Defunct firms not clearing govt liabilities to get easy exit
KATHMANDU, Oct 17: Companies defunct for long and looking to shut down their operations legally will get an easy exit for a year if the First Amendment Bill of the Company Act 2006 gets through the parliament.
The amendment bill, which was endorsed by the cabinet's Bills Committee on Friday, will be tabled in the parliament soon, according to officials of the Ministry of Industry.
Among others, the amendment will relieve individuals and firms from the liability of fees and fines piled up for several years. They will have to pay only one percent of their paid-up capital, according to a provision in the amendment bill.
"Companies, which failed to report their operation details and pay liabilities for several years, can enjoy this facility for one time," Prem Kumar Shrestha, the registrar at the Office of the Company Registrar, said at a press meet on Sunday.
This special scheme, however, will be valid only for a year from the publication of the law in the Nepal Gazette following authentication by the President.
“The easy exit not only relieves promoters from the company's liability but might also allow them to contest elections and make them eligible for appointment in public offices,” said Shrestha.
However, all other provisions of appointing liquidator and publishing notice of liquidation and other process are unchanged.
Minister for Industry Nabindra Raj Joshi said that amendment, which started five years ago, has a number of provisions aimed at easing doing business and creating more jobs.
“Around 50,000 defunct companies can benefit from this exit scheme,” Joshi said.
The amendment bill has also raised the threshold of paid-up capital of firms requiring compulsory formation of three-member auditors committee for auditing of their financial operations to Rs 100 million from existing Rs 30 million. Likewise, a firm can donate up to Rs 100,000 in a fiscal year up from Rs 50,000 in the existing law.
The draft law has also a number of measures to regulate firms that report bloated administrative cost to show them in loss. It has also introduced stringent provisions for promoters and executive issuing loans or providing financial assistance to their relatives and standing as a guarantor for them.
The amendment bill has capped administrative cost of firms not distributing profit in the past year at 25 percent of their annual expenditure. This measure is believed to tighten screws on unscrupulous firms reporting loss by showing bloated meeting allowance and other unnecessary costs.
With the introduction of online company registration three years ago, Nepal's doing business indicator had progressed by five points. Minister Joshi claimed that these amendments are expected to improve doing business environment and also attract private sector investments including foreign direct investments.