Chapter 2

Shares and Debentures

20. Application for Shares
(1) Persons desirous of purchasing the shares of a company shall submit an application according to the specimen form No. 1 indicated in Schedule 1. 
(2) The application shall be accompanied by an advance of at least ten percent of the value of the shares applied for prelse it shall be rejected. 

21. Allotment of Shares
(1) Shares shall be allotted within a period of six months after the registration of the company in such a manner that all applicants as far as possible receive shares and  a notice in respect thereto shall then be sent to shareholders according to the specimen form No. 2 indicated in Schedule 1. 
Provided that such allotment shall not be made until fifty percent of the issued share capital as mentioned in the memorandum is subseribed.
(2) In case allotment cannot be made within a period of six months from the date of the registration o1 the company for reasons indicated in the restrictive clause of Sub-Section (1), and in case the promoters submit an application explaining the reasons for the non-allotment of shares within seven days on the expiry of this time-limit, the appropriate department may extend the time-limit by six months, if it so considers proper. 
(3) In case allotment is not possible even within the time-limit extended by the appropriate department under Sub-Section (2), the amount accruing from the sale of shares shall be refunded to the shareholders who have pain installments thereon, along with interest at ten percent per year within thirty-five days after the expiry of the time-limit so extended, and where no time-limit has been extended by the appropriate department, within thirty-five days after the expiry of the original six months. The shortfall, if any, shall be personally met by the promoters. 
(4) In case an application is received for extension of time-limit under Sub-Section (2), the appropriate department shall issue sanction within fifteen days. 

22. Particulars of Shares to be Submitted to the Appropriate Department 

(1) Particulars relating to the number of allotted shares, the total value thereof, the names and addresses of shareholders, and the amount collected as well as due on each share, shall be submitted to the appropriate department within thirty-five days after the allotment of shares. 
(2) In case shares are issued or sold for any consideration other than cash, a copy of the agreement concluded in respect thereto shall also be duly submitted to the appropriate department. 

23. Brokerage 

Any person who places or sells shares may be paid brokerage at rates not exceeding these prescribed in the articles of the company from the amount paid on shares placed or sold by him, and the brokerage so paid shall be indicated in the balance sheet. 

23A. Underwriting of Shares 

No one, with the exception of financial institutions or institutions authorised to deal in securties, may under-write shares with-out the approval of the appropriate department. 

24. Share Certificates 

(1) A share certificate according to the specimen from No. 5 indicated in Schedule 1 shall be issued to each shareholders for each share purchased by him. The certificate shall indicate the name of the company, the value of the shares, and the date of issue, and shall bear the signature of at least two directors and the seal of the company. In case the shares are partly paid up, the front side of the certificate shall explicitly indicate the amount which has been paid up and the balance due on such shares. 
(2) In case shares are held jointly by two or more persons, the certificates to be issued under Sub-Section (1) shall mention the names of all such joint holders and may be issued to any one of them. 
(3) In case the certificate mentioned in Sub-Section (1) is lost or damaged, the owner thereof shall submit an application to this effect to the head office of the company within thirty five days from the date of such loss or damage. 
(4) In case an application is filed by any person under Sub-Section (3), the company shall publish a notice in the press to the effect that in case any person has any objection to the issuance of a fresh certificate to the applicant, he should file a complaint within thirty-five days from the date of the publication of such notice. In case any complaint is received from any person thereafter, and in case it is deemed necessary to establish the claim, the company shall issue a notice to both the parties to the effect that action on the claim will be taken after they establish their respective claims through the court. In case no complaint is filed within this time-limit, the company shall issue a fresh Certificate to the aplicant after indicating the matter accordingly. The company shall indicate the matter also in the register of shareholders.

25. Issue of Loans or Debentures 

(1) The Board of Directors of a company may, if it so deems necessary, issue loans, explaining the reasons therefor, the purpose of such loans, and the estimated amount required for this purpose. 
Provided that : 
(a) In case loans or debentures are to be issued with the company's assets as collateral, the company shall submit an application to the appropriate department, and issue such loans or debentures only after obtaining necessary approval. It shall register the bonds in respect to such loans or debentures in accordance with current Nepal law. 
(b) Incase loans or debentures are sought to be issued without mortgaging the assets of the company, the appropriate department shall be notified accordingly within seven days after the issuance of such loans or debentures. The amount of such loans shall not exceed fifty percent of the paid-up capital.
(c) A company shall not issue such loans or debentures unless it has obtained a certificate for commencement of business under Section 44.
(2) Notwithstanding anything contained in other current Nepal law, subject to the provisions of Sub-Section (1), the company may obtain further loans from other creditors against assets which have already been pledged to its creditors, within the limit o1 the value of such assets, provided that the previous creditors and the amount of loan already obtained are mentioned explicitly. The registration office shall register documents relating to such transactions.
(3) Not with standing anything contained in other current Nepal law, the terms, time-limit for redemption, interest, and other conditions of loans obtained or provided by the company shall be as indicated in the bond and conditions stipulated between the creditor and the debtor.
(4) The company shall maintain a separate register mentioning the name and address of every creditor form whom it has obtained loans, or to whom it has sold debentures, the amount of such loans or debentures, and other particulars.

26. Transfer of Shares 

The shares of a company may be transferred or mortgaged like movable property in accordance with law. 
Provided that
(a) Transfer or mortgage of the shares of a private company to any person other than shareholders shall require the approval of the Board of Directors. In case no such approval is sought, or in case such transfer or mortgage increased the number of shareholders to more than fifty even though approval is obtained, the transaction shall not be valid. 
(b) Shares subscribed by the promoters of the company shall not be transferred or mortgaged until the first general meeting of the company is held and until such shares are fully paid-up. 

27. Registration of Notices of Transfer of Shares 

(1) In case shares are mortgaged under Section 26, the mortgagee shall submit an application according to specimen form No. 4 indicated in Schedule 1, along certificate mentioned in Section 24, to the registered office of the compay, for the purpose of recording such the company shall act in accordance with the provisions of  Sub-Section (3). 
(2) In case title to shares is relinquished under Section 26, the person acquiring such title shall submit an application according to specimen form No. 5 as indicated in Schedule 1, along with a copy of the concerned document and the certificate mentioned in Section 24, to the registered office of the company. On receipt of such application, the company shall act in accordance with the provisions of Sub-Section (3). 
(3) In case any application is filed under Sub-Section (1) or (2) and no complaint is received from existing shareholders even within thirty-five days from the date of the receipt of such application, and in case transfer of shares is refused under Section 28, the fact of  the shares having been mortgaged, the name of the mortgagee, the date of mortgage, the value of the transaction, and date of mortgage, the value of the transaction, and the terms thereof, shall be indicated  in the shareholder register., Entries relating to such mortgage shall be struck off the register on receipt of notice of redemption thereof. In cases of relinquishment of title, brief particulars of the concerned document shall be entered in the register, the name of the transfer or shall be struck off, and the shares shall be registered in the name of the transferee. In case any complaint is filed regarding ownership of shares connected with such transfer, action shall be taken according to the final decision of the court. 
Provided that it shall be necessary to obtain the prior approval of the Board of Directors to enter any mortgage or transfer in the register as required under this Section. 
(4) Transfer of shares shall be entered in a register to be maintained for the purpose according to specimen form No. 6 indicated in Schedule 1, and such register shall be signed by the authorised representatives of the Board of Directors and the the managing agent, if any. 
(5) The applicant shall pay a fee of one rupee to the company for having a mortgage or transfer of shares registered under Sub-Section (3). 

28. Power to Withhold Permission to Register Notice of Share Transfers 

(1) The company may refuse to register a mortgage or transfer of shares in the following circumstances : 
(a) In case the shares are not fully paid-up. 
(b) In case the document and the share certificate to be submitted under Section 33 are not submitted along with the application. 
(c) In case there is any objection to the transfer of shares, or 
(d) In case fees are not paid under Sub-Section (5) of Section 27. 
(2) In case any application for registration of a mortgage or transfer of shares is rejected under Sub-Section (1), both the transfer or and the transferee shall be notified accordingly within thirty-five days after the receipts of the application. 

29. Other Circumstances in Which Shares May be Transferred 

In case any shareholder dies or become is solvent, or in case the title to the shares held by him develves on any person under current Nepal law for any other reason, and in case the person so acquiring title thereto submits an application along with evidence, the shares shall be transferred in his name subject to the provisions of Sub-Section (1) of Section 28. 

30. Register of Shareholders 

(1) Every company shall maintain at its head office according to specimen form No. 7 if Schedule a register of its shareholders according to the serial number of shares, with the following particular in respect to each shareholder : 
(a) Name and address, along with those of the grandfather and father, 
(b) Date of registrations as a shareholder, 
(c) Serial number of the share certificate obtained by the shareholder, 
(d) Total amount paid-up on the shares held by the shareholder, and 
(e) Date when his name was struck off the register of shareholders. 
Provided that in case His Majesty's Government or any company, firm, or corporation, is a shareholder of the company, only their names may be registered in the shareholders register, and not the names of the grand-father and father as prescribed in Clause (a) of this Sub-Section. 
(2) The register maintained under Sub-Section (1) shall be made available for inspection by the shareholders of the company if they desire to do so. Provided that : 
(a) The company may be notification in the leading newspapers of Nepal in advance of seven days, close the register for a maximum period of three days at one time, but not exceeding forty-five days in a year. 
(b) In the case of a private company, no person other than its shareholders shall be entitled to inspect such register. 
(3) In case any person wants to obtain a copy of the register mentioned in Sub-Section (1), he may be allowed to do so on payment of a fee of one rupee except when the register is closed, or he is not entitled to inspect such register under the restrictive clause of  Sub-Section (2). 

31. Records of Shares, Debentures, Etc. 

(1) At the time of the annual general meeting of the company, the company shall every year prepare a record of existing and former shareholders. 
(2) The record mentioned in Sub-Section 1, shall be prepared  according to specimen form No. 8 as indicated in Schedule 1. It shall explicitly mention the names and addresses of existing and former  shareholders, the number of shares held in the names of existing shareholders, the date when the sale or purchase of shares by any of such shareholders was indicated in the records, or when the transfer of shares was registered, and the number of such shares in addition to the following particulars : 
(a) Authorized capital and the number of shares of the company, 
(b) Issued share capital, 
(c) Calles made on each share, 
(d) Total amount paid-up, 
(e) Total amount due due on shares, 
(f) Total amount paid on shares and debentures or as brokerage, 
(g) Total number of shares forfeited by the company, if any, the reasons thereof and the date of such forfeiture, 
(h) Total value of shares for which certificates have been issued to shareholders till the date when the record was compiled, 
(i) The number of shares indicated in each share certificate, 
(j) Names and addresses of the present directors and of the managing agent, 
(k) The amount of loans obtained or debentures issued by the company with its assets as collateral, 
(l) Total amount of loans taken by the company without mortgaging assets, and 
(m) Other necessary particulars. 
(3) The record prepared under Sub-Section (1) shall be sumitted by the company to the appropriate department within thirty-five days from the date of the annual general meeting of the company, along with certificate signed by at least two directors to the effect that all the particulars contained therein are correct. 

32. Lien on Shares 

The company shall have lien on all shares on which payment of installments is due from shareholders, and it may freeze the shares and the dividends to be paid thereon and  recover the arrears from such dividends. 

33. Payment on Shares 

(1) Payment on shares shall be made whenever calls are made in accordance with the articles. 
(2) When making calls under Sub-Section (1), a public company shall send a notice in writing according to specimen form No. 9 as indicated in Schedule 1 to every shareholder, prescribing a time-limit of thirty days and the place and time for payment. The notice shall be published also in the loading newspapers of Nepal. 
(3) In case any shareholder fails to pay the amount due on shares within the prescribed time-limit, a written notice shall be sent to him and also published in leading newspapers, allowing an extension of fifteen days and specifying that in case the payment is made within the extended time-limit, it shall be accepted with interest at five percent per year, and that in case payment is not made even within the extended time--limit, the concerned shares shall be forfeited. But in case the shareholder submits an application within three months after the expiry of this time-limit indicating satisfactory reasons for his failure to pay up the installment due from him, the Board of Director  may retain the shares as fully paid up to the extent of the amount actually paid-up. 
(4) Shares forfeited by the company under Sub-Section (3) may be sold or issued in may other manner, or can celled on such conditions and in such manner as the Board of Directors may deem appropriate, subject to the articles of the company. 

34. Payment of Shares Held Jointly

In case shares are held jointly, the joint holders shall be jointly or individually liable to pay installment due thereon. 

35. Equal Ownership to be Recognised 

In case there is no document duly specifying the shares of each holder in respect to shares held jointly, each of them shall be deemed to have an equal share therein. 

36. Ownership of Shares and Debentures 

The person in whose name the shares, debentures, etc. of the company are registered shall be regarded as owner thereof. 

37. Increase of Share Capital 

(1) In case any company intends to increases its share capital, it shall present a special resolution to the effect at its general  meeting. In case such a resolution is passed, an application shall be  submitted to the appropriate department for approval make necessary amendments in the memorandum and articles for the purpose. Such amendments shall not be made in the memorandum and articles, and the share capital shall not be increased, without the approval of the department. 
(2) In case any increase in the capital after obtaining approval under Sub-Section (1) necessitates the issue of new shares or enhancement in the value of shares, a fresh prospectus as mentioned in Section 15 shall be published, and a notice to this effect also shall be sent to the appropriate department. 
(3) The right of pre-emption in respect to shares increased under the  provision of Sub-Section (1) shall vest in the shareholders and the staff and workers of the compay. Such shares shall be sold to  shreholders in proportion to their existing shareholding, and to workers and employees in the manner prescribed by the company. 
(4) With the exception of the profits of the company, or funds created  from profits, the assets of the company shall not be revalued for issuing or increasing shares or bound shares. 
(5) Prior approval of the appropriate department must be obtained for issuing shares by adding premium to the value of shares. 

38. Reduction of Share Capital 

(1) In case it is required to reduce the share capital, the company shall present a special resolution to this effect at its general  meeting. In case such a resolution is passed by the general meeting, an application shall be submitted to the appropriate department for approval to make necessary amendments in the memorandum and articles and to reduce the share capital. No such amendment shall be effected in the memorandum and articles, nor shall the share capital be reduced, without the approval of the department. 
(2) After the approval of the appropriate department is obtained, the share capital may be reduced in the following manner : 
(a) By retaining only such amount as has been actually paid-up, in case calls made on shares are not fully paid-up, or 
(b) By refunding the capital already paid up and reducing the number of shares, or 
(c) By devaluing shares, in case the company has sustained losses or suffered from natural calamities. 

39. List of Creditors to be Sumitted to the Appropriate Department 

In case the company submits an application for the approval of a resolution seeking to reduce its capital, it shall also attach a list of all of its creditors along with their names and addresses, signed by all of its directors. 

40. Notice to be Issued by the Appropriate Department

(1) The appropriate department shall issue a notice directing  creditors whose names may have been omitted from the list submitted  by the company under Section 39 to apply for having their names  registered in the list. The notice shall prescribe the time-limit within which creditors may submit applications opposing reduction in the share capital under Section 39. 
(2) In case the appropriate department is satisfied that the consent of all the creditors of the company has already been secured for the proposed reduction in the share capital, or that the creditors have already been paid if, or that they have been given reliable security against their outstanding dues, it shall indicate the matter accordingly in the register and than approval the reduction in the share capital. 

41. Reduction to be Indicated in Share Certificates

In case the share capital is reduced under this act, the concerned director shall indicate the matter accordingly in every share certificate and affix his signature thereon. 

42. Company Prohibited From Purchasing Its Own Shares or Those of the Principal Company

No company shall purchase its own share capital, or that of its principal company, or issue or accept loans on the security, with its paid-up capital. 

43. Notice Regarding Capital 

A public company shall explicitly indicate also the number of subscribed shares, and the total amount actually paid thereon, in notices and advertisements relating to its authorized capital. 

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