Kathmandu, May 5

President Bidhya Devi Bhandari, on Thursday, authenticated the Company Act Amendment Bill, allowing more than 68,000 defunct companies in the country to exit.

The new Company Act has defined defunct firms as those companies or firms that have neither paid government taxes for the last four years nor submitted their annual audited report to the government. As per the Office of Company Registrar (OCR), almost 170,000 companies have been registered in the country till date, of which 40 per cent (68,000) are no longer in operation.

The Company Act has offered such firms a chance to exit by paying 0.5 per cent of its paid-up capital or 0.5 per cent of the due taxes that such companies owe to the government, whichever is less. However, this provision in the Company Act will remain effective only for the next two years.

“Thousands of firms are no longer in operation and they owe a huge amount of taxes to the government. Such companies are unwilling to exit as their taxes to the government has piled up significantly,” Registrar Prem Kumar Shrestha said, adding that the exit chance given by the new Company Act will certainly encourage such defunct firms to exit by paying low charge.

However, such firms will have to clear all their dues if they want to operate their firms further, according to Shrestha.

The initial draft of the Company Act Amendment Bill had a provision for exit for defunct companies by paying one per cent of their due to the government or one per cent of the paid-up capital of the company. Though the Ministry of Industry (MoI) and the Cabinet had passed the Company Act Amendment Bill with such provision, lawmakers in the Parliament had recommended charging only 0.5 per cent of the applicable taxes or 0.5 per cent of company’s paid-up capital to exit.

The Company Act has also incorporated a provision requiring private telecommunication service providers with paid-up capital of more than Rs 50 million to turn into a public company within the next two years. Under this provision, such telecom service providers will have to issue shares to public in the near future.

The Company Act has also given validity to the use of digital signatures for the first time in the country and introduced online registration of companies.