Nepal | April 05, 2020

Company Act Amendment Bill offers respite to defunct firms

Such companies can exit or revive their business by paying 1 per cent of their paid-up capital

Sujan Dhungana

Such companies can exit or revive their business by paying 1 per cent of their paid-up capital

Kathmandu, October 14

The draft of Company Act Amendment Bill has introduced a provision under which the companies that are registered but have remained defunct since long will get a chance to exit or revive their company by paying one per cent of their paid-up capital to the government.

The Bill Committee of the Cabinet, today, passed the draft of Company Act Amendment Bill which includes such a provision. The bill will now be tabled by the Ministry of Industry (MoI) at the Parliament for its endorsement.

“We have incorporated such a provision to encourage non-operational private companies that have not renewed their licence since years and do not wish to revive the business but have been unable to close the company because they owe huge debt to the government,” Yam Kumari Khatiwada, joint secretary of MoI told The Himalayan Times, adding that companies can choose either to clear all their piled up dues to the government or pay one per cent of the company’s paid-up capital.

Informing that there are more than 40,000 small and big registered companies in the country that are currently not in operation, Khatiwada said she expected a majority of the owners to deem the provision a good alternative.

However, Khatiwada also said that the provision will remain in place for only a year from the date of endorsement of Company Act Amendment Bill from the Parliament.

“The provision will largely facilitate the defunct companies whose liabilities to the government have piled up to millions,” opined Khatiwada.

Meanwhile, Industry Minister Nabindra Raj Joshi said that the MoI will table the Company Act Amendment Bill at the Parliament next week.

“The provisions in the draft bill are industry-friendly and we have basically aimed at easing the entry and exit procedure of any industry in the new draft bill of the Company Act,” Joshi said, adding, “We plan to table the bill at the Parliament either on Sunday or Monday.”

Other new provisions of the Company Act Amendment Bill include online registration of companies and use of digital
signatures, among others. Meanwhile, the bill also prohibits any company from appointing more than 11 board members.

Private sector players, on the other hand, feel that the government should help such companies to exit or revive without imposing any penalties.

“How can these companies pay all the debt that they owe to the government or one per cent of their paid-up capital if these companies have not conducted any business transaction in decades?” questioned Hari Bhakta Sharma, president of Confederation of Nepalese Industries.

Commenting on the cumbersome exit procedure for industries in Nepal, Sharma added, “The government should make exit policies as simple as the entry policies for industries.” He also suggested the government to come up with long-term plans and programmes to give a way out to these companies.

A version of this article appears in print on October 15, 2016 of The Himalayan Times.

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