Capital increase process in Nepal refers to the formal legal process through which a registered company raises its authorized capital, issued capital, or paid-up capital. Companies registered under the Companies Act 2063 must follow a defined legal procedure to increase their share capital. Whether a private limited company or a public limited company seeks to expand operations, attract investment, or meet regulatory requirements, increasing capital is a fundamental corporate action governed by Nepal’s company law.
The Office of the Company Registrar (OCR) under the Government of Nepal is the primary regulatory authority overseeing company capital structures. Any change in the capital structure of a company including authorized capital, issued capital, or paid-up capital must be registered and approved by the OCR. The capital increase process in Nepal involves shareholder approval, amendment of the memorandum of association, payment of additional registration fees, and filing of prescribed documents.
What is Authorized Capital, Issued Capital, and Paid-Up Capital in Nepal?
Understanding these three terms is essential before initiating any capital increase process in Nepal.
| Term | Definition | Legal Reference |
|---|---|---|
| Authorized Capital | The maximum capital a company is legally permitted to issue as stated in the Memorandum of Association | Companies Act 2063, Section 10 |
| Issued Capital | The portion of authorized capital that has been issued to shareholders | Companies Act 2063, Section 2(j) |
| Paid-Up Capital | The actual amount paid by shareholders against issued shares | Companies Act 2063, Section 2(l) |
A company in Nepal cannot issue shares beyond its authorized capital. Therefore, if a company wishes to increase its paid-up capital beyond the existing authorized capital, it must first increase its authorized capital through the OCR.
Legal Framework Governing Capital Increase in Nepal
The capital increase process in Nepal is governed by the following laws and regulations:
- Companies Act 2063 (2006) — Primary legislation governing company registration and capital structure
- Companies Regulations 2063 — Detailed procedural rules for company compliance
- Securities Act 2063 (2006) — Applicable for public companies issuing shares to the public
- Nepal Rastra Bank Act 2058 — Applicable for banks and financial institutions increasing capital
- Bank and Financial Institution Act (BAFIA) 2073 — Regulates capital requirements of BFIs
- Securities Board of Nepal (SEBON) Regulations — Applicable when public companies issue new shares through rights issues or IPOs
For companies operating in specific regulated sectors, additional approvals from sector-specific regulators such as the Nepal Rastra Bank, Insurance Board, or Nepal Telecom Authority may be required before or after OCR registration.
Types of Capital Increase in Nepal
There are multiple methods through which a company can increase its capital in Nepal. Each method has different legal requirements and procedures.
1. Increase in Authorized Capital
This is the most common first step. When a company’s paid-up capital needs to exceed the current authorized capital limit, it must increase its authorized capital by amending its Memorandum of Association. This requires an extraordinary general meeting (EGM) resolution and OCR registration.
2. Rights Issue
In a rights issue, existing shareholders are given the right to subscribe to new shares in proportion to their existing shareholding. This is regulated under the Securities Act 2063 and SEBON guidelines for public companies.
3. Bonus Share Issuance
Bonus shares are issued to existing shareholders from retained earnings or reserves, converting accumulated profits into paid-up capital. This does not bring in new cash but increases the paid-up capital figure.
4. Fresh Share Issuance to New Investors
Private limited companies may issue new shares to new investors through a special resolution of shareholders. The terms and price of such shares must be determined by the board and shareholders.
5. Conversion of Loan into Equity
Companies may convert outstanding loans or debentures into equity shares to increase paid-up capital. This requires board resolution, shareholder approval, and creditor consent.
Step-by-Step Capital Increase Process in Nepal
Step 1: Board of Directors Resolution
The process begins with the Board of Directors passing a formal resolution proposing the capital increase. The resolution must specify the proposed amount of capital increase, the method of increase, and the rationale.
Step 2: Call an Extraordinary General Meeting (EGM)
The company must convene an Extraordinary General Meeting (EGM) or Annual General Meeting (AGM) to pass a special resolution approving the capital increase. Under Section 68 of the Companies Act 2063, a special resolution requires at least a 75% majority of votes from shareholders present and voting.
- Issue EGM notice to all shareholders at least 15 days in advance (21 days for public companies)
- Include the agenda item of capital increase in the meeting notice
- Conduct the meeting and pass the special resolution
Step 3: Amendment of Memorandum of Association
If authorized capital is being increased, the Memorandum of Association must be amended to reflect the new capital structure. The amended Memorandum must be prepared and signed.
Step 4: Payment of Capital Increase Fees
The OCR charges registration fees on the increased capital amount. These fees are prescribed under the Companies Regulations 2063 and are calculated based on the incremental capital amount.
| Increased Capital Amount (NPR) | OCR Registration Fee |
|---|---|
| Up to 1,00,000 | NPR 1,000 |
| 1,00,001 to 5,00,000 | NPR 2,500 |
| 5,00,001 to 25,00,000 | NPR 5,000 |
| 25,00,001 to 50,00,000 | NPR 10,000 |
| Above 50,00,000 | As per OCR Schedule |
Note: Fee schedules are subject to revision by the Government of Nepal. Always verify the latest fee schedule at www.ocr.gov.np
Step 5: Prepare and Submit Documents to OCR
After completing the internal approvals and fee payment, the company must submit the required documents to the OCR through the official portal or in person.
Step 6: OCR Review and Approval
The OCR reviews the submitted documents. If everything is in order, the OCR updates the company’s registration record to reflect the new capital structure and issues a revised company certificate or an acknowledgment of the capital change.
Step 7: Update Company Records
After OCR approval, the company must update its internal records, share register, and Minutes Book to reflect the increased capital.
Documents Required for Capital Increase in Nepal
The following documents are required to be submitted to the Office of the Company Registrar for processing the capital increase application:
- Application Form in the prescribed format (as per OCR guidelines)
- Certified copy of the Special Resolution passed at EGM/AGM approving the capital increase
- Minutes of the EGM/AGM confirming the resolution
- Amended Memorandum of Association reflecting the new authorized capital
- Amended Articles of Association (if applicable)
- Board of Directors Resolution proposing the capital increase
- Proof of payment of OCR registration fees (bank voucher)
- Updated Shareholder details including names, addresses, and shareholding
- Citizenship documents of directors and shareholders (for new investors)
- Audited Financial Statements (for the last financial year, if required)
- Share allotment details showing the basis of new share allocation
- No Objection Certificate (NOC) from relevant regulatory authority (for banks, insurance companies, and other regulated entities)
For foreign investment-related capital increases in Nepal, additional documents from the Department of Industry (DOI) or Investment Board Nepal (IBN) may be required under the Foreign Investment and Technology Transfer Act (FITTA) 2075.
Capital Increase for Banks and Financial Institutions in Nepal
For banks and financial institutions (BFIs) operating under the Bank and Financial Institution Act (BAFIA) 2073, the capital increase process involves additional regulatory compliance. Nepal Rastra Bank (NRB) periodically mandates minimum paid-up capital requirements for commercial banks, development banks, and finance companies.
- Commercial Banks: Minimum paid-up capital of NPR 8 billion (as per NRB directives)
- Development Banks: Minimum paid-up capital of NPR 2.5 billion (national level)
- Finance Companies: Minimum paid-up capital of NPR 800 million
BFIs must obtain prior approval from NRB before initiating the capital increase process and submit a separate set of documents to NRB in addition to OCR requirements. The NRB regulatory framework requires board approval, shareholder approval, and compliance with NRB Unified Directives.
Capital Increase for Foreign-Invested Companies in Nepal
Companies with foreign investment in Nepal must follow additional procedures under FITTA 2075 when increasing capital. The Department of Industry (DOI) or Investment Board Nepal (IBN) must be notified or approval obtained if the capital increase involves additional foreign investment.
Key requirements include:
- Prior approval from DOI or IBN for additional foreign investment above prescribed thresholds
- Compliance with sectoral investment limits under the Foreign Investment Negative List
- Repatriation and remittance compliance under NRB foreign exchange regulations
- Updated foreign investment registration certificate reflecting the new investment amount
Common Issues and Challenges in Capital Increase Process
Several companies in Nepal face procedural delays or rejections during the capital increase process. Common challenges include:
- Incomplete documentation submitted to OCR
- EGM notice not issued within the prescribed timeline
- Special resolution not passing the required 75% threshold
- Mismatch between proposed capital and actual share allotment details
- Non-payment of correct OCR registration fees
- Missing NOC from sector-specific regulatory authority
- Failure to update the Memorandum of Association correctly
To avoid these issues, companies should carefully review OCR checklists available on the OCR official website before submission.
Capital Increase Timeline in Nepal
The typical timeline for completing the capital increase process in Nepal is as follows:
- Board Resolution: 1 day
- EGM Notice Period: Minimum 15–21 days
- EGM Meeting and Resolution: 1 day
- Document Preparation: 3–7 days
- OCR Processing Time: 7–15 working days (standard processing)
- Total Estimated Timeline: 30–45 days
Delays may occur if additional approvals are required from sector regulators like NRB, SEBON, or DOI.
FAQs
1. What is the minimum paid-up capital required to register a company in Nepal?
Under the Companies Act 2063, there is no minimum paid-up capital requirement for private limited companies in Nepal. However, regulated sectors like banking and insurance have specific minimum capital requirements set by their respective regulators.
2. Can a private limited company increase capital without EGM?
No. Under Section 68 of the Companies Act 2063, any increase in authorized capital requires a special resolution passed at a general meeting. A private limited company cannot increase capital without convening a valid EGM or AGM.
3. How long does the OCR take to approve a capital increase application?
The OCR typically processes capital increase applications within 7 to 15 working days after receiving complete documents. Processing time may vary depending on the workload at OCR and whether the application requires additional scrutiny.
4. What happens if a company issues shares beyond its authorized capital?
Issuing shares beyond the authorized capital limit is illegal under the Companies Act 2063. Such issuance is void and the company and its officers can face legal penalties. The authorized capital must first be increased before issuing additional shares.
5. Is there a fee for increasing authorized capital at OCR Nepal?
Yes. The OCR charges registration fees on the incremental amount of capital increase as prescribed under the Companies Regulations 2063. The fee structure is based on the amount of capital being increased and varies accordingly.
6. Does foreign capital increase require separate approval in Nepal?
Yes. If a capital increase involves additional foreign investment, prior approval from the Department of Industry (DOI) or Investment Board Nepal (IBN) is required under FITTA 2075, in addition to standard OCR registration procedures.