The document summarizes the legal environment for business in Nepal. It outlines the definition of a company according to Nepalese law as an artificial person created by law. A company is a separate legal entity from its members and has perpetual existence. The key characteristics of a company include incorporation, voluntary association, limited liability, and management by representatives. The document then traces the history of company law in Nepal from the 1993 Company Act influenced by British law to the current Company Act of 2063. It describes the types of companies in Nepal as private companies with 50 or fewer members, public companies with 7 or more members, and non-profit distributing companies established for professional or social welfare purposes.

1. Legal Environment for Business in Nepal
2 January 2017
1Saroj Shrestha

2. Company is an artificial person that is created,
operated and ended by the law.
A company is a form of business organization, in
which the funds of a large number of investors are
managed by a committee of representatives.
Company Act, 2063 section 2 (a) defines the term
‘company’ means a company incorporated in
accordance with this Act’.
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3. A company is a legal person just like a an individual
but with no physical existence. This concept is
defined in a leading British case (Saloman Vs.
Salomon & Company (1897), that – “A company is
a ‘legal person’ or ‘legal entity’ separate from , and
capable of surviving beyond the lives of it’s
members, capable of rights and duties of its own
and endowed with the potential of perpetual
succession”. This definition of a company is not
only applies to joint stock company but also to
single man company.
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4. The Saloman case indicates the following elements:
Company is
 Separate legal entity
 Separate from the survives beyond the lives of its
members
 Capable of rights and duties
 Potential of perpetual succession.
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5. Characteristics of a Company
1. Incorporated association
2. Voluntary association
3. Legal entity
4. Permanent existence
5. Common seal
6. Limited liability
7. Transferability of shares
8. Management by representatives
9. Contractual capacity
10. Registered office
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6.  Nepal Company Kanoon 1993: Influenced by the
British Company Law which was issued by Rana
Prime Minister Juddh Samsher. Biratnagar Jute
Mills Limited was established in Ashad 30, 1993
under the Nepal Company Act, 1993.
 Company Act of Nepal 2007 with amendments in
2018, 2019, 2021 were activated.
 Company Act, 2021played a important role for the
development of company in Nepal
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7.  Company Act, 2021 was amended eight times in
2025, 2028, 2030, 2031, 2041, 2043, 2046 and
2048. The act was replaced by the Company Act,
2053
 Then Company Ordinance 2062 came into force.
 Now Company Act, 2063 was promulagated on
Kartik 24, 2063. It has 21 Chapters and 188
Sections.
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8. 1. Private Company: Sec. 2 (b) of Company Act,
2063 contains that ‘the company incorporated
under this act is a Private Company’. The
number of shareholders must not be crossed
fifty members’ The members of such company
cannot sale its share and debentures to others
openly in the market. And the shares and
securities are to be sold and transferred only to
the members, as accordance to its
Memorandum , Articles and Consensus
Agreements.
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9. 2. Public Company: Sec. 2 (c) of Company Act,
2063 contains that ‘the companies incorporated
under this Act other than other than the private
company are public company .’ The number of
the promoters must be more than seven
members for a public company. In case, a public
company is to be established by any public
company, this restrictive rule does not apply.
Members can sale its shares, debentures and
securities to the public in open market.
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10. 3. Non profit Distributing company: The Company
Act, 2063 has provided the provision of such
types of companies. According to Chapter 19 of
Company Act, 2063 ‘a company not for
distributing profit’ can be registered for the
purpose of develop or prosper any professional
or protecting interest of any group of society or
welfare of the society. The company not for
distributing profits are incorporated with the
following conditions:
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11. • To protect common interest of group of persons or
welfare of the society,
• To manage to keep on the members not less than five
persons,
• To terminate the company automatically in case of
merger, deregistration or death of any member of the
company,
• Not to transfer the membership by any manner,
• Not any term like ‘Co’, Pvt. , Ltd. , except the pre-
consent of the office of company registrar,
• To the extension of any branch consent of the office is
necessary.
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12. 12Saroj Shrestha
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