Annual General Meeting Process in Nepal

What is Annual General Meeting (AGM)?

The Annual General Meeting (AGM) is a crucial corporate governance event for companies operating in Nepal. As mandated by the Companies Act, 2063 (2006), all registered companies in Nepal are required to conduct AGMs within specific timeframes. These meetings serve as a platform for shareholders to engage with the company’s management, review financial performance, make key decisions, and exercise their voting rights.

In Nepal, the concept of AGMs is deeply rooted in corporate law and practice. The primary purpose of an AGM is to ensure transparency, accountability, and shareholder participation in the company’s affairs. It provides an opportunity for shareholders to voice their concerns, approve financial statements, elect directors, and make decisions on matters that require their consent.

II. Legal Framework for AGMs

The legal framework governing AGMs in Nepal is primarily established by the Companies Act, 2063 (2006). This Act provides the foundational requirements for conducting AGMs, including timing, notice periods, and mandatory agenda items. Additionally, the Securities Act, 2063 (2007) and various directives issued by the Securities Board of Nepal (SEBON) provide supplementary regulations for listed companies.

Key legal provisions related to AGMs include:

1. Section 67 of the Companies Act, 2063: Mandates that every company must hold its first AGM within one year from its incorporation date and subsequent AGMs annually, with no more than 15 months between two consecutive AGMs.
2. Section 68 of the Companies Act, 2063: Specifies the notice period and method of calling an AGM.
3. Section 69 of the Companies Act, 2063: Outlines the business to be transacted at an AGM.
4. Section 70 of the Companies Act, 2063: Provides for the appointment of a chairperson for the AGM.

These legal provisions form the backbone of AGM requirements in Nepal, ensuring that companies adhere to standardized practices in conducting these important meetings.

III. AGM Process in Nepal

A. Step 1: Meeting Planning and Scheduling

The AGM process begins with careful planning and scheduling. The company’s board of directors is responsible for setting the date, time, and venue for the AGM. This decision must comply with the legal timeframe specified in Section 67 of the Companies Act, 2063.

Key considerations during this stage include:

• Ensuring the AGM is held within the stipulated timeframe
• Selecting a suitable venue that can accommodate all shareholders
• Coordinating with auditors and other relevant parties to ensure their availability
• Preparing a preliminary agenda for the meeting

B. Step 2: Notice Issuance

Once the AGM details are finalized, the company must issue a notice to all shareholders. Section 68 of the Companies Act, 2063 stipulates that:

• The notice must be sent at least 21 days before the AGM date
• It should specify the date, time, and place of the meeting
• The notice must include the agenda items to be discussed
• For listed companies, the notice should also be published in a national daily newspaper

The notice serves as an official invitation to shareholders and provides them with essential information about the upcoming AGM.

C. Step 3: Preparation of Agenda and Documents

The company must prepare a comprehensive agenda and all necessary documents for the AGM. This typically includes:

• Annual financial statements and auditor’s report
• Directors’ report
• Proposed resolutions
• Any other relevant documents or reports

These documents must be made available to shareholders for inspection at the company’s registered office at least 21 days before the AGM, as per Section 84 of the Companies Act, 2063.

D. Step 4: Conducting the AGM

On the day of the AGM, the meeting is conducted according to the agenda. The typical proceedings include:

1. Verification of quorum: As per Section 73 of the Companies Act, 2063, the quorum for an AGM is at least three shareholders present in person or by proxy, representing not less than 25% of the total voting rights.
2. Appointment of chairperson: Section 70 of the Companies Act, 2063 provides for the appointment of a chairperson to preside over the AGM.
3. Presentation of financial statements and reports
4. Discussion and voting on resolutions
5. Election of directors (if applicable)
6. Appointment of auditors
7. Any other business

The chairperson is responsible for ensuring that the meeting is conducted in an orderly manner and that all shareholders have an opportunity to express their views.

E. Step 5: Post-AGM Compliance and Reporting

After the AGM, the company must fulfill several post-meeting obligations:

1. Preparation of minutes: Section 75 of the Companies Act, 2063 requires that minutes of the AGM be prepared and signed by the chairperson within 30 days of the meeting.
2. Filing of resolutions: Any special resolutions passed at the AGM must be filed with the Office of the Company Registrar within 30 days, as per Section 81 of the Companies Act, 2063.
3. Submission of annual returns: The company must file its annual returns with the Office of the Company Registrar within 30 days of the AGM, as stipulated in Section 78 of the Companies Act, 2063.
4. For listed companies, additional reporting to SEBON and the stock exchange may be required.

IV. Required Documents for AGM

To ensure a smooth and compliant AGM process, companies in Nepal must prepare and maintain several key documents:

1. Notice of AGM
2. Agenda of the meeting
3. Annual financial statements
4. Directors’ report
5. Auditor’s report
6. Proxy forms
7. Attendance register
8. Minutes of the previous AGM
9. Proposed resolutions
10. Any other relevant reports or documents

These documents serve as the foundation for discussions and decision-making during the AGM and are crucial for maintaining transparency and accountability.

V. Our AGM Consultation Services

As experienced legal professionals specializing in corporate law and compliance in Nepal, we offer comprehensive AGM consultation services to ensure your company’s AGM process is smooth, compliant, and effective. Our services include:

1. AGM planning and scheduling assistance
2. Preparation and review of AGM notices and documents
3. Guidance on legal compliance and regulatory requirements
4. Assistance with shareholder communications
5. On-site support during the AGM
6. Post-AGM compliance and reporting assistance

Our team of experts is well-versed in Nepali corporate law and can provide tailored solutions to meet your company’s specific needs.

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VI. Typical Timeline for AGM Preparation

A well-planned AGM typically follows this timeline:

• 8-10 weeks before AGM: Board meeting to set AGM date and agenda
• 6-8 weeks before AGM: Finalize financial statements and auditor’s report
• 4-6 weeks before AGM: Prepare and send AGM notice to shareholders
• 3-4 weeks before AGM: Make documents available for shareholder inspection
• 1-2 weeks before AGM: Final preparations and logistics
• AGM day: Conduct the meeting
• Within 30 days after AGM: Prepare and sign minutes, file necessary documents with authorities

This timeline ensures compliance with legal requirements and allows for thorough preparation.

VII. Costs Associated with AGM

The costs of conducting an AGM in Nepal can vary depending on the company’s size and complexity. Typical expenses include:

1. Venue rental
2. Printing and distribution of notices and documents
3. Auditor’s fees
4. Legal and professional fees
5. Refreshments for attendees
6. Technology costs (for virtual or hybrid meetings)
7. Travel and accommodation for out-of-town directors or shareholders

Companies should budget for these expenses well in advance to ensure a well-organized AGM.

VIII. Relevant Company Laws and Authorities

The primary laws and authorities governing AGMs in Nepal include:

1. Companies Act, 2063 (2006)
2. Securities Act, 2063 (2007)
3. Office of the Company Registrar
4. Securities Board of Nepal (SEBON)
5. Nepal Stock Exchange (for listed companies)

Familiarity with these laws and regulatory bodies is essential for ensuring AGM compliance.

IX. Current AGM Practices in Nepal

In recent years, AGM practices in Nepal have evolved, particularly in response to technological advancements and global events:

1. Virtual AGMs: The COVID-19 pandemic has accelerated the adoption of virtual AGMs. SEBON has issued guidelines allowing listed companies to conduct virtual AGMs, subject to certain conditions.
2. Enhanced shareholder engagement: Companies are increasingly focusing on improving shareholder participation through better communication and use of technology.
3. Sustainability reporting: Many companies are incorporating sustainability and ESG (Environmental, Social, and Governance) reporting into their AGMs.
4. Increased scrutiny: Shareholders and regulators are placing greater emphasis on corporate governance and transparency during AGMs.

These trends reflect a growing maturity in Nepal’s corporate governance landscape.

X. Conclusion

The Annual General Meeting is a cornerstone of corporate governance in Nepal, providing a crucial platform for shareholder engagement and decision-making. Adhering to the legal requirements and best practices outlined in this guide will ensure that your company’s AGM is not only compliant but also effective in fostering transparency and accountability.

As the corporate landscape in Nepal continues to evolve, staying informed about AGM requirements and practices is essential for maintaining good corporate governance. By understanding the legal framework, following the prescribed process, and leveraging professional expertise when needed, companies can conduct successful AGMs that serve the interests of all stakeholders.

FAQs:

1. How often must companies hold AGMs in Nepal? Companies in Nepal must hold their first AGM within one year of incorporation and subsequent AGMs annually, with no more than 15 months between two consecutive AGMs, as per Section 67 of the Companies Act, 2063.
2. What’s the minimum notice period for an AGM? The minimum notice period for an AGM in Nepal is 21 days, as stipulated in Section 68 of the Companies Act, 2063.
3. Who can attend an AGM? All shareholders of the company have the right to attend the AGM. Directors, auditors, and other relevant parties may also attend as required.
4. Can AGMs be held virtually in Nepal? Yes, virtual AGMs are now permitted in Nepal, especially for listed companies, subject to guidelines issued by SEBON in response to the COVID-19 pandemic.
5. What matters must be addressed in an AGM? Key matters to be addressed in an AGM include approval of financial statements, appointment of auditors, election of directors, and any other business specified in the notice, as outlined in Section 69 of the Companies Act, 2063.
6. How is voting conducted in AGMs? Voting can be conducted by show of hands or by poll, depending on the company’s articles of association and the nature of the resolution. Electronic voting is also becoming more common, especially for virtual AGMs.
7. What’s the quorum requirement for AGMs? The quorum for an AGM is at least three shareholders present in person or by proxy, representing not less than 25% of the total voting rights, as per Section 73 of the Companies Act, 2063.
8. Can shareholders propose resolutions at AGMs? Yes, shareholders can propose resolutions at AGMs, subject to certain conditions and notice requirements specified in the company’s articles of association and the Companies Act, 2063.
9. How are AGM minutes recorded and maintained? AGM minutes must be prepared and signed by the chairperson within 30 days of the meeting, as required by Section 75 of the Companies Act, 2063. These minutes should be kept at the company’s registered office.
10. What happens if a company fails to hold an AGM? Failure to hold an AGM as required by law can result in penalties, including fines for the company and its officers, as specified in the Companies Act, 2063. The Office of the Company Registrar may also take action against non-compliant companies