Company Incorporation and Related Services
In Nepal, company registration can be completed online through ocr.gov.np. Private limited company is the most common type of legal entity that is preferred by millions of Entrepreneurs. A private limited company can be registered online in less than 10 days.
What is a Private Limited Company?
A Private Limited Company (PLC) is one of the most common types of legal entity in business world. Private Limited Companies are governed by the Companies Act, 2006 and require a minimum of 2 Directors and 2 Shareholders with one of the Directors being an Nepalese Resident and Nepelease Citizen.
To register a company in Nepal, the following are minimum requirements:
- 2 Directors – 1 Person should be an Nepalese Resident and Nepelease Citizen.
- 2 Shareholders – The Directors can be shareholders
- Registered Office in Nepal
100% Foreign Direct Ownership (FDI) is permitted in most sectors in Nepal and there is no restriction on foreign shareholding of a private limited company.
Documents Required for Company Registration
- Citizenship of Directors and shareholders
- Memorandum of Association
- Article of Association
- Application for Registration
Capital Required to Start a Company
A company can be started in Nepal with a very minimum amount of capital. There is no fixed amount and the shareholders of the company being incorporated can determine the capital they wish to contribute. While setting up the capital structure of the company, the following are some of the concepts to be kept in mind:
Face Value of Share: The face value of a share is the price per share with which the company is incorporated. Normally, the face value of share is Rs. 1 or Rs. 10 or Rs. 100 or Rs. 1000 or Rs. 10,000.
Authorised Capital: Authorised capital is the total value of shares a company can issue to shareholders. Normally, all companies are incorporated with an authorized capital of Rs. 1 lakh or Rs. 10 lakhs. If a higher authorized capital is required, the company would be required to pay additional fees to the Office of Company Registrar. The authorised capital of a company can be increased at any time after incorporation.
Paid-up Capital: Paid-up capital of a company is the number of shares issued to shareholders for which they have paid or deposited money to the company. Paid-up capital of a company cannot be more than the authorized share capital of the company.
Company Registration Process
The following are the steps involved in registering a company in Nepal:
- Apply name for registration
- An application for company name approval is first submitted to the Office of Comapny Registrar (OCR) to reserve the company name. In the name approval application, 1 or 2 names with business objectives can be submitted. If a name approval is rejected, 1 or 2 more names can be resubmitted. Normally, the OCR approves all name approval applications in less than 5 working days.
- Incorporation Application Submission : Once the name application is approved, prepare all required documents such as MOA, AOA, application for company registration and signed it properly and upload it to application.ocr.gov.np.
- Submit Physical Documents : Hard copy of documents with notary and application for registration has to be presented to OCR for final registration after completion of online fillings.
- Payment : Fees as required depending upon the capital structure of the company has to pay
- Signed the documents with Registrar and complete the registration process.
Registered Office of Company
All companies registered in Nepal are required to maintain a registered office in Nepal. The registered office must have a board with the name of the company and should be a place where notice or communication if any can be served. Hence, the registered office of a company cannot be vacant land or under construction premises.
After incorporation, the registered office of a company can be changed if required. In case the registered office is changed within the same city or same Registrar of Company, the process can be completed easily. In case the registered office of a company is changed from one state to another, the process would be longer and more cumbersome.
PAN/VAT/EXCISE Registration after Company Registration
During the company registration process, the Directors can opt to obtain VAT registration along with the incorporation. However, it is not mandatory for a company to be registered under the VAT unless certain turnover limits are crossed. You can know more about the turnover limit and process for obtaining VAT registration in our detailed guide on VAT registration in Nepal.
Bank Account for Private Limited Company
After company registration, a bank current account must be opened in the name of the company within 180 days and the subscription amount must be deposited. If the above steps are not completed, the commencement of business certificate would not be issued and a penalty would be applicable.
The following are documents required to open bank account for a private limited company:
- Incorporation Certificate of Company
- Directors KYC Documents
- Board Resolution Authorizing the Directors to open Bank Account
- Address Proof of the Company
- VAT/PAN registration certificates
At Solution Hub, we work with various banks to help our clients open a current accounts for their companies in a seamless fashion.
Advantages of Private Limited Company
The following are the major advantages of incorporating a private limited company in Nepal versus other entity types.
Separate Legal Entity
A company is both a legal entity and a juristic person. Therefore, a company has broad legal rights to like acquiring property, incurring debts, hiring people, etc. As a company is a separate legal entity, the company's members (shareholders or directors) are not personally liable for the company's liability.
Limited Liability
A private limited company is a separate legal entity with limited liability provisions. Therefore, the shareholders are not liable for the losses of the company – for an amount more than what was invested by them into the company as share capital.
Uninterrupted Existence
A company has 'perpetual succession,' which means it will continue to exist until it is legally dissolved. Because a company is a separate legal entity, it is unaffected by the death or other departure of any of its members, and it continues to exist regardless of membership changes.
Fund Raising
A private limited company has multiple options for fundraising. A company can raise funds from shareholders, investors, angels, venture capital funds, private equity funds, foreign funds, NBFCs, banks and other financial institutions. Only a company can raise debt and equity funds from investors.
Disadvantages of Private Limited Company
While a company has various advantages, registering a company may not be ideal for all entrepreneurs due to the following reasons:
Compliances
A company has to mandatorily maintain various compliances irrespective of business turnover or activity. Hence, operating a company involves a minimum recurring cost each year.
Lack of Management Skills
Small entrepreneurs with no team and mini business are not requiested to go for company registration is its required certain legal knowlegde and annual compliance.
