Company Act 2063 (कम्पनि ऐन २०६३) | Objectives and Major Provisions

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Company Act 2063 (1)

What is a company?

Company is an organization of firm incorporated under the provision of company law. Incorporation means the process of registering the firm, organization, institution under the provision of law. A company is also known as a legal or artificial person.

Features of the company 

  • Company is incorporated association
  • Company has limited liabilities
  • Perpetual succession (It lasts for long life until the liquidation and BOD keep changing)
  • Legal capacity to sue and to be sued
  • Contractual capacity
  • Common seal
  • It has its own signature
  • Ownership is divided into a unit of shares and share capital
  • Management by representative
  • Permanent existence
  • Registered office
  • Must have MOA, AOA
  • Driven by formalities (Operate formally)
  • Shares are transferable

Objectives of the Company Act 2064

  • To create dynamism into the economic development of the nation by promoting investment in industries, trade, and business.
  • To promote the use of economic liberalization.
  • To make legal provision relating to incorporation, operation, management, and administration of the company much simpler, easier and more transparent.

Major Provisions of the Company Act

  • It has the provision of the company incorporation in which various types of companies can be incorporated under its provision such as private, public, profit not distributing, investment, subsidiary, etc. (Laxmi capital is a subsidiary company of Laxmi Bank).
  • It has the provision to promote corporate good governance.
  • It defines the management tools of the company such as AOA, MOA, and BOD.
  • It creates the features of a legal person.
  • All the company must use suffix as Pvt. Ltd. or Ltd as per their nature.
  • Few types of companies should be incorporated only as a public company such as B &FIs, Insurance, Stock Market, Mutual Fund, Retirement funds, Telecommunication service providers which has capital more than 5 crores.
  • It has provision relating to the conversion of private company into public and vice versa.
  • Provision of Office of Company Registrar (OCR) can provide service from branch office and outlets.
  • It has the provision relating to share, capital, and debenture of companies.
  • It has the provision of Board of Director (BOD) formation, Types of director and their rights and liabilities and also BOD meeting procedures.
  • It has the provision of general meeting its types and agendas of the company.
  • It has the provision of account record keeping and auditing.
  • Provision of company winding up as per the voluntary, compulsory and with deregistration process.

-It has the special provision of de-registration

-If the company are defunct they need to submit/providing 0.5% (as a fee) of their capital should be submitted to OCR for deregistration from the time of the last amendment. यदि 0.5% तिर्न नसकेमा Fine Fee तिरेर पनि दर्ता खारेजी गर्न सक्छ।

  • It has provision relating to the protection of shareholders.
  • It has provision relating to private, holding (मुख्य कम्पनि), subsidiary and foreign company.
  • It has provision relating to control the use of ultra vires by BOD. (Company should not go beyond the AOA & MOA) (अधिकार क्षेत्रभन्दा बाहिरको काम गर्न पाउदैन व्यवस्था)
  • It has provision relating to a proceeding of lawsuits and punishment.
  • Provision of the substantial shareholder (आधारभूत शेयरधनि सम्बन्धि व्यवस्था).

-Hold more than 1% if capital is 25 Crore

-Hold more than 5% if capital is more than 25 Crore

(यदि कसैले २५ करोड पुजी भएको कम्पनिमा १ % भन्दा बढी होल्ड गर्छ वा २५ करोड भन्दा बढी कुल पुजी भएको कम्पनि यदि कसैले ५% शेयर होल्ड गर्छ भने तिनी हरुलाई आधारभूत शेयरधनि भनिन्छ।  आधारभूत शेयरधनि हरुको लागि छुट्टै विशिष्ट व्यवस्था गरिएको छ।)

  • Compulsory provision of company secretary for a company which has more than 1 crore capital
  • It is in compliance with the Money Laundering Prevention Act.
  • It has the provision of merger and acquisition of the company.
  • Development committee can be converted into the public company if the government gives permission.

Types of General Meeting 

  • First Annual General Meeting (FAGM)
  • Annual General Meeting (AGM)
  • Special/Extraordinary General Meeting (SGM).

1. First Annual General Meeting (FAGM)

  • This meeting is held to approve all the documents which were submitted while registering the company.

2. Annual General Meeting (AGM)

  • Chairperson or director shall call the Annual General Meeting.
  • AGM should be conducted within 6 months after the end of the fiscal year.
  • It can be extended up to three months with the approval of OCR.
  • If a company can not conduct AGM within the predefined time, OCR schedule the time.
  • If the company still do not call for AGM, the stakeholders can file a case in court for calling up AGM.

Process of calling AGM

  • AGM notice should be published before 21 days of the AGM date mentioning the date/time, venue and agendas.
  • AGM notice should be published at least two times in the national level newspaper.
  • If any changes occur, notice should be published before 7 days of the AGM date.
  • AGM will be hosted by the secretary, chaired by president and minute must be approved by all the members.
  • This minutes’ copy should be submitted to OCR within 30 days from the date of approval.

(Same process in the case of banks)

3. Special General Meeting(SGM) 

  • Call by Board of Director, chairperson.
  • Three parties can call SGM with a written request – Auditor,  Shareholders (at least 10% of share capital with minimum 3 shareholders),  Shareholders (at least 25% of shareholders).
  • After the written request from the above three parties, the director or president must call a Special General Meeting within 30 days.

Process of calling SGM

  • SGM notice should be published before 15 days of the SGM date mentioning the date/time, venue and agendas.
  • AGM notice should be published at least two times in the national level newspaper.
  • If any changes occur, notice should be published before 7 days of the SGM date.
  • SGM will be hosted by the secretary, chaired by president and minute must be approved by all the members.
  • This minutes’ copy should be submitted to OCR within 30 days from the date of approval.

Agendas of SGM

  • Increase/decrease capital
  • Share buyback
  • Bonus share
  • About Merger/acquisition
  • Company name change etc

All the members of the BOD must attend the meeting physically. If not possible physically, use of video conference to use voting right.


Possible Questions

Q) Write about the process of calling AGM defined by the company act 2064. 
Q) What are the provision relating to AOA and MOA defined by company act?
Q) What are the heading defined in AOA or MOA?
Q) What are the provision relating to the incorporation of the company? 

Answer- for this question explain the following three points in detail

-Nature of the company for incorporation
-Process of incorporation and required documents
-Provisions/conditions to refuse of company incorporation
-Nature of the company for incorporation

i)For private company

  • No limitation of capital
  • No need to disclose financial or audit report publicly
  • Must have minimum 1 and maximum 101 shareholders

ii)For public company

  • Minimum capital 1 crore
  • Need to publish prospectus publicly
  • Minimum 7 and maximum unlimited shareholders
  • Few special companies must be incorporated as public such as B&FIs, Insurance, Mutual funds, Retirement fund, Telecommunication service provider

iii)Profit not distributing company

  • Minimum shareholder 5 and maximum unlimited
  • Rest of the rules the same as a public company

– Required documents

  • Submit 2 copies of proposed MOA and AOA
  • Mutual agreement of promotors
  • Prior approval from respective office (NRB in case of B&FIs)
  • Details of the promotors
  • Application and required fees.
  • If promotor is a legal person (organization) then need to submit a copy of registration certificate.
  • In case of foreign promotor (person/institution) approval of investment, registration certificate and citizenship certificate.

Process of incorporation

  • Submit the application along with required documents and fees to the Office of Company Registrar (OCR).
  • The form can be submitted online as well.
  • OCR should provide a registration certificate within 7 days from the application received. Otherwise, provide refusal notice within 3 days after the registration timeline.
  • After approval, the company must be started within 1 year from the approval time.
  • For a foreign company, provide registration certificate within 30 days otherwise provide refusal notice within 7 days after the registration timeline.

-Provisions/conditions to refuse of company incorporation 

i) Due to name

  • If the name of the proposed company is same as other existing company.
  • If the proposed name is is similar to some other insolvent company [only for 5 years after the insolvent date].
  • If the name of the proposed company is almost similar to an existing company.
  • If the name of the proposed company is against the law, customs.

ii) Due to its objectives

  • If the objective of the company is against the law.
  • If the functions are against the law.

iii) Other reasons

  • If the required fees and documents are not properly submitted.
  • If AOA and MOA are not completely filled up.