private company with in 6 month from the date of ending fiscal year
(Balance sheet, profit of loss cash flow)
•  III. Report of Board of Directors
• Public company or a private company with its paid up capital of 10 million rupees or more than
annual turnover o 100 million rupees or more must prepare its report to the general meeting
contents of such report are as follows:-
• Reviews of transaction of previous year
• Impact of national and international situation on the transaction
• Achievement of current fiscal years
• Industrial and business relation of company
• Change in the BD
• Major thing affecting the transactions
• Shares progress report major transaction buyback of share
• Total management cost etc
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• IV Summary of Financial Statement
• Statement of financial report
• Statement of auditor report
• Statement of auditor's comment
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 Audit an Auditor

• 1. Introduction
• Every company whether public or private has to audit its account
which helps to obtain the real information on the business
transaction and each company has to present audit report in the
GM for discussion .It should be prepared as per the instruction of
companies act .
• Here, the person who audit is called an auditor who is authorized
and independent person of the company with the authorities to
audit account. A company has to appoint an auditor for audit (110
section of company act 2063). He can audit al account of company
and its branches with and outside the nation.
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 2. Appointment method

• An auditor from among the auditor registered or licensed under the

existing law can be appointed in case of a public company by the GM and
in terms of private country MOG, AOA or GM can Furthermore An auditor
can be appointed through the following modes:-
• Appointment by BOD - (First auditor) Before FAGM
• Appointment by GM - in case of public company, 3(consecutive term)
• Appointment in a private company By MOA, or AOA. or in the unanimous
agreement
• Appointment by the OCR company Registration) (office of
• If AGM failed to appoint
• If AGM could not held
• If appointed auditor failed to join office
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3. Disqualification for appointment of auditor

• Person having interest within company

• Any debtor of the company
• Convicted in any cases and 5 years has not been elapsed
• Declared insolvent
• Relatives or person caring 1% shares of total paid up capital.
• Convicted in corruption, fraud, criminal offence
• Partner, ex-partner or employee or ex-employee
• Any part time or fulltime employee
• Any company or corporate body with limited body
• Any person having interest in any transaction etc

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 4. Removable of Auditor

• An auditor of any company is not a permanent employee. Therefore, the auditor can be removed or
can be dismissed from his post of office in any of the following condition:-
• In case of not re-appointment
• In case of expiry of term
• In case of removal by BOD
• In case of certificate and license
• In case of provision for removing
• In case of loosing qualification
• In case of special resolution passed.
• New auditor's appointment by office of Company Reg.
• In case of charge of inserting false particulars
• In case of another auditor appointed by GM
• In case of failure to submit report
• In case of death or insanity of auditor
• In case of resignation by auditor
• In case of indifference (disqualifications)
• In case of breach of code of conduct
 5. Rights of Auditor

• Rights to access the Account: - An audit is entitled to access the account and books of the company
appointing him. He can demand off the accounts bills vouchers, ledgers, records, etc.
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• Rights to ask for explanation - In course of auditing the auditor can ask the concerned office to give
explanation on the account as he finds necessary.
• A right to visit all branches - An auditor is free to visit all the branches if company have
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• Right to retain in post-till not completing term
• Right to request for calling (EGM) - In course of auditing
• Right to attend the EGM
• Right to correct wrong statement- (If director have done)
• Right to legal and technical advice
• Right to prepare audit report independently
• Right to get remuneration
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 6. Duties of Auditor

• To submit auditor 's report (per audit

standard)
• To affix signature - on report
• To maintain accounts -true and fair
• To provide report
• To perform duties with care (Proper diligence)
 7. Dissolution / Liquidation of company

• Meaning and definition

• A Company is a legal person, being an artificial person it depends its lift and death of the company an accordance
of law and its provision.
• The term dissolution refers an ending or a breaking. the dissolution of a company means the termination of legal
existence and legal personality of company by closing its transaction. The dissolution of a company is similar to
the death of the living person. A company, which has been dissolved, no longer exists as a corporate entity
capable of holding property or of being sued in any court. The dissolution of company takes place for different
reasons such as winding up of a company through special resolution, deregistration, order of court etc.
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• completion of the liquidation proceedings, the company loses its institutional legal existence provided by the
company act.
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 Meaning of Liquidation

• There are many methods to end the life of a company.

Liquidation is one of them which proceeds dissolution
• Liquidation is a process of bringing about an end to the life
of a company. It is also known as winding up of company.
Winding up is a means by which the dissolution of company
is brought about and its assets realized and applied in a
payment of its debts and after satisfaction of the debts.
• Winding up or liquidation is a process by which the
management of a company is taken out and whole assets of
company are controlled by an independent official called
liquidator. After the
• Modes of Liquidation / Winding up of A Company
• The company is not dissolved immediately due to
the declaration of winding up or liquidation
proceedings. As a neutral person dies in accordance
with the general rules, a company dies after
liquidation based on report of liquidator. The
directors and BOD are stopped to hold post after
initiating the process of winding up.
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• The company can be wound up in different ways i.e.
• (A) Compulsorily (B)Winding up by the court (C)Winding up by the OCR (D)Voluntarily winding
up
• A. Compulsorily winding up:- A company may be wound up as per the order of the court. The
commercial bench of the court as per mentioned in the Gazette with the consent of the Supreme
Court. Insolvency act 2063 has stipulated some provision regarding proceeding for insolvency.
According to the act, if company fails to career in liabilities can apply for winding up (at court).
• Company itself 5% credit holders 5% share/ debentures holder, liquidity, regulatory authority can
apply for winding up the company.
• While applying the following documents should be submitted:-
• Company apply
• Document attested by BOD regarding declaration of insolvency of company
• Creditor's
• Special resolution to initiate insolvency including balance sheet and auditor's report
• Claimed amount of principal and interest
• Liquidator - opinion
 Con..
• B. Winding up by the court:- It is also the part of winding up company compulsorily. The
aggrieved shareholders can file the case of court. In addition, court can issue
inappropriate order for winding up to a company. Process of winding up the company
compulsory is equal to compulsory winding up.
• C. Winding up by the OCR:- It is also a part of winding up of a company. The OCR can
issue on order for winding up or do registration of company using its authority.
• If promoters of company at OCR referring failure of company's transaction and if company
fails to submit its annual report or conduct AGM as well as if company is not in operation.
• D. Voluntary winding up:- A voluntary wining up of a compulsory means a winding up by
the members of the company voluntarily. In another word, the winding up without
intention of court or the office is called voluntary winding up of a company.
• If the members of company themselves decides to dissolve the company that situation is
called Voluntary winding up
• If company failed to pay liability/loan
• If company is, BOD declares