Things every shareholder must know and do after registering a company in Nepal

Company registration is a fairly easy and quick process if you have a good consultant. Many business consultancies that provide company registration services create a company for you and hand over all the documents and vouchers. Now it is the responsibility of business owners to carry out post-registration services.  However, most small businesses can’t/ don’t hire an accountant or lawyer in their initial phase, so things can get a little confusing. However, we at Bizsewa provide assistance with these post-registration services as well. This is even reflected in our tagline, “One-Stop Business Solution”.

So, what are the obligations that a newly registered company has, or what are the legal and regulatory requirements after successfully registering a company? We have created a compact yet comprehensive list that provides you with sufficient information.

1. Registration with Tax Authorities:

All businesses registered at any authorities should compulsorily take Permanent Account Number (PAN) to start and continue their operations. With the company, OCR (Office of The Company Registrar) provides you with a letter containing a PAN number that is reserved for your company.

Before visiting the  Inland Revenue Department (IRD) a.k.a Kar Karyalaya, you need to make sure you have these documents/things with you:

1. Photocopy of Certificate of registration, MOA, and AOA (Prabandhapatra, Niyamawali)
2. Original letters provided by OCR (these are provided by OCR along with other registration documents)
3. Stamp of the company (Please include the full name of the company in the stamp)
4. Minutes of board meeting deciding the registration at IRD (MINUTES SAMPLE) (Try our minute maker)
5. Photocopy of Citizenship certificates of all shareholders
6. Two PP-size photos of any shareholder (the name of that Shareholder must be stated in the minutes)
7. Personal PAN card of one shareholder. (If you don’t have a PAN card, you can get one easily by filling out an online form at IRD website)
8. Rent Agreement (RENT AGREEMENT SAMPLE) (Try our Rent Agreement Maker)
9. Online form filled at IRD website with Rs. 10 ticket/stamp. (You can use our NSIC code search page to find the machng code for your business – NSIC Search. Ticket/stamp can be purchased at photocopy center near any tax office.)
10. Copy of citizenship/ Receipt of payment for any government service by the landlord (electricity / khanepani), house tax payment slip (tiro tireko rasid). (you need to ask these documents with landlord. Some tax/ward offices even ask copy of lalpurja)

These documents must be filed in a document file and submitted at the IRD office of your ward that is specified in the company registration documents. In Kathmandu, almost all wards have their own IRD offices however in other places, there is a single IRD office for the municipality or district.

It is also mandatory to display a copy of the PAN certificate and company registration certificate at your office for public view. We recommend creating a color photocopy and framing it just in the reception area.

Please note that a company with an annual transaction exceeding NPR 50 lakh and a service provider with an annual transaction exceeding NPR 20 lakh must also get registered under Value Added Tax (VAT). The PAN number remains the same. Also, there are various businesses/industries that require compulsory VAT registration irrespective of their transaction volume. Details here:

2. Obtain licenses, and permissions required to conduct your business:

Certain businesses and industries require to obtain licenses or permissions from their respective departments or bodies which regulate those businesses. If your business requires additional license/permission or registration for operation, please obtain that as well.

For example, if you register a travel and tourism company, you must get a tour license from the Department of Tourism. Similarly, a construction company requires a license to bid in tenders, the liquor seller needs to get registered at excise, Online shop should register at the Small and Cottage Industry department and Banijya Bibhag, and so on.

3. Opening of Bank Account:

After you obtain a PAN certificate, you must open a bank account immediately. We advise all businesses to conduct their transactions through their bank account, be it collecting share capital, paying suppliers, or salary to your staff. This will help you to track the finances, and keep transparency and financial discipline. The best practice is to limit the use of cash, except for petty expenses or where it is not possible.

Please carry these documents/ things while visiting the bank to open an account for your company:

1. Photocopy of Certificate of registration, MOA, and AOA (Prabandhapatra, Niyamawali)
2. Stamp of the company
3. Rent Agreement
4. Minutes of board meeting deciding to open a bank account at the specified bank ( Sample of Minute for Bank Account opening)
5. Photocopy of Citizenship certificates of all shareholders
6. PP-size photos of all shareholders (this can be attached to the KYC form)
7. KYC (Know your Customer) is filled by all the shareholders. For most of the banks, you can download the KYC form from their website. (Simply search “KYC form plus your bank name”)

Before opening a bank account, here are a few things that all business owners should know:

1. You can have signatories (the person who is authorized to sign on cheques or other documents) other than shareholders as well.

2. You can have condition-based signatories. This means you can specify one person as a signatory but for cheques of an amount more than say, Rs 1,00,000, any two of the three people specified must sign the cheque or so. Some of the most common types of permissions held by authorized signers on business accounts are:

• Ability to sign checks/cheques
• Access to an account’s balance
• Access to transactions history
• Ability to cancel payments on checks/cheques
• Ability to close the account

For each signatory, you can give access or restrict any of these permissions.

4. Submit Details to the Office Of Company Registrar Office (OCR) within 15 days and three months:

Within 15 days of registration of the company, you need to submit the details about the appointment of the auditor and his/her fees. The appointment is done by passing the resolution at the shareholder’s meeting.

You must send various details about your company to OCR after registration of the company within three months of the completion of registration.  This includes

• The exact address of the registered office of the company within three months of registration (Annexure 184).
• Details of share allotment.
• Source of Income of each shareholder.
• Appointment of auditor by the board for the first year specifying the audit fee.

5. Obtain a share certificate from OCR after receiving the promised amount from the Shareholder:

Shareholders promise to pay the company for the shares they buy from the shares issued by the company. Within the promised date, you need to obtain share certificates authorized by OCR. To obtain share certificates, you need to provide a bank statement of your company showing the deposit of a sum equal to the allotted shares. You can use this sum to operate the business. (FIXED DEPOSIT IS NOT REQUIRED). If any shareholder wishes to provide any other assets other than cash, you can have that as well. For example, if a Shareholder wishes to obtain a certificate by giving the land of equivalent shares, he/she should transfer the ownership of the land to the company and provide those documents as well. Be informed that OCR charges a fine if you don’t obtain the certificate in time.

6. Designing and Printing your Recording Materials:

Your company requires different materials such as invoices, receipts, vouchers, and ledgers to record your transactions. There is a specific format for these materials to ensure that all the required information is captured, and some are even to be approved by regulators prior to use. You need to design and print those materials to ensure that your first transaction is recorded correctly. If you are registered at VAT, you need to have sales and purchase register where you will enter all the VAT sales and VAT purchases. Also, these registers must be authorized by IRD.

[FOR COMPANIES REGISTERED AT VAT] Keep in mind that for a new accounting period (financial year), new sales and purchase registers must be maintained. These need to be authorized from IRD within the 25th of Shrawan. (Financial Year in Nepal ends at Asar end and start from 1st of Shrawan). This provision has been dismissed in Budget Speech 2078/79. This means you don’t need to manually verify sales and purchase books yearly.

7. Register at Woda Office:

Your company should also be registered at your ward office. Please make sure to carry all the documents as mentioned in point 1 while visiting the ward office. Some IRD offices (Tax offices) might ask you to register at the ward office before accepting applications for IRD registration. Also, some ward offices ask for proof of tax payment made by the landlord (tiro tireko rasid). Update: Many tax offices are starting to ask applicants to register at ward office prior to registration at IRD.

Additional (These are not mandatory but recommended)

8. Designing a company logo and stationary:

This can be done right after the company registration or alongside the registration process. Designing your unique logo, business card, letterhead, envelope and brand identity guidelines, and other stationeries. Branding is one of the most important aspects of the business, so you need to think about it from the right start of your company.

9. Brand Protection (Trademark, Copyright, Patent):

You may wish to protect your company name or the name and logo of your product. You can apply for a trademark once you obtain a PAN certificate. Also, if your business has any unique process/technology, you can also register a patent for that. There are various types of intellectual properties that you can acquire/ protect. Details of patient, trademark, copyright, and other intellectual properties: Intellectual Properties.

10. Designing and implementing your Accounting System:

From the day you start your transaction, you must record your transactions in line with a minimum requirement of government authorities (Inland Revenue Department, Office of Company Registrar, and other Industry Specific Regulators) and Nepal Accounting Standards. Value Added Tax (VAT) Income Tax, Excise Duty, and any other tax are calculated based on data captured in your accounting system. If you will not be able to comply with the requirement of those authorities and submit sufficient evidence of the transactions you recorded, you may have to pay additional tax, fines, and penalties. Only a robust accounting and internal control system will help you to scale your business in case of need.

The above-mentioned actions might seem tedious for beginners. However, they are almost necessary to

• keep your business insulated from future legal and regulatory hassles
• create a robust internal control mechanism
• sustain the business in the long term by being able to regularly review the financial position of the business.

If you find the process too complicated, we advise you to take the experts’ service rather than ignore it.

11. Create a website and social media accounts:

In the digital age, it is absolutely essential for your business to have an online presence. Whether it’s a website, an e-commerce platform, a social media page, or a combination of all three, getting your company online will reap major benefits. Even if your company does not conduct business online, customers and potential customers are expecting to see you online. A digital presence gives your brand an ideal platform to communicate with consumers. It gives you the opportunity to set the narrative on who you are as a brand and set yourself apart from your competitors. You can create a website, social media accounts, and youtube channels at absolutely no cost if you can spare some time.  A company can apply for a free domain name (COMPANYNAME.com.np) at https://register.com.np/ and create a free website with blogspot.com. However, if you need a .COM or .ORG URL (domain name), you need to purchase it (~10$/year).

If you don’t have enough time or knowledge or wish to have a professional website, you can consult a web development agency. Generally, web developers charge somewhere between Rs 10,000-50,000 for a basic website.

Also, every Private Limited Company has to submit the following documents yearly:

1. Submit Audited Financial Statements (Audit Report) to Inland Revenue Department (Kar Karyalaya) before Ashoj End every year. The financial statements need to be signed by a Registered Auditor or Chartered Accountant, the Director of the company, and the Accountant who prepared the statements. You need to upload the statements and fill in the records on the IRD dashboard.
2. Submit Audited Financial Statements (Audit Report) , Minutes of Annual General Meeting (AGM /बार्षिक साधारण सभा ) to Office of The Company Registrar (OCR) before Poush End every year.
3. Renew your business at Ward Office and Pay TDS on Rent. (Ward office renewal)
4. If you have any specific licenses/ affiliations/permits obtained from various authorities, you may be required to submit those documents to the authorities as well.

If you have any confusion/ queries or require any assistance, BizSewa is always there by your side.