Every company is required to obtain PAN or VAT Registration Certificate from IRD (Inland Revenue Department) before the commencement of its business, depending on the value of the annual transaction of the business. The minimum amount of investment to be made by a Private Company is not prescribed, while the minimum value is Rs.1,00,00,000 for Public Companies. The total time for registration of a company is 7 to 10 days.
Procedure
The Companies Act, 2063 (2006) governs the incorporation of the companies in Nepal, and the registration of companies differs as per its nature. The companies need to follow the procedure mentioned below for registration.
- Step 1: Reservation of Company Name at the OCR (Office of Company Registrar)
- Step 2: Submission of the physical copy of documents at OCR
- Step 3: Examination of submitted documents by OCR
- Step 4: Issuance of Company Registration Certificate by OCR
- Step 5: Tax Registration (VAT/PAN) at IRD
According to the Company Act, the company also needs to provide a set of necessary documents while registering a new company. The documents in the table below are required documents to be submitted to the OCR office for registration.
| S.N. | Documents | No. of Copies |
|---|---|---|
| 1 | Application for Registration | 1 set - original |
| 2 | Memorandum and Articles of Association of the proposed Company | 2 sets - original |
| 3 | Citizenship Certificate of Nepali Promoters/Passport in case of Foreign Promoters | 1 copy |
| 4 | Shareholder's Agreement (if any) | 1 copy |
| 5 | Copy of certificate of registration and other registration documents (memorandum of association, articles of association) if the shareholder is a company | 1 copy |
| 6 | Corporate resolution of the shareholder if the shareholder is a company | 1 copy |
| 7 | Copy of prior approval of the DOI(Digital Object Identifier) if the shareholder is a foreign investor | 1 copy |
Fees
The Government of Nepal charges a certain fee based on the proposed authorised capital of companies.
Government Fees For Private Company
| S.N. | Amount of Authorized Capital (in Rs) | Registration Fee (in Rs) |
|---|---|---|
| 1 | Up to 1,00,000 | 1,000 |
| 2 | 1,00,001 to 5,00,000 | 4,500 |
| 3 | 5,00,001 to 25,00,000 | 9,500 |
| 4 | 25,00,001 to 1,00,00,000 | 16,000 |
| 5 | 1,00,00,001 to 2,00,00,000 | 19,000 |
| 6 | 2,00,00,001 to 3,00,00,000 | 22,000 |
| 7 | 3,00,00,001 to 4,00,00,000 | 25,000 |
| 8 | 4,00,00,001 to 5,00,00,000 | 28,000 |
| 9 | 5,00,00,001 to 6,00,00,000 | 31,000 |
| 10 | 6,00,00,001 to 7,00,00,000 | 34,000 |
| 11 | 7,00,00,001 to 8,00,00,000 | 37,000 |
| 12 | 8,00,00,001 to 9,00,00,000 | 40,000 |
| 13 | 9,00,00,001 to 10,00,00,000 | 43,000 |
| 14 | More than 10,00,00,000 | 30,000 per 1,00,00,000 |
Government Fees for Public Company
| S.N. | Amount of Authorized Capital (in Rs) | Registration Fee (in Rs) |
|---|---|---|
| 1 | Up to 1,00,00,000 | 15,000 |
| 2 | 1,00,00,001 to 10,00,00,000 | 40,000 |
| 3 | 10,00,00,001 to 20,00,00,000 | 70,000 |
| 4 | 20,00,00,001 to 30,00,00,000 | 1,00,000 |
| 5 | 30,00,00,001 to 40,00,00,000 | 1,30,000 |
| 6 | 40,00,00,001 to 50,00,00,000 | 1,60,000 |
| 7 | Above 50,00,00,000 | 3,000 for each 1,00,000 |
Refusal of Incorporation
There have been instances where company registration has been refused by the Office of Company Registrar on the bases mentioned below.
- If the company's proposed name is identical to an existing company name registered at the OCR.
- If the name and objective of the company don't coherently abide by the prevailing law.
- If the required documents for the company are not duly fulfilled.
Categorisation of a Company
The categorisation of the companies is done according to their nature of work and the amount invested in them. A registered company needs to pay the tax amount set by its nature.
Taxation is compulsory and is levied on individuals or entities by the government in every country. It is imposed on individuals or entities to raise revenue for the government to meet its expenditures.
Under the Companies Act 2006 (2063), there are mainly three types of companies:
- Private Company
- Public Company
- Non-profit Company
However, we will be talking about those companies which need to pay the profit tax. They are the Private Company and the Public Company.
Private Company
A Private Company is privately held, meaning that the founders, management teams or a group of individual investors own the company. An individual can establish it, and the maximum number of members cannot exceed 50. A private company is denoted by the suffix Pvt. Ltd. It is not listed on a recognised stock exchange, and shares are not publicly traded.
Public Company
A Public Company refers to a company that sold a certain portion of shares to the public via an Initial Public Offering (IPO) to raise funds. A public company establishment requires a different set of manuals to adhere to before the registration process is initiated, and there must be a minimum of 7 members. A public company is denoted by the suffix Ltd. It is listed on the recognised stock exchange to raise capital from the general public.
The difference between Private and Public companies based on distinction is mentioned below.
| S.N. | Basis of Difference | Public Company | Private Company |
|---|---|---|---|
| 1 | Minimum Paid Up Capital | Rs. 1,00,000 | No Minimum Paid Up Capital prescribed |
| 2 | Number of Members | 7 to any number of members | 1 to 50 members |
| 3 | Transfer of Shares or Securities | Share & securities are freely transferable | Share & Securities can only be transferred to the existing shareholders of the company |
| 4 | Number of Board Directors | 3 to 11 | Any number of Directors |
| 5 | Presence of Company Secretary | Mandatory | Optional |
| 6 | General Assembly | Mandatory | In accordance with the Articles |
I hope this article was informative to you!