Compliance Requirements

Post Incorporation Compliance for Private Limited Company in Nepal: Everything you need to do after registering a company

by The Khatapana Guy

Dec 11, 2023 - 6 min read

Post Incorporation Compliance for Private Limited Company in Nepal: Everything you need to do after registering a company

In recent years, Nepal has streamlined the process of incorporating a company, making it more accessible and affordable. The Nepal Government's decision to waive registration fees this year is a testament to this effort. However, the real challenge begins post-incorporation, often likened to opening Pandora's box if not well-managed.

Incorporating a company is akin to birthing a legal entity, necessitating various formalities. Shareholders, directors, and management must be vigilant about post-incorporation compliance to avoid penalties. The Companies Act 2063, with its stringent norms, leaves no room for error. Even minor delays or incomplete submissions can lead to hefty fines. The legal maxim "Ignorantia juris non excusat" (ignorance of law is not an excuse) aptly applies here, stressing the importance of compliance awareness.

It's crucial for directors, shareholders, and company officials to be well-informed about the mandatory legal compliances post-incorporation. Engaging professionals like Khatapana, a firm specializing in corporate services, is highly recommended for timely and accurate compliance management. Their expertise ensures that the complexities of legal formalities are handled efficiently, safeguarding companies from potential legal pitfalls.

In conclusion, while the incorporation process in Nepal has become more user-friendly, the importance of post-incorporation compliance cannot be overstated. Companies must prioritize legal adherence to establish a solid foundation for their business ventures. Seeking professional guidance from experts like Khatapana can be a decisive step in ensuring seamless compliance and successful business operation in Nepal's evolving corporate landscape. Wondering what all you need to do after registering a company in Nepal? Don't worry! We are here to guide you. 

Here are some of the significant action items for an entrepreneur to comply with post incorporation compliance requirements i.e. tasks you must complete after your company is registered at the Office of Company Registrar: 

A. Immediate Steps after Incorporation

1. First meeting of the Promoters: 

After incorporation, the company should hold the first meeting of the promoters. There is no specific timeline but since the company is required to undertake other registration work e.g. business registration at ward office, tax registration at tax office and so on. Here are some important discussions and decisions that the meeting should undertake: 

a. Notification of incorporation of company to all promoters

First thing first, all the promoters should be notified about the incorporation of the company i.e. the birth of a new legal person. 

b. Confirmation of registered office address

As per Section 184(2), a company should establish a registered office and within 3 months of from the date of incorporation, register the address of the registered office at the Office of Company Registrar. The contact information including telephone number, fax, email etc. should also be notified to the OCR and any changes in these information including registered office address should also be updated immediately to the OCR. The registered office address should be used to receive all official communication from the various authorities. 

In addition, every company is required to affix its name and address in Nepali language in a signboard and place it outside its registered office. And hence, the first meeting of the promoters should discuss and decide on these matters related to the registered office address and notify the same to the OCR on a timely manner. If the office is to be set up on a leased premises, which is generally the case, the company is also required to decide on the terms of lease and accordingly execute a lease agreement. 

c. Finalize and prepare the company seal 

A company is a legal person and like a natural person, it cannot sign the official documents on its own. And hence, every company is required to prepare a distinct company seal with its name engraved in a clearly visible manner. Such company seal should be used in all documents related to the company including any report submitted by the company, records and any commercial document used in the name of the company including invoices, bills, purchase order, notice, official publications, bills of exchange, promissory notes, official deeds, agreements etc. 

Therefore, the first meeting of the promoters should decide on preparation of the company seal as the same will also be required to enter into the lease agreement and also obtain ward and tax registration. Also the banks make it mandatory for the companies to have a company seal for opening and operating a bank account.  

2. Legal Registrations 

  1. Business registration at ward office
  2. Registration at tax office 
  3. Industry/Firm Registration

3. Bank Account Opening 

Section 108(4) of the Company Act requires the company to deposit its cash to the bank and transact using its bank account only except for certain amount specified by the board of directors and hence opening a bank account is one of the first thing that a company needs to do. However, a bank account can only be opened after obtaining a permanent account number a.k.a. PAN i.e. tax registration. While opening a bank account, the company also needs to decide on the authorized signatory and it is mandatory to use the company seal too. 

4. Share Capital Call

As soon as the company comes into existence following incorporation, the company needs money to operate and hence the meeting of the promoters/board of directors should call the money from the promoters as per their initial commitment. The timeline for payment of the share amount should also be specified and notified to all the promoters. 

5. Appointing the first auditor of the Company

The meeting of the promoters or the meeting of the board of directors should appoint the first auditor of the company. Thereafter, the auditor is always appointed by the general meeting of the shareholders only and the auditor is always accountable to the shareholders. And within 15 days of such appointment, the company is required to notify the same to the Office of Company Registrar. 

B. Notification of the Initial Compliance to the Office of Company Registrar: 

1. Registered Address: 

Notify the Office of Company Registrar of the company's registered address within 3 months from the date of incorporation.

2. First Auditor Appointment: 

Notify the appointment of the first company auditor within 15 days of appointment.

C. Share Allocation : 

The promoters are required to deposit the share call money as per the notification of the board of directors of the Company within the time specified therein. If any promoter fails to pay the committed money on time, then the shares allocated for them may be forfeited and issued to other shareholders. Based on the share capital received by the company, the shares should be allotted to the promoters making them the shareholders of the company. 

Section 31 of the Company Act, 2063 requires the company to submit the details of allocation of shares to the Office of Company Registrar within 30 days from the date of allocation. The details of allocation should include the number of shares allocated, the paid up amount, the name of the shareholders, address and the amount each of the shareholders have paid and remaining unpaid amount, if any,.  

D. Share Certificate

Within 2 months from the date of allocation, the company should also issue the share certificates to all the shareholders. The share certificates should be in a specified format and duly signed and should also contain the company seal. 

E. Books of Accounts: 

As per section 108 of the Company Act, 2063, every company is required to maintain proper books of accounts either in Nepali or English language. The books of accounts should be maintained following the double entry book keeping system and should represent an accurate and fair view of the state of affairs of the company. The companies are also required to company with the accounting standards issued by relevant authority i.e. The Institute of Chartered Accountants of Nepal and should also adhere to other terms and conditions specified by the Company Act. 

F. Ongoing Compliance

Annual Filings: Submit annual reports, including audited financial statements, and maintain up-to-date records of shareholders and directors.

Tax Compliance: Adhere to income tax and VAT filing requirements, ensuring timely submission.

Khatapana: Your Ideal Compliance Partner

Khatapana offers comprehensive services for navigating post-incorporation compliance:

  • Customized Compliance Strategies tailored to your business needs.
  • Proactive Management of compliance obligations.
  • Regular Regulatory Updates and monitoring.
  • Expert Consultation to navigate complex legal requirements.

Understanding and adhering to post-incorporation compliance is crucial for the credibility and longevity of your business in Nepal. Khatapana stands ready to guide you through these essential steps, ensuring your business not only meets all legal standards but thrives in Nepal’s dynamic market.

Ready to ensure your company’s seamless post-incorporation journey in Nepal? Contact Khatapana today for expert guidance and support in managing your compliance requirements. Check our entrepreneur friendly compliance packages or download our app for comprehensive compliance solutions.

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