Private Company Registration in Nepal

Establishing a private limited company in Nepal is a structured process governed by the Companies Act, 2006 (2063 B.S.). This legal framework outlines the procedures for incorporation, operation, and dissolution of companies within the country. Understanding the detailed steps and legal provisions involved is crucial for entrepreneurs aiming to set up a business entity in Nepal.

1. Definition

A private limited company in Nepal is a corporate entity characterized by limited liability, where the liability of its shareholders is confined to the unpaid amount on their shares. The features of a Private Limited Company include:

1. Limited Shareholders: A minimum of one and a maximum of 101 shareholders are permitted.
2. Restricted Share Transfer: Shares cannot be freely transferred without the consent of other shareholders, ensuring control over ownership.
3. Prohibition on Public Share Subscription: The company is prohibited from inviting the public to subscribe to its shares or debentures.

These characteristics make private limited companies suitable for small to medium-sized enterprises and family-owned businesses.

2. Eligibility Criteria for Registration

To register a private limited company in Nepal, the following eligibility requirements must be met:

1. Number of Shareholders: At least one shareholder is required, with the total number not exceeding 101.
2. Nationality: Both Nepalese and foreign nationals can be shareholders. Foreign investors must comply with the Foreign Investment and Technology Transfer Act, 2019, which mandates obtaining prior approval from the Department of Industry or the Investment Board Nepal, depending on the investment amount.
3. Company Name: The proposed company name must be unique and not identical or deceptively similar to existing registered companies. It should end with the suffix "Private Limited" or "Pvt. Ltd."

3. Step-by-Step Registration Process

The process of registering a private limited company in Nepal involves several steps:

Step 1: Name Reservation

• Application Submission: Submit an application for name reservation to the Office of the Company Registrar (OCR) through their online portal. The application should include the proposed company name and its intended objectives.
• Approval: Upon verification, the OCR reserves the name for a specified period, typically 30 days, during which the registration process must be completed.

Step 2: Document Preparation

The following documents are essential:

1. Memorandum of Association (MOA): This document outlines the company's objectives, authorized capital, and the liability of its members.
2. Articles of Association (AOA): This details the internal management regulations of the company, including the rights and duties of directors and shareholders.
3. Consent Letters: Written consent from individuals agreeing to act as directors.
4. Identification Documents: Copies of citizenship certificates or passports of shareholders and directors.
5. Registered Office Address Proof: Evidence of the company's registered office address, such as a lease agreement or utility bill.

Step 3: Submission of Application

1. Filing: Submit the application for company registration along with the prepared documents to the OCR. This can be done online or in person.
2. Fees: Pay the applicable registration fees, which are determined based on the company's authorized capital.

Step 4: Verification and Approval

1. Review: The OCR reviews the submitted documents for compliance with legal requirements.
2. Approval: If all documents are in order, the OCR issues a Certificate of Incorporation, officially recognizing the company as a legal entity.

Step 5: Post-Registration Compliance

After incorporation, the company must undertake the following:

1. Tax Registration: Obtain a Permanent Account Number (PAN) from the Inland Revenue Department for tax purposes. If the company's annual turnover is expected to exceed NPR 5 million, Value Added Tax (VAT) registration is also required.
2. Local Registration: Register the business with the local ward office where the company’s registered office is located.
3. Social Security Registration: Enroll employees in the Social Security Fund as mandated by the Labor Act, 2017.

4. Legal Provisions and Compliance

The Companies Act, 2006, along with its subsequent amendments, provides the legal framework for company operations in Nepal. Key provisions include:

1. Annual General Meeting (AGM): The company is required to hold an AGM within six months from the end of the fiscal year to present financial statements and discuss company affairs.
2. Financial Reporting: Submission of audited financial statements to the OCR and the Inland Revenue Department are mandatory.
3. Record Keeping: The company must maintain accurate records of meetings, financial transactions, and statutory registers, including the register of members and directors.
4. ompliance with Other Laws: Depending on the nature of the business, compliance with additional laws such as the Industrial Enterprises Act, 2020, and sector-specific regulations.

5. Fees and Charges

The registration fee for a private limited company in Nepal is based on its authorized capital. The fee structure is as follows:

6. Conclusion

Establishing a private limited company in Nepal involves a structured legal process governed by the Companies Act, 2006. With limited liability, restricted share transfer, and a cap on shareholders, private limited companies are ideal for small to medium-sized businesses. Additionally, adherence to tax regulations, financial reporting, and corporate governance ensures smooth operations.