Frequently Asked Questions About the Company Act of Nepal

If you are planning to enter Nepal, the Company Act Nepal will shape almost every legal and operational decision you make. From incorporation to annual filings, director duties, and penalties, this law governs how companies are formed and run in Nepal.

Foreign companies often struggle to find one authoritative, plain-English explanation. This guide solves that problem. It answers the most common questions foreign investors ask about the Company Act Nepal, while also explaining compliance obligations you must meet after registration.

This article is written for decision-makers. Founders. CFOs. Legal heads. And foreign promoters who want clarity without legal jargon.

What Is the Company Act Nepal?

The Company Act Nepal (Companies Act, 2063 – 2006) is the primary legislation governing company incorporation, governance, compliance, restructuring, and dissolution in Nepal.

It applies to:

• Nepali companies

• Foreign-owned companies

• Joint ventures

• Subsidiaries formed under Foreign Direct Investment

The Act is administered by the Office of the Company Registrar (OCR) under the Ministry of Industry, Commerce and Supplies.

Why the Company Act Nepal Matters for Foreign Companies

Foreign companies are subject to additional scrutiny. Regulators expect strict adherence to:

• Capital structure rules

• Board governance standards

• Disclosure and filing timelines

• Share transfer restrictions

• Penalties for non-compliance

Ignoring these requirements can delay operations, freeze bank accounts, or invalidate corporate actions.

Types of Companies Recognised Under the Company Act Nepal

The Company Act Nepal recognises several company structures. Foreign investors typically choose one of the following.

1. Private Limited Company

Most common structure for foreign-owned businesses.

Key features:

• Minimum 1 shareholder

• Maximum 101 shareholders

• Share transfer restrictions

• No public share issuance

2. Public Limited Company

Used for large enterprises and regulated sectors.

Key features:

• Minimum 7 shareholders

• Public share issuance allowed

• Higher compliance burden

• Mandatory statutory disclosures

3. Branch Office or Liaison Office

Not separate legal entities. Operate under foreign parent approval.

Step-by-Step: Company Incorporation Under the Company Act Nepal

Foreign companies must follow a structured process.

Incorporation Process

1. Name reservation with the Office of Company Registrar

2. Drafting constitutional documents (MOA and AOA)

3. Submission of incorporation application

4. Capital declaration and shareholder details

5. Certificate of incorporation issued

After incorporation, additional registrations are mandatory under tax, labour, and foreign investment laws.

Key Documents Required Under the Company Act Nepal

Foreign promoters must prepare:

• Passport copies of shareholders and directors

• Board resolution approving Nepal incorporation

• Memorandum of Association

• Articles of Association

• Registered office address in Nepal

• Power of attorney (if applicable)

All foreign documents must be notarised and, in some cases, apostilled.

Director and Shareholder Requirements Explained

Directors

• Minimum one director required

• Can be foreign nationals

• Fiduciary duties imposed by law

• Liable for statutory non-compliance

Shareholders

• Can be 100% foreign owned (subject to FDI sector rules)

• Capital contribution must align with approved investment

• Share transfers are regulated and must be reported

Compliance Obligations Under the Company Act Nepal

Once incorporated, compliance does not stop.

Ongoing Obligations Include

• Annual General Meeting (AGM)

• Annual return filing

• Financial statement submission

• Shareholding updates

• Director appointment changes

Failure to comply attracts penalties under the Company Act Nepal.

Statutory Timelines You Cannot Miss

This table highlights where foreign companies most often default.

Penalties and Fines Under the Company Act Nepal

Non-compliance is costly.

Penalties may include:

• Daily fines for late filings

• Lump-sum penalties for serious breaches

• Personal liability of directors

• Invalidation of corporate decisions

Repeat offenders face higher scrutiny and operational disruption.

Relationship Between Company Act Nepal and FDI Laws

The Company Act Nepal does not operate in isolation.

Foreign companies must also comply with:

• Foreign Investment and Technology Transfer Act

• Industrial Enterprises Act

• Income Tax Act

• Labour Act

• Social Security regulations

In practice, incorporation under the Company Act is only the first step.

Common Mistakes Foreign Companies Make

Many foreign investors repeat the same errors.

• Assuming incorporation equals operational readiness

• Missing annual filing deadlines

• Ignoring director liability provisions

• Misunderstanding capital repatriation rules

• Using incorrect constitutional clauses

These mistakes are preventable with proper advisory support.

Compliance Checklist for Foreign Companies

Here is a practical checklist:

• Company registered under Company Act Nepal

• FDI approval obtained where required

• Tax registration completed

• Labour and SSF compliance active

• Annual filings calendar maintained

Using a compliance calendar is strongly recommended.

Frequently Asked Questions About the Company Act Nepal

Does the Company Act Nepal allow 100% foreign ownership?

Yes. Subject to sectoral FDI rules, foreign companies can own 100% equity in a Nepali company incorporated under the Company Act Nepal.

Is a local director mandatory under the Company Act Nepal?

No. The Act allows foreign directors. However, certain regulators and banks may prefer a local authorised representative.

What happens if annual returns are not filed?

Late filings attract daily penalties. Persistent non-compliance may invalidate corporate records and restrict operations.

Can profits be repatriated under the Company Act Nepal?

Yes. Repatriation is allowed but governed by FDI and central bank regulations, not the Company Act alone.

Is audit mandatory for all companies?

Yes. All companies must maintain accounts and submit audited financial statements annually.

Comparison: Private vs Public Company Under the Company Act Nepal

This comparison helps foreign investors choose the right structure.

Why Expert Guidance Matters

The Company Act Nepal is detailed. Interpretation matters as much as compliance.

Foreign companies benefit from:

• Structuring advice before incorporation

• Constitution drafting aligned with FDI approval

• Ongoing secretarial compliance

• Director liability protection strategies

This is not an area to rely on templates alone.

Call to Action: Get Expert Support on the Company Act Nepal

If you are planning to register or already operate a foreign-owned company in Nepal, professional guidance saves time and risk.

Speak with a corporate compliance specialist today to ensure your company fully complies with the Company Act Nepal and related FDI laws.

Conclusion: Navigating the Company Act Nepal with Confidence

The Company Act Nepal is the legal backbone of corporate operations in Nepal. For foreign companies, understanding it is essential for long-term success.

With the right structure, timely filings, and expert support, compliance becomes a strategic advantage rather than a burden.