Company registration in Nepal involves a structured process governed by the Companies Act, 2006. The (OCR) oversees company registrations, ensuring compliance with legal standards. This guide provides a detailed walk through of the registration process, types of companies, required documentation, associated fees, and post-registration obligations.
Types of Companies in Nepal
Under Nepalese law, companies are primarily categorized into:
- Private Limited Company: Suitable for small to medium-sized enterprises, requiring a minimum of one shareholder and allowing up to 101 shareholders. Private companies cannot publicly trade shares.
- Public Limited Company: Designed for larger businesses, necessitating at least seven shareholders with no upper limit. These companies can offer shares to the public and are often involved in sectors like banking, insurance, and stock exchange.
- Non-Profit Distributing Company: Established for social, charitable, or public welfare objectives, these companies are prohibited from distributing profits to members.
Step-by-Step Company Registration Process
1. Name Reservation
Begin by reserving a unique company name through the OCR’s online portal. Ensure the proposed name is distinctive and adheres to regulatory guidelines to avoid rejection.
2. Document Preparation
Prepare the following essential documents:
- Memorandum of Association (MOA): Outlines the company’s objectives, scope, and operational framework.
- Articles of Association (AOA): Details the internal management, governance, and shareholder rights.
- Application Form: Completed with accurate information about the company and its founders.
- Identification Proof: Citizenship certificates or passports of all shareholders and directors.
3. Online Submission
Submit the prepared documents electronically via the OCR’s e-services platform. Ensure all information is accurate to prevent processing delays.
4. Document Verification
The OCR will review the submitted documents for compliance. This scrutiny ensures adherence to legal standards and the authenticity of information.
5. Certificate Issuance
Upon successful verification, the OCR issues a Certificate of Incorporation, officially recognizing the company’s legal status.
6. Tax Registration
Register the company with the Inland Revenue Department (IRD) to obtain a Permanent Account Number (PAN), enabling lawful tax operations.
Required Documents for Registration
- Memorandum of Association (MOA),
- Articles of Association (AOA),
- Shareholders’ Agreement (if applicable),
- Copies of National ID Card of Shareholders,
- Application and Power of Attorney.
Understanding the difference between Public and Private Companies
The differences between private and public companies based on the distinctions are mentioned below:
| S.N. | Basis of Difference | Public Company | Private Company |
|---|---|---|---|
| 1 | Minimum Paid-Up Capital | Rs. 1,00,000 | No minimum paid-up capital prescribed |
| 2 | Number of Members | 7 to any number of members | 1 to 50 members |
| 3 | Transfer of Share or Securities | Shares and securities are freely transferrable | Shares and securities can only be transferred to the existing shareholders of the company |
| 4 | Number of Board of Directors | 3 to 11 | 1 to 11 |
| 5 | Presence of Company Secretary | Mandatory | Optional |
| 6 | General Assembly | Mandatory | In accordance with the Articles |
Post-Registration Compliance
After incorporation, companies must:
- Obtain a PAN: Mandatory for tax purposes, acquired from the IRD.
- Register for VAT (if applicable): Required if annual turnover exceeds the threshold set by the IRD.
- Maintain Statutory Registers: Including records of shareholders, directors, and meeting minutes.
- File Annual Returns: Submit financial statements and other required documents to the OCR annually.
- Comply with Tax Obligations: Regularly file tax returns and adhere to tax laws to avoid penalties.
Foreign Investment Considerations
Foreign investors must:
- Obtain Approval: Secure permission from the Department of Industry (DOI) and Nepal Rastra Bank for foreign direct investment (FDI).
- Meet Minimum Investment Requirements: Currently, a minimum investment of NPR 20 million is required for foreign investors.
- Appoint a Local Director: At least one director must be a Nepalese resident.
Tax Registration
Every company is required to obtain a PAN or VAT Registration certificate from Inland Revenue Department prior to the commencement of its business depending on the value of the annual transaction of the business after the company registration in Nepal. The Process of Company Registration in Nepal requires sufficient means of paying Tax through PAN Number.
Conclusion
Registering a company in Nepal is a systematic process that requires careful adherence to legal requirements. By following the outlined steps and ensuring compliance with post-registration obligations, businesses can establish a solid legal foundation for operations in Nepal.
Registering a company in Nepal is a straightforward process if you follow the outlined steps and adhere to post-registration rules. Whether you choose a private or public structure, understanding the differences and regulations will ensure smooth operations. For professional assistance, consult legal experts to navigate the process efficiently.
Company Registration in Nepal- FAQs
What is the Minimum Capital to Start a Company in Nepal?
There is no fixed minimum capital requirement. However, the initial capital depends on the business type and scale.
How Long Does it Take to Register a Company in Nepal?
Company registration typically takes 7-15 working days, provided all documents are in order.
Can a Foreigner Register a Company in Nepal?
Yes, foreigners can register companies in Nepal. They must comply with the Foreign Investment and Technology Transfer Act, 2019 (FITTA).
Is Online Company Registration Available in Nepal?
Yes, the OCR provides an online registration portal for convenience. Applicants can submit forms and track the process digitally.
Do Nonprofit Companies Require Additional Approvals?
Yes, nonprofits often require approvals from the Social Welfare Council (SWC) and other regulatory bodies based on their area of operation.
How to Register a Nonprofit Company in Nepal?
Nonprofit companies in Nepal are registered under Section 166 of the Companies Act, 2006. These organizations focus on social welfare rather than profit-making.
How Much Does It Cost to Start a Business in Nepal?
The cost of starting a business in Nepal depends on factors like company type and authorized capital. Typically, registration fees range from NPR 1,000 to NPR 15,000. Additional costs include:
- Notary and legal consultation fees
- Tax registration charges
- Office setup expenses
Small businesses generally require lower initial investments compared to larger corporations.