Foreign companies in Nepal must invest in permitted sectors with equity or establish a branch/liaison office, as per the Companies Act of Nepal 2006. The Act mandates foreign companies to set up a branch office before commencing business in Nepal, and a liaison office before establishing an office. Engaging through equity investment, management, or employing agents/distributors does not constitute a branch or liaison office. Approval involves submitting an application to the Office of the Company Register (OCR), obtaining sector regulatory authority approval, and receiving OCR’s registration certificate within 30 days. Registered branch offices can engage in permissible business activities in Nepal, while liaison offices are restricted from income-generating activities.
Documents and Information Required for Branch Office Registration in Nepal
To open an office for a foreign company in Nepal, the company needs to follow the rules in the Companies Act, specifically in Section 155. Here’s what the company needs to do and provide:
Permission/License: The foreign company must have permission or a license from the relevant authority in Nepal to do business there.
Important Documents: Copies of essential documents like the certificate of incorporation, memorandum of association, and articles of association are required.
Translation: These documents should be translated into Nepali. Photocopies of the translated versions are also needed.
Company Information: Details about the foreign company, such as its full name, registered office address, principal business location, date of incorporation, issued capital, and main objectives, must be provided.
Key People: Information about the people running the company, including their nationality, names, addresses, and roles like directors, managers, company secretary, or chief officer, should be submitted.
Nepalese Representative: The name and address of the person representing the company in Nepal are required.
Business Plans: If the company plans to do business in Nepal, it needs to outline its proposed investments, transactions, or business activities. Information about the purpose and the planned start date is necessary.
Declaration of Truth: The directors or their representatives must make a declaration, confirming that the documents and information provided to the Office of the Company Registrar are accurate.
Power of Attorney: This legal document gives someone the authority to act on behalf of the foreign company. It is an important requirement for the registration process.
By providing all these documents and information, the foreign company shows its commitment to transparency and adherence to the laws of Nepal. This process ensures that the company is authorized to operate in the country and contributes to the regulation of foreign businesses within Nepal’s legal framework.
After Registration of Branch Offices or Liaison Office
For branch offices, post-registration requirements include appointing an auditor and submitting an annual financial statement, balance sheet, and profit and loss account to the OCR within 6 months of the fiscal year’s completion. Additionally, the branch office must submit its parent company’s balance sheet within 3 months of its preparation. The annual financial statement should detail properties, cash holdings, and liabilities in Nepal.
As for liaison offices, after registration, they must appoint an auditor, prepare an annual financial statement, and submit it to the OCR within 3 months of the fiscal year’s completion. The annual financial statement should include details on salaries, allowances, payments to employees, consultants, liaison persons, and deductions of tax as per prevailing laws. Payments for rental and office operating expenses should also be accounted for in the statement.
