How to Transfer Shares of a Private Limited Company in Nepal

Are you planning to transfer shares of a private limited company in Nepal? Whether you’re a shareholder selling your shares or a company updating its shareholder structure, the process must follow the legal steps outlined by the Companies Act of Nepal.

In this blog post, we’ll walk you through the step-by-step process of share transfer in a private limited company, along with necessary documents, fees, and compliance requirements.

What is Share Transfer?

Share transfer is the process of legally transferring ownership of shares from one person (the transferor) to another (the transferee).

In a private limited company, shares are usually transferred among existing shareholders or to a third party, subject to the company’s Articles of Association (AOA).

When is Share Transfer Required?

Some common scenarios include:

• A shareholder wants to sell their shares
• An investor wants to come on board
• Ownership restructuring among family or business partners
• Exit of a founder or key stakeholder

Legal Basis for Share Transfer in Nepal

The process is governed by the Companies Act, 2063 (2006) of Nepal. The law allows share transfers, but it must be in accordance with the provisions in the company’s Memorandum and Articles of Association.

Step-by-Step Process to Transfer Shares in Nepal

• Step 1: Review the Company’s Articles of Association (AOA)
• Step 2: Prepare Share Transfer Agreement
• Step 3: Call a Board Meeting and Approve the Transfer
• Step 4: Submit Share Transfer Documents to OCR
• Step 5: Update the Share Register

Step 1: Review the Company’s Articles of Association (AOA)

Before initiating the transfer, review your company’s AOA. Some companies may have restrictions or pre-conditions, such as:

• Approval from the Board of Directors
• Right of first refusal to existing shareholders

Step 2: Prepare Share Transfer Agreement

A Share Transfer Agreement (STA) is a legal document signed between the transferor and transferee. It outlines:

• Number of shares
• Price per share
• Date of transfer
• Terms and conditions

Step 3: Call a Board Meeting and Approve the Transfer

The company must hold a Board of Directors meeting to:

• Approve the share transfer
• Update the shareholder list
• Record the resolution in minutes

Step 4: Submit Share Transfer Documents to OCR

After board approval, submit the following documents to the Office of the Company Registrar (OCR):

Required Documents:

• Share Transfer Agreement
• Application for share update (with revenue stamp)
• Minutes of the Board Meeting
• Updated shareholder list (SHL)
• Copy of PAN of transferee
• Citizenship copies of transferor and transferee

Step 5: Update the Share Register

Once the OCR verifies and approves the documents, the company must:

• Update its Share Register
• Issue a new Share Certificate to the new shareholder

Share Transfer Fees in Nepal

While the OCR doesn’t charge a specific fee for share transfers, a revenue stamp (Rs. 5 or Rs. 10) must be affixed to the application. You may also incur professional service fees if you’re using a legal or company registration service provider like Company Sewa.

Things to Keep in Mind

• The transfer must not violate the AOA or any shareholder agreement
• Tax implications may apply if the transfer involves a large transaction
• Always keep copies of all submitted documents and approvals

Frequently Asked Questions (FAQs)

What is the complete process of transferring shares of a Private Limited Company in Nepal?

• Step 1: Review the Company’s Articles of Association (AOA)
• Step 2: Prepare Share Transfer Agreement
• Step 3: Call a Board Meeting and Approve the Transfer
• Step 4: Submit Share Transfer Documents to OCR
• Step 5: Update the Share Register

Do I need board approval to transfer shares?

Yes, in most cases. The Board of Directors must approve the share transfer through a board resolution.

Where do I submit the share transfer application?

All share transfer applications must be submitted to the Office of the Company Registrar (OCR), Nepal.

How long does it take to complete a share transfer in Nepal?

The process typically takes 3 to 7 working days, depending on document accuracy and OCR workload.

Is a lawyer required for transferring shares?

While not mandatory, hiring a professional or a service provider like Company Sewa is highly recommended to avoid mistakes.

Can shares be transferred to a foreign national?

Yes, but prior approval from concerned authorities like the Department of Industry (DOI) or Nepal Rastra Bank (NRB) may be required for FDI (Foreign Direct Investment).

Is there any tax on share transfer in Nepal?

Yes. Capital gains tax may apply depending on the value of the transfer and profit earned. It’s advisable to consult a tax expert.

Can I transfer shares to my family member?

Yes, shares can be transferred to family members, subject to board approval and legal compliance.