Meaning
A company is a group of people who work together to run a legal business or achieve a legal goal. It is a different legal entity from the people who set it up or run it.
This implies that a business possesses assets, engages in transactions, initiates or faces legal actions, and maintains its operations even in the event of the owners’ demise.
In short, registering a business provides it a legal life and identity, turning your dream into a recognized and protected business.
Definitions of Theorists
Lord Justice Lindley:
“A company is an association of many persons who contribute money or money’s worth to a common stock and employ it in some trade or business and who share the profit or loss arising therefrom.”
Professor Haney:
“A company is an artificial person created by law with a separate legal entity, perpetual succession, and a common seal.”
Both definitions make it clear that a company is a legal entity, not a natural person, and that it can do whatever a person can do under the law.
According to the Company Act of 2063 (Nepal)
Section 3(1) of the Company Act, 2063 (B.S.) states that a company is created by law as soon as it is registered with the Office of the Company Registrar (OCR).
“A company may be incorporated for any lawful objective by one or more persons by subscribing their names to the memorandum of association and complying with the provisions of this Act.”
Once registered with the Office of the Company Registrar (OCR), a company becomes a corporation under the law.
The Act also breaks down companies into three primary groups:
- Private Limited Company
- Public Limited Company
- Non-Profit Company
Each category has distinct ownership limits, capital structures, and operational procedures.
Under Other Laws
Income Tax Act, 2058:
Recognizes a company as a separatA taxable person. Every company must obtain a Permanent Account Number (PAN) and file tax returns as required by law.
Value Added Tax Act, 2052:
Companies engaged in goods or services exceeding the annual turnover threshold must register for VAT with the Inland Revenue Department (IRD).
Audit Act, 2055:
- Every company is required to undergo an annual audit of its accounts by a registered auditor.
- Foreign Investment and Technology Transfer Act, 2075:
- Regulates companies with foreign shareholding or technical collaboration, ensuring compliance with Nepal’s investment laws.
Example:
- Let’s say that Himalayan Traders Pvt. Ltd. is a company that is registered under the Company Act of 2063.
- It can create a bank account, own property, sign contracts, and pay taxes in its name.
- Because it is its own legal entity, the company keeps going even if its initial directors leave or die.
This “continuity beyond individuals” is what makes a company safer and more trustworthy than a sole proprietorship or partnership, which is directly affected by the personal circumstances of its owners.
Features of a Company
Separate Legal Entity
The statute established the company as a separate legal entity, denoting its independence from its owners or shareholders.
Limited Liability:
Limited liability is what makes a company different from other types of businesses. Shareholders are only responsible for the amount of money they put into the company.
Perpetual Succession:
The company will still be around even if its members die or retire.
Transferability of Shares:
Shares can be used to transfer ownership, especially in public companies.
Artificial Legal Person:
Law creates an artificial legal person, which can act through its authorized representatives.
Common Seal (if you need one):
For legal reasons, the Common Seal is the company’s official signature.
Bound by Compliance:
The company has to respect the law and the rules; if it doesn’t, it won’t be able to get legal protection. It must follow the rules set out in the Company Act, the Income Tax Act, the VAT Act, and other similar laws.
Types of Companies (Under Section 4, Company Act, 2063)
Private Limited Company (Pvt. Ltd.):
- There must be at least one stakeholder and no more than 101.
- Private Limited Companies are not allowed to sell shares to the public.
- This happens a lot with small enterprises, family businesses, and startups.
Public Limited Company (Ltd.):
- At least 7 shareholders are needed, but there is no upper limit.
- Can invite the public to subscribe to shares.
- The public must have access to financial information.
Non-Profit Company:
- Established for social welfare, charity, or public benefit.
- Cannot distribute profits to members.
Required Documents for Registering a Company
To register a business with the Office of the Company Registrar (OCR), you need the following papers:
- Application for Registration
- Memorandum of Association (MOA)
- Articles of Association (AOA)
- A copy of the citizenship certificates of the directors and shareholders
- Power of Attorney (if submitted by an agent)
- Passport (for stockholders from other countries)
- Proof of Registered Office Address
- Receipt for Government Revenue and Fees Payment
- Digital Signature (for submitting online)
OCR provides the company a Certificate of Incorporation after checking that everything is correct. This makes the company a legal entity.
Things You Need to Keep in Mind When Running a Company
Renew Every Year:
Every year, renew the company (Adhyawadhi). This is free of government fees, but you have to do it to stay active.
Conduct Annual General Meeting (AGM):
Must happen within six months of the end of the fiscal year.
Audit Reports:
Submit audited accounts annually to OCR and IRD.
Maintain Tax Compliance:
Please ensure that your PAN, VAT, and income tax returns are filed on time.
Maintain Transparency:
Follow the law and keep records of your finances and operations.
Update Changes:
Any change in address, directors, or capital must be updated with OCR.
Practical Importance of Company Registration
- Builds public and financial credibility.
- Enables you to open a business bank account.
- Allows participation in government tenders and contracts.
- Protects your personal assets through limited liability.
- Helps in tax registration (PAN & VAT) and legal compliance.
- Strengthens your brand and investor confidence.
Final Thoughts
More than just a legal concept, the business enables entrepreneurship and economic advancement. The Company Act, 2063 (Nepal), says that creating a company gives your company legal power, legitimacy, and long-term protection.
