A country's economic development increases with direct foreign investment, and foreign investments must be legitimate. Since Nepal is open to many countries for trade and development, Nepal welcomes foreign investment. Therefore, several directives have been developed by the IRD to make entry easy for multinational companies in the Nepali Market.
The purpose of these directives is to maintain proper regulation and to define the provisions for foreign companies. Apart from foreign companies, the directive also provides provisions developed for non-profit companies. Non-profit companies are different; they are established mostly for the betterment of society, social life and social welfare.
69. No Foreign Company Shall be Deemed to Have Done Business(व्यवसाय) or Business(कारोबार):
(1) If any of the following conditions prevail, no foreign company shall be deemed to have conducted any business or business in Nepal as it has appointed any agent, distributor etc., in Nepal.
a. All transactions done in Nepal are conducted by the agent or distributor in their own name, and importing goods produced by a foreign company in Nepal is done in their own name.
b. The agent or distributor has used his own name in all the documents used at the place of business or business.
c. If the trademark of such a foreign company is to be used as per the agreement with the foreign company, the place of business and your name in all the documents used in the business are used explicitly.
d. Except for the conditions relating to the sale price of goods or services, the right to decide on all matters of daily business in Nepal rests with the concerned agent or distributor.
70. The Liaison Office Should not be Established by a Foreign Company
(1) If a foreign company has entered into a separate agreement to appoint a registered agent as its agent in Nepal under the Nepal Agencies Act, 2014 or a foreign company to appoint a person residing in Nepal as its advisor pursuant to subsection 154, then no liaison office shall be established in Nepal to appoint or appoint any person for such purpose or taking service of any person.
71. Duties of the Liaison Office of a Foreign Company
(1) The liaison office registered in Nepal will not be allowed to perform any contract or agreement on behalf of such foreign company or market promotion and expansion, advertisement of products or services of the foreign company. The liaison office registered in Nepal may take the following action:
a. To contact or correspond on behalf of a foreign company in Nepal,
b. If any person in Nepal needs any assistance in importing and using the products or services of the company, to provide necessary assistance without taking any money from such persons, and
c. If there is an agent of a foreign company in Nepal, coordinate with such an agent.
72. Must Have Written Proof of Foreign Founder
(1) If a foreign natural person is the founder of a company, such person shall submit his/her citizenship or passport along with the company registration application.
(2) If the founder of a foreign company or organization, a copy of the certificate of establishment of the company or major documents related to the establishment should be submitted.
(3) For the purpose of subsection (2), the principal instruments relating to establishing a foreign company refer to the following instruments of such a foreign company.
a. Letter of Company Establishment or Certificate of Establishment
b. Memorandum of Articles (प्रबन्ध पत्र)
c. Articles of Association (नियमावली)
(4) If a foreign company or organization is the founder, to establish a company in Nepal, the citizenship or passport of the person authorized by such company or body shall also be submitted.
(5) The main documents related to citizenship, passport and establishment submitted by the foreign founder to the office should be certified in accordance with the foreign country's law. Generally, such writings must be certified by one of the following bodies:
a. Notary Public or the body authorized to certify such instrument as per the foreign country's law.
b. If a foreign country is not a notary public, such a foreigner Diplomatic missions of the country based in Nepal.
c. Nepalese diplomatic missions in foreign countries, even if not such diplomatic missions.
73. Investment of a Foreign Company:
(1) For the purpose of clause (g) of section 155 of the Act, "Investment" of a foreign company doing business or business within Nepal shall mean the amount of investment or proposed expenditure required to operate such business in Nepal.
74. Nepali Translation of Writings of Foreign Companies
(1) The following writings of foreign companies to be submitted to the office to establish a branch office or liaison office in Nepal in accordance with the Act shall be translated into the Nepali language.
a. Certificate of Company Establishment
b. Memorandum of Articles and
c. Articles of Association
75. Change from Liaison Office to Branch Office
(1) A foreign company having established a liaison office in Nepal shall submit additional documents required to establish a branch office in accordance with the Act.
(2) A foreign company that submits only additional instruments pursuant to subsection (1) shall have to submit or update the documents with such amendment if any writing is altered while establishing the liaison office.
(3) No amendment or alteration shall be made in the application submitted by the operator or his foreign company representative submitting additional documents pursuant to subsection (1) at the time of establishing the liaison office.
(4) The name of such liaison office shall be removed from the registration book of the office after the registration of the foreign company which has established a branch office by closing the liaison office.
76. In the Authority of Foreign Company
(1) Every foreign company wishing to register a branch office or liaison office in Nepal should submit the company's application for registration along with the term, information, etc., issued in the name of the company or authorized person of the company.
(2) If such a foreign company has been established in authority pursuant to subsection (1) or if the law of the country where the company headquarter has been prescribed in any format, it should have been prepared in the same format.
(3) In the authority pursuant to subsection (1), such foreign company shall be established or duly certified by a licensed notary public or person or body authorized to certify in such authority as per the law of the country where the company headquarter is.
77. Failure to Submit the Statement will Result in a Penalty to the Foreign Company
(1) The failure to submit the statement for the purpose of section 81 of the Act will result in a penalty to the operator or official of the foreign company on the following grounds:
a. If the amount of the proposed investment to be made in Nepal by a foreign company having established a branch office to do business in Nepal is disclosed, the amount will be considered as paid capital for the purpose of subsection (2) of section (81).
b. If the amount of the proposed investment as per clause (A) is not disclosed, the operator or office bearer of the foreign company shall be fined as per subsection (2) of section 81.
c. Penalty against the operator or official of a foreign company who has established a liaison office shall be the same as against the operator or official of a foreign company having paid-up capital more than Rs. 25 Lakhs and up to Rs. 1 crore.
78. Only Resident People may be Authorized
(1) Only natural people residing in Nepal may be appointed authorized persons by a foreign company. Nepali citizenship is not required.
But no company or organization can be appointed by a person authorized by a foreign company.
79. Must be Certified by an Auditor
(1) The foreign company going for de-registration or liquidation has to prove in the Office of the Registrar of Companies that there is no obligation to pay any person, organization or governmental body within Nepal as per subsection (2) of section 158 of the Act.
80. Remuneration, Allowance of the Officer, etc.
(1) To determine the salary, meeting allowance, and other facilities to be received by the operator or office bearer of the non-profit company, the company shall disclose its capital status, earned or possible income and proposed salary, allowance, and facilities to be specified.
(2) Pursuant to subsection (1), the company will have to disclose the following in the details submitted to the office.
a. According to the prevailing law, by classifying the posts of the office bearers, the responsibilities of the office bearers at each level and the minimum and maximum limit of their salary, allowance and other facilities,
b. The basic salary, allowance, and other facilities to be received by the office bearers and the reason, and
c. Sources of payment of salaries, allowance and other facilities received by the office-bearers.
(3) The prior approval of the general meeting shall be taken when appointing any salaried employee or advisor to any member, operator and close relative of any other company officer.
(4) Pursuant to subsection (3), the employee and advisors appointed by the General Assembly shall be informed about the salary and facilities to be received by them, and the office must be notified in writing within 35 days from the date of appointment.
81. Establishment Expenses and Operating Expenses of Non-Profit Distributing Company
(1) The establishment and operating expenses of the company shall not exceed the actual expenses incurred during the establishment and operation of the company. The total expenses should be supported or certified by a bill voucher or other written documents.
(2) The fee to be paid by the company for such services should be reasonable if it has been taken consulting service during the establishment work of the company or during the operation of the company.
However, no fee will be charged for the consulting service to the member's founder, office bearer or close relative.
82. A company that Distributes Profits Cannot Become a Non-profit Company.
a. No obstacle to establishing a Non-Profit Distributing Company
(1) Nothing in this guideline shall constitute an impediment to establishing a non-profit company in accordance with Article 166 of the Act. For the purpose of this section, even the provision of section (6) of the directive will not be an obstacle.