The process of purchasing shares in a private company in Nepal includes obtaining board approval, share valuation, transaction between buyer and seller, and registration with regulatory authorities. This article outlines the requirements, procedures, documents, costs, and timeline for completing a private company share purchase in Nepal.
What is Company Share Purchase/Share Registry?
Company share purchase refers to the process of acquiring ownership in a private company by buying shares from existing shareholders. In Nepal, private companies are governed by the Companies Act 2063 (2006), which regulates share transfers. The Act allows shares to be freely transferable unless restricted by the company’s articles of association.
Requirements for Company Share Purchase in Nepal
To purchase shares in a private company in Nepal, the following key requirements must be met:
- The company’s articles of association must allow share transfers
- Board of directors’ approval is required for the share transfer
- Proper valuation of shares must be conducted
- Share transfer forms and agreements must be executed
- The transaction must be registered with the Office of Company Registrar
- Applicable taxes and fees must be paid
- The buyer must meet any eligibility criteria specified in the company’s articles
Company Lawyers in Nepal
Prime Law Associates has a leading team of 10+ Lawyers providing legal, compliance & licensing services for Companies in Nepal. The Firm assists companies in changing objectives, location & name of the companies along with Company Registration Service in Nepal.
Amit Karna
Amit Karna is a Company Registration Lawyer in Nepal with extensive experience in registering multiple companies in Nepal.
Sukra Subba
Sukra Subba has 10 Years of experience in the Corporate Sector of Nepal & facilitating company registration at the Firm.
Process for Company Share Purchase in Nepal
The process for purchasing shares in a private company in Nepal with the following:
Step 1: Submit an Application to Company’s Board of Directors
Step 2: Notice of Company Share Selling by the BOD
Step 3: Share Valuation & Transaction between Buyer & Seller
Step 4: Filing an Application to Company verifying the transaction
Step 5: Submission to Office of Company Registrar
Step 6: Completion of Company Share Purchase
Step 1: Submit an Application to Company’s Board of Directors
The share purchase process begins with the potential buyer submitting a formal application to the company’s board of directors expressing interest in purchasing shares. This application should include:
- Buyer’s personal/company details
- Number of shares interested in purchasing
- Proposed purchase price
- Reasons for wanting to invest in the company
- Any other relevant information requested by the board
The board will review the application to ensure it complies with the company’s articles and share transfer policies.
Step 2: Notice of Company Share Selling by the BOD
If the board approves the share purchase application, they will issue a formal notice to existing shareholders informing them of the proposed share sale. This notice typically includes:
- Details of shares being offered for sale
- Name of the potential buyer
- Proposed sale price
- Deadline for existing shareholders to exercise right of first refusal
The notice allows existing shareholders to purchase the shares on offer before they are sold to an outside buyer, as per any pre-emption rights in the company’s articles.
Step 3: Share Valuation & Transaction between Buyer & Seller
Once the notice period expires, the buyer and seller can proceed with the share valuation and transaction. Key steps include:
- Conducting a proper valuation of the company’s shares
- Negotiating and agreeing on the final sale price
- Drafting and executing a share purchase agreement
- Completing payment for the shares as per agreed terms
- Transferring share certificates from seller to buyer
The share valuation should be conducted by a qualified valuer to determine a fair market price.
Step 4: Filing an Application to Company verifying the transaction
After completing the share purchase transaction, the buyer must file an application with the company to verify and record the share transfer. This application typically includes:
- Details of shares purchased (number, class, etc.)
- Copy of executed share purchase agreement
- Proof of payment for shares
- New shareholder information for company records
- Request to update the register of members
The company will review the application and supporting documents to ensure the transfer complies with all requirements before proceeding with registration.
Step 5: Submission to Office of Company Registrar
Once the company verifies the share transfer, they must submit the required documents to the Office of Company Registrar (OCR) within 21 days. Key documents include:
- Share transfer form
- Board resolution approving the transfer
- Updated register of members
- Proof of tax payment on the transfer
The OCR will review the submission and may request additional information if needed. Once satisfied, they will register the share transfer and issue a certificate of registration.
Step 6: Completion of Company Share Purchase
The share purchase process is completed once the OCR registers the transfer. Final steps include:
- Updating company books and records
- Issuing new share certificates to the buyer
- Cancelling old share certificates
- Notifying relevant stakeholders of the ownership change
- Providing the buyer with all shareholder rights and privileges
Also Read: Company Registration in Nepal
Documents required for Company Share Purchase in Nepal
The following key documents are typically required for a private company share purchase in Nepal:
- Share purchase application to the board
- Board resolution approving the transfer
- Notice to existing shareholders & Share valuation report
- Share purchase agreement
- Share transfer form
- Tax clearance certificates
- Old and new share certificates
- Application to OCR for registration
- OCR share transfer registration certificate
Cost of Company Share Purchase in Nepal
The costs involved in a private company share purchase in Nepal typically include:
- Share purchase price (varies based on valuation)
- Share transfer fees (as per company articles)
- Stamp duty on share transfer
- Capital gains tax (varies based on holding period)
- OCR registration fees (NPR 1,000 per transfer)
- Legal and professional fees for documentation
- Valuation fees if external valuer used
- Bank charges for fund transfers
The total cost can vary significantly based on the size of the transaction and complexity of the deal structure.
Timeline for Company Share Purchase
The typical timeline for completing a private company share purchase in Nepal is:
- Application to board
- Board approval and shareholder notice
- Share valuation and transaction
- Company verification
- OCR submission and registration
The entire process usually takes 2-3 months but can be longer for complex transactions or if there are delays in obtaining approvals or documentation.
Post-Share Purchase Process in Nepal
After completing the share purchase, the new shareholder should:
- Obtain copies of all company constitutional documents
- Review shareholder rights and obligations
- Receive dividends and other distributions
- Access company financial records as permitted
- Comply with any shareholder agreements
- Consider appointment to board of directors if applicable
Consult an Expert Company Lawyer
Share Registry/Company Share Purchase in Nepal: FAQs
How to sell my Private Company Share in Nepal?
To sell private company shares in Nepal:
Notify the board of directors
Obtain company approval
Find a buyer and agree on price
Execute share transfer documents
Register the transfer with the company and OCR
What are the requirements for selling Private Company Share?
Key requirements for selling private company shares:
Company articles allow share transfers
Board approval for the sale
Compliance with pre-emption rights
Proper share valuation
Execution of transfer documents
Payment of applicable taxes and fees
How to find Company Share Registry Service in Nepal?
To find company share services in Nepal:
Consult legal firms specializing in corporate law
Contact chartered accountants or company secretaries
Inquire with investment banks and advisory firms
Check with the Nepal Stock Exchange for referrals
Ask for recommendations from business associations
What are the required information for Company Share Purchase?
Required information for company share purchase:
Buyer and seller details
Number and class of shares being transferred
Purchase price and payment terms
Company financial statements and valuation
Shareholder rights and restrictions
Tax implications of the transaction
Conclusion
Purchasing shares in a private company in Nepal involves a structured process governed by the Companies Act and company articles. It includes board approval, share valuation, executing the transaction, and registering the transfer with authorities.
Disclaimer: This Article is for informational purposes only and shall not be construed as legal advice, advertisement, personal communication, solicitation, or inducement of any sort from the firm or any of its members. The firm shall not be liable for consequences arising out of any action undertaken by any person relying on the information provided herein.
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