NEPAL COMPNAY ACT 1991

Preamble :
Whereas it is expedient to enact legislation relating to companies in keeping with the existing circumstances, How therefore,  His Majesty Ying Mahendra Bir Bikram Shah Dev has enacted this law on the advice and with the approval of the National Panchayat. 


Chapter 1


Preliminary


1. Short Title, Extent and Commencement 

(1) This law may be called the Company Act, 1964. 
(2) It shall be enforced throughout the Kingdom of Nepal. 
(3) It shall come into force at once. 

2. Definitions 

Unless repugnant to the subject or context, in this act,
(a) Company means a limited company incorporated under this act.
(b) Private Company means a company incorporated under this act, which limits the member of its shareholders to fifty, is prohibited from issuing public invitations to subscribe to its shares and debentures, and is subject to restrictions on the sale or nortgage of its shares or debentures to persons other than shareholders without the approval of the Board of Directors.
(c) Public Company means a company other than a private company.
(d) Subsidiary Company means a company under the control of the parent company, which has. subscribed to more than fifty percent of its shares.
(e) Foreign Companies means companies incorporated in foreign countries. 
(f) Share means a division of the share capital, as well as stock. 
(f1) Bonus Shares mean shares issued to shareholders in the form of  additional shares by capitalizing the surplus or reserve funds of the  company; the term includes an increase in the paid-up value of shares through such capitalization. 
(g) Preference Shares mean shares having preference ever ordinary shares. 
(h) Ordinary Shares means shares entitled to dividends from profits left after paying dividends to preference shareholders. 
(i) Memorandum means the memorandum of association of company. 
(j) Articles mean the articles of association of a company. 
(k) Prospectus means a prospectus to be published by a company under this act. 
(l) Shareholder means an owner of shares. 
(m) Debenture means the bonds issued by the company under this act with its assets as collateral. 
(n) Share Certificate means a certificate issued by the company to the person the has purchased its shares. 
(o) Share Underwriter means one who has undertaken to sell shares and to purchase all unsold shares.
(p) Special Resolution means a resolution passed as a special resolution under this act.
(q) Director means a director appointed under this act. The term includes an alternate director.
(q1) Managing Director means the Managing Director appointed according to Section 69A.
(q2) Company Secretary means the Company Secretary appointed according to Section 69B.
(r) Managing Agent means a managing agent appointed under this act.
(r1) Security means the shares, bonds, debentures, loan bonds issued by a company; the term includes receipts relating to deposits for securities, an rights and letter of authority relating to securities.
(s) Concerned Department means the Department of industry of His Majesty's Government, or any other department or office prescribed by it.

3. Incorporation of Company

(1) Persons desirous of undertaking any acconcmic enterprise on the basis of limited liability after raising capital by issuing shares for this purpose shall incorporate a company under this act. 
(2) No company shall be incorporated unless the minimum number of promoters is three in the case of a private company, and seven in the case of a public company. 
(3) No company shall be incorporated unless thirty percent of its issued capital has been subscribed. In case a company is incorporated subject to the prevision that shares will be subscribed in this way, 
and in case the stipulated shares are not taken up within three months from the date thereof, its incorporation shall ipso facto be null and  void. 
(4) No new company shall be incorporated with a name similar to that of a company which has already been registered. 
(5) In case the concerned department deems any proposed name inappropriate or undesirable, it may refuse to permit a company to be  incorporated under such name. 
(6) Unless otherwise provided for in this act, the liability of the promoter or shareholder of any company in respect to its business or functions shall be limited to the maximum amount of shares which he has pledged to subscribe. 
(7) The word "limited" shall be added to the name of a public company, and the words "private limited" to the name of a private company, incorporated under this act. 
 (8) No concern not incorporated as a limited company under this act shall use the word "limited after its name. 

4. Application for Incorporation of Company 

An application signed by at least three persons in the case of a private company, and seven persons in the case of a public company, shall be submitted to the concerned department for incorporation of a  company under this act. The memorandum and articles of the company... shall be submitted along with the application. 
 
5. Registration of Company 
(1) In case an application for incorporation of a company is filed under Section 4, the concerned department shall institute necessary inquiries and then register the company subject to the provisions of  current Nepal law, inform the remoters of the company accordingly, and issue a certificate thereof. 
(2) The company shall be regarded as having been incorporated after it is registered under Sub-Section. (1), and its entire business shall then be conducted under the name so registered. 

6. Registration Fees 

Fees for registration of companies shall be as prescribed by the concerned department by notification in the Nepal Rajapartra from time to time. 

7. Company to be Like an Individual 

(1) The company established under this act shall be a corporate body with perpetual succession. It shall have a separate seal of its own for purposes of its business. 
(2) The company may self, mortgage, donate, or accept as donation, movable and immovable assets like an individual, and it may sue or be sued in its name. 

7A. Prohibition to Open Partnership or Private Firms 

A. company shall not open partnership or private firms. 

8. Serving of Notices, Time-Limits, Etc., to Company

In case it is required to serve any notice, time-limit, etc. to the company, or to its employees, this may be delivered at its registered office, or dispatched by registered post. 

9. Memorandum 

(1) The memorandum shall contain the following particulars: 
(a) Full name of the company, 
(b) Address of the head office of the company, 
(c) Objects of the company, 
(c1) Functions to be performed for fulfilling the objects of the company. 
(d) Amount of authorised capital which is proposed to be raised, and the number and denominations of shares of different categories, and 
(e) A statement to the effect that the liability of the share holders limited, so that they are not personally liable for any liabilities of the company except to the extent of the value of the shares held by them, 
(f) Restrictions, if any, on the purchase or transfer of shares, 
(g) Other necessary particulars. 
(2) In case there exists any agreement providing for the following matters, the memorandum shall, in addition to the particulars mentioned in Sub-Section (1), also indicate the existence of such agreement and the provisions contained there in; 
(a) Purchase of or claim over shares by a promoter signing the memorandum, or by any other person, for any consideration other than payment in cash, or 
(b) Acquisition of any property in any manner by the company from any promoter signing the memorandum, or form any other person during the preliminary stage of the company, or 
(c) Liability of the company itself for expenses incurred in its establishment, or 
(d) Conferment of any special facility or privilege by the company to any promoter signing the memorandum, or to any there person. 

10. Signatures to be Affixed in Memorandum

(1) The memorandum shall contain the full names and addresses of the individuals who have undertaken to purchase shares. It shall indicate the number of shares which each of them has undertaken to purchase, and shall be signed by each of them. 
(2) The signature of every promoter signing the memorandum shall be attested by at least one witness. 
(3) No person who is connected with the company to which the memorandum belongs shall be made a witness. 
(4) No promoter shall sign the memorandum unless he has purchased a minimum of 25 (twenty-five) shares. 

11. Articles of the Company 

For the purpose o1 properly regulating its business, every company shall frame articles in such a way that they do not conflict  with this act. The articles shall contain also the particulars indicated in Section 12. Such articles shall come into force after they are approved by the appropriate department. 

12. Matters to be Indicated in Articles 

The articles shall contain the following matters, and shall have been signed by the promoters signing the memorandum : 
(a) Particulars indicated in Section 9. 
(b) Appointment and term of director. 
(b1) Functions, duties and powers of the Managing Director. 
(c) Time for convening the annual general meeting. 
(d) Matters relating to the procedure of the company's meetings, notice of meeting, etc. 
(d1) Privileges of preference shareholders, and 
(e) Other necessary matters. 

13. Alteration in Memorandum or Articles 

In case it is required to effect alternations in the memorandum or articles, this shall be done through a special resolution at a general meeting with the approval of the appropriate department by explicitly mentioning the impact of sue alteration on the scope of business and financial results of the company. Provided that in case it is required to effect any alterations in the particulars contained in any agreement indicated in Sub-Section (2)  of Section 9, this may be done with the approval of the general meeting and the concerned department. 

14. Memorandum and Articles to be Printed 

Every public company shall print and publish its memorandum and articles. 

15. Publications of Prospectus 

(1) Before inviting the public to purchase its shares or debentures, every public company shall print and publish a prospectus in accordance with this act. provided that before publishing the prospectus, the directors shall submit a copy thereof, duly signed by them, to the appropriate department for approval, and shall publish it only after obtaining such approval. 
(2) The first page of every prospectus to be published under Sub-Section (1) Shall state the fact that a copy thereof has been registered at the appropriate department, and the prospectus has been approved by that department, as well as the date when this was done. 

16. Particulars to be Indicated in Prospectus 

The prospectus shall contain the following particulars : 
(a) The objects or the company and other main particulars given in the memorandum and articles. 
(b) The number of shares to be subscribed by the directors, and the salaries, allowances, or remunerations prescribed for them. 
(c) Shares or cash received or to be received as remuneration by the promoters of the company. 
(c1) Any arrangement of contract for reservation of shares for share-holders, employees, or any other person. 
(d) The number of shares to be sold to the public. 
(d2) Reasons and justification for adding premium if the shares are to be sold by adding premium to the value of the shares. 
(d3) Arrangements relating to participation in the Board of Directors by shareholders who take up shares distributed among the public. 
(e) The minimum number of shares which must be sold prior to allotment, and the advance payment to be made on each share along with the application. 
(f) Reasons for obtaining loans in the form of debentures, the number of partly or fully paid-up debentures, and the total amount of out-standing loans. 
(g) Assets purchased with the proceeds of the sale of shares, the name of the person selling them, and particulars of arrangements, if any, made for payment in the form of shares or debentures instead of  in cash. 
(h) Brokerage on shares and debentures. 
(i) Estimates of the expenditure required for the business of the company and of the income of the company. 
(j) Financial arrangements of the company. 
(k) Names and Addresses of suitors, and audit reports, if any. 
(l) Particulars as to whether any amount belonging to the promoters or directors is involved in assets purchased or to be purchased by the company, and whether such promoters or directors are partners in any other firm, or are connected with any other company. 
(m) The time when notices in respect to allotment of shares are to be published. 
(m1) Particulars of preliminary expenses incurred for establishment in the case of new companies, and an accurate outline of the latest balance sheet, in the case of companies already under operation.
(n) The time an place of inspecting the balance sheet and the profit and loss accounts of the company, and the agreements mentioned in Sub-Section (2) of Section. 
(o) Fees for undo erriting shares, and
(o1) Arrangements for the sale or purchase of securities.
(p) Other necessary particulars.
 
17. Rights and Liabilities Under the Act not to be Affected by Anything Mentioned in the Prospectus
Nothing contained in the prospectus shall affect the rights and liabilities of any person under this act.

18. Responsibility for Particulars Contained in the Prospectus

The responsibility for particulars mentioned in the prospectus shall vest in the promoters and directors who sign it. In case any person sustains any loss or damage as a result of his purchasing shares or debentures, believing in a prospectus in which false particulars are inserted deliberately or with mollified intentions, liability to pay compensation for such loss or damage shall be bone the promoters or directors as mentioned above.
Provided that in case any promoter or director has resigned before the publication of the prospectus, or after having come to know about the false particulars contained therein, and publishes a notice to this effect for the information of the public prior to the sale or allotment of shares or debentures, he shall not be liable for such  loss or damage.

19. Issue of Duplicate Copies

In case any shareholder or any other concerned person demands a copy or printed duplicate of the memorandum, the articles or the  prospectus, it shall be provided to him on payment of a fee of one rupee.

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