House approves amendment to Company Act

Published On: March 15, 2017 12:02 PM NPT

KATHMANDU, March 14: The Company Act Amendment Bill has finally been endorsed by the parliament.

The bill, which couldn’t get through the parliament on Friday due to lack of a quorum, was endorsed on Tuesday. The new law is expected to simplify entry, operation and exit of companies in Nepal.
One of the key laws that could encourage prospective investors -- both domestic and foreign -- in Nepal, the amendment to the Company Act has made things easier for companies which are defunct for long and are looking to wind up their operations legally, according to Minister for Industry Nabindra Raj Joshi. 

The amendment has also relieved individuals and firms of liability to pay fees and fines piled up for several years. Such individuals and firms will have to pay only one percent of their paid-up capital, according to a provision in the new law. Companies, which failed to report their operation details and pay liabilities for several years, can enjoy this facility for one time only. 
“Around 50,000 defunct companies can benefit from this exit scheme,” according to the Ministry of Industry.

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. 
According to Joshi, the amendment, which started five years ago, has a number of provisions aimed at easing doing business and creating more jobs in the country. 
With the introduction of online company registration three years ago, Nepal’s doing business indicator had progressed by five points. 

“Apart from easy exit, the amendment has also made entry of a company easy,” Joshi said, adding that the amendments in the Company Act are expected to improve doing business environment and also attract private sector investments including foreign direct investments.  
The new law 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 legislature has also capped administrative cost of firms not distributing profit in the past year at 25 percent of their annual expenditure. This measure is also believed to tighten screws on unscrupulous firms reporting loss by showing bloated meeting allowance and other unnecessary costs.

Likewise, the new amendment has also made it mandatory for telecom companies having paid-up capital of Rs 50 million or above to float their shares to general public.

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