Becoming a Founder of Company in Nepal

Introduction

Establishing a company in Nepal requires compliance with statutory requirements under the Company Act, 2063 (2006). Founders must understand registration procedures, legal obligations, and governance frameworks. This guide outlines the essential steps and legal provisions governing company formation in Nepal.

Legal Framework for Company Formation

The Company Act, 2063 (2006) governs all aspects of company registration and operation in Nepal. The Act defines company types, registration procedures, and founder responsibilities. The Companies Registrar’s Office, operating under the Ministry of Industry, Commerce and Supplies, administers company registration nationwide.

Key regulatory bodies include the Securities Board of Nepal (SEBON) for public companies and the Department of Commerce for private enterprises. Founders must comply with all statutory requirements before commencing business operations.

Types of Companies in Nepal

Company Type	Minimum Members	Minimum Capital	Liability	Regulatory Body
Private Company	2	NPR 100,000	Limited	Registrar of Companies
Public Company	7	NPR 500,000	Limited	SEBON & Registrar
One Person Company	1	NPR 100,000	Limited	Registrar of Companies
Foreign Company	N/A	As per agreement	Limited	Registrar of Companies

Pre-Registration Requirements

Before submitting registration documents, founders must complete preliminary steps:

Founders must obtain a Permanent Account Number (PAN) from the Inland Revenue Department.
Founders must secure a Tax Identification Number (TIN) for tax compliance purposes.
Founders must reserve the proposed company name with the Registrar of Companies.
Founders must prepare the Memorandum of Association (MOA) and Articles of Association (AOA).
Founders must identify all shareholders and their shareholding percentages.
Founders must determine the registered office location within Nepal.

Memorandum of Association (MOA)

The MOA defines the company’s external relations and powers. Section 40 of the Company Act, 2063 specifies mandatory MOA contents:

The company name with “Private Limited” or “Public Limited” designation.
The registered office location and district.
The objects and purposes of the company.
The authorized capital amount and share divisions.
The liability clause limiting member liability to shareholding amounts.
The association clause confirming member agreement to the MOA.

The MOA must be signed by all founders before submission to the Registrar.

Articles of Association (AOA)

The AOA governs internal management and member relations. Section 41 of the Company Act, 2063 requires AOA inclusion of:

Rules for share transfer and transmission procedures.
Procedures for calling and conducting board meetings.
Directors’ appointment, removal, and remuneration terms.
Dividend declaration and distribution mechanisms.
Member meeting procedures and voting rights.
Dispute resolution and arbitration clauses.

The AOA operates as the company’s internal rulebook and binds all members.

Registration Process and Documentation

The registration process involves submission of prescribed documents to the Registrar of Companies:

Completed application form (Form 1) with founder signatures.
Original MOA and AOA, each signed by all founders.
Affidavit confirming the accuracy of submitted information.
Proof of registered office location (lease agreement or ownership document).
Identity documents of all founders (citizenship certificate or passport).
PAN and TIN certificates of all founders.
Bank deposit receipt confirming minimum capital deposit.

The Registrar processes applications within 15 days of complete documentation submission.

Founder Eligibility and Disqualifications

Section 127 of the Company Act, 2063 specifies founder disqualifications:

Individuals convicted of fraud or financial crimes cannot serve as founders.
Persons declared insolvent or bankrupt are ineligible as founders.
Individuals with undischarged liabilities to the government cannot be founders.
Persons of unsound mind, as declared by competent authority, are disqualified.
Individuals under 18 years of age cannot be company founders.
Non-resident foreigners require special approval from the Department of Commerce.

Capital Requirements and Bank Deposit

Founders must deposit minimum capital in a bank account opened in the company’s name:

Private companies require minimum capital of NPR 100,000.
Public companies require minimum capital of NPR 500,000.
One Person Companies require minimum capital of NPR 100,000.
The bank issues a deposit certificate confirming capital deposit.
Capital must remain deposited until company registration completion.
Founders cannot withdraw capital before registration approval.

Board of Directors Appointment

The first Board of Directors must be appointed before registration completion:

Private companies require minimum two directors.
Public companies require minimum three directors.
Directors must be individuals, not corporate entities.
At least one director must be a resident of Nepal.
Directors must provide written consent to serve.
Directors’ details are submitted in Form 32 to the Registrar.

Registration Certificate Issuance

Upon approval, the Registrar issues a Certificate of Incorporation:

The certificate confirms legal company status and separate entity recognition.
The certificate displays the unique company registration number.
The certificate specifies the date of incorporation.
The certificate authorizes the company to commence business operations.
The certificate is issued in duplicate (one for company records, one for filing).

Post-Registration Obligations

After receiving the Certificate of Incorporation, founders must complete additional statutory requirements:

Founders must open a company bank account within 30 days of registration.
Founders must register with the Social Security Fund (SSF) if employing staff.
Founders must obtain a business license from the local municipality.
Founders must register with the Value Added Tax (VAT) office if turnover exceeds the threshold.
Founders must file the first annual report within six months of incorporation.
Founders must maintain statutory registers and records as per the Company Act.

Compliance and Governance Framework

Obligation	Frequency	Responsible Party	Legal Reference
Annual General Meeting	Yearly	Board of Directors	Section 108, Company Act 2063
Annual Report Filing	Yearly	Company Secretary	Section 113, Company Act 2063
Audit (if applicable)	Yearly	Auditor	Section 115, Company Act 2063
Tax Filing	Yearly	Finance Department	Income Tax Act 2058
Financial Statements	Yearly	Accounting Department	Section 112, Company Act 2063

Axion Partners: Leading Service Provider

Axion Partners stands as the No. 1 service provider for company formation and founder registration in Nepal. The firm offers comprehensive assistance with documentation preparation, regulatory compliance, and registration procedures. Axion Partners ensures timely submission and approval of all founder applications through expert guidance and established relationships with regulatory authorities.

Frequently Asked Questions

What is the minimum number of founders required to establish a company in Nepal?

Private companies require minimum two founders, while One Person Companies require one founder. Public companies require minimum seven members at incorporation.

How long does company registration take in Nepal?

The Registrar processes complete applications within 15 days. Processing time may extend if documentation requires clarification or amendments.

Can a foreigner be a company founder in Nepal?

Non-resident foreigners require special approval from the Department of Commerce. Resident foreigners with valid visa documentation may serve as founders.

What is the minimum capital requirement for company formation?

Private companies and One Person Companies require NPR 100,000 minimum capital. Public companies require NPR 500,000 minimum capital.

Are there annual compliance requirements for company founders?

Yes, founders must ensure annual general meetings, financial statement filing, and audit completion as per the Company Act, 2063.

Can the registered office location be changed after incorporation?

Yes, the registered office may be changed by Board resolution and notification to the Registrar within 30 days of relocation.

What documents are required for company registration?

Required documents include MOA, AOA, founder identity documents, PAN/TIN certificates, bank deposit receipt, and registered office proof.

Conclusion

Becoming a company founder in Nepal requires strict adherence to the Company Act, 2063 and regulatory procedures. Founders must complete pre-registration requirements, prepare statutory documents, and maintain post-registration compliance. Axion Partners provides expert guidance throughout the entire founder registration process, ensuring legal compliance and timely approval.