Are you planning to convert your public company into a private company in Nepal? Whether you want more control over your business or want to reduce regulatory requirements, this guide will explain the process in simple steps.
What is the Difference Between a Public and Private Company?
- Public Company: Shares are sold to the general public and can be listed on the stock exchange.
- Private Company: Shares are held privately by a limited number of shareholders and are not listed publicly.
Legal Framework in Nepal
The conversion process follows the Companies Act, 2063 (2006) and related regulations issued by the Office of the Company Registrar (OCR).
Steps to Convert a Public Company into a Private Company
1. Hold a Board Meeting and Get Shareholder Approval
- Call a Board of Directors meeting to propose the conversion.
- Prepare a resolution explaining why you want to convert the company.
- Call an Extraordinary General Meeting (EGM) for shareholders.
- Get approval from at least 75% of shareholders present, as required by law.
2. Update the Company’s Articles of Association (AoA)
- Change the AoA to reflect the conversion from public to private.
- Add rules to limit the number of shareholders to 50 and restrict the transfer of shares.
3. File Documents with the Office of the Company Registrar
- Submit the special resolution passed by shareholders.
- File the amended AoA and Memorandum of Association (MoA).
- Submit Form 7 or other forms required by the OCR.
4. Get Approval from Regulatory Authorities
- If the company was listed, get approval from the Securities Board of Nepal (SEBON).
- Inform the Nepal Stock Exchange (NEPSE) about the conversion.
5. Update Tax and Other Registrations
- Notify the Inland Revenue Department (IRD) about the company’s new status.
- Update any licenses or registrations as needed.