A Company Secretary is an officer appointed by a company to ensure compliance with statutory and regulatory requirements, implement board decisions, maintain company records, and oversee administrative and governance-related duties.
Mandatory Appointment of company secretary:
According to Section 185 of the Companies Act, 2063, every public company having a paid-up capital of ten million rupees (NPR 1 crore) or more is required to appoint a Nepalese citizen as the Company Secretary. This provision ensures that companies of significant size have a qualified person responsible for compliance, corporate governance, and statutory affairs
Required Qualifications for Appointment:
To be eligible for appointment as a Company Secretary, a person must be a Nepalese citizen and must fulfill at least one of the following qualifications. First, the person may have obtained a professional certificate of Company Secretary issued by a native or foreign institution authorized under the prevailing law, and must have worked in the related field for at least two years after obtaining such certification. Alternatively, the person may have completed at least a bachelor’s degree in law, management, commerce, or economics, and must have worked in the related field or in the field of company management for at least three years. However, this requirement does not apply to those who were already working as Company Secretary at the time this Act came into force; such individuals may continue to hold the position for up to three years from the commencement date of the Act.
Disqualification of Directors from Appointment as Company Secretary:
The Companies Act, 2063 clearly states that no director of the concerned company shall be eligible to be appointed as the Company Secretary of that company. This provision establishes a strict separation between the role of directorsand that of the Company Secretary. Directors are individuals who hold decision-making power and participate in governing the overall strategy, policies, and operations of the company. In contrast, the Company Secretary plays an administrative and compliance-oriented role, responsible for implementing the decisions of the board, maintaining statutory records, ensuring adherence to legal requirements, and acting as a liaison between the company and regulatory authorities.
Restriction on Holding Multiple Company Secretary Positions:
The Companies Act, 2063 imposes a restriction on any person from being appointed as the Company Secretary of more than one company at the same time. This provision is designed to ensure that a Company Secretary is able to dedicate adequate time, attention, and accountability to the operations and compliance requirements of a single company. The role of a Company Secretary in a public company is demanding it involves preparing board meetings, filing regulatory documents, ensuring statutory compliance, maintaining registers, and advising on legal and corporate matters. Allowing one person to hold this position in multiple companies simultaneously could dilute the quality of their work and lead to non-compliance or delays in statutory obligations.
Temporary Delegation of Duties in Absence or Vacancy (Sub-section 5):
The Companies Act, 2063 addresses situations where the position of Company Secretary becomes vacant or the appointed Company Secretary is, for any reason, unable to perform specific duties assigned to them by the Act, other prevailing laws, or the company’s Articles of Association. In such cases, the law allows the Board of Directors totemporarily assign these responsibilities to another employee of the company who meets the prescribed qualifications for a Company Secretary under this Act.
This provision ensures that the company’s essential legal and regulatory functions do not remain unfulfilled during periods of transition, illness, resignation, or unforeseen incapacity of the official Company Secretary. However, the person so designated must possess the minimum qualifications defined in Section 185(2) such as a professional certificate in company secretary ship or a relevant bachelor’s degree with appropriate experience.
What Kind of Company Needs a Company Secretary?
Under the Companies Act, 2063 (Nepal), the appointment of a Company Secretary is mandatoryfor certain companies. Specifically, public companies with a paid-up capital of NPR 10 million (1 crore) or moreare legally required to appoint a qualified Company Secretary. This rule is stated in Section 185(1) of the Act. The Company Secretary must be a Nepali citizen and meet specific qualifications related to education and work experience, as outlined in the law.
On the other hand, private companiesand public companies with less than NPR 10 million in paid-up capitalarenot required by law to appoint a Company Secretary. However, such companies may still choose to appoint one voluntarily for better legal compliance, corporate governance, and recordkeeping.
Having a Company Secretary, even when not legally required, helps ensure that the company maintains proper legal records, organizes meetings in accordance with the law, files necessary returns with the Office of Company Registrar (OCR), and minimizes the risk of non-compliance.
Additionally, in sectors that are heavily regulated such as banking, insurance, and listed companies under the Securities Board of Nepal (SEBON) there may be additional regulatory requirements for appointing a Company Secretary, beyond the Companies Act itself.
Difference between director and company secretary:
| Basis of Difference | Director | Company Secretary |
|---|---|---|
| Nature of Position | A policy-making authority, part of the Board of Directors the highest governing body of the company | A compliance and administrative officer, not part of the Board, responsible for assisting and implementing the board’s legal and procedural decisions |
| Appointed By | Shareholders at the Annual General Meeting or as per provisions of the Articles of Association | Board of Directors of the company |
| Eligibility Criteria | No mandatory academic qualification, but must not be disqualified (e.g., insolvent, criminal conviction, etc.) | Must be a Nepali citizen and either: • Hold a professional certificate of Company Secretary + 2 years’ experience, or • Have a bachelor’s degree in law, management, commerce, or economics + 3 years’ experience |
| Restriction on Dual Role | Can serve as a Director in multiple companies unless restricted | Cannot serve as Company Secretary in more than one company simultaneously, except in the case of parent and subsidiary companies (Section 185(4)) |
| Disqualification Clause | Disqualified under Section 89(e.g., mental unfitness, default, fraud, criminal offense, etc.) | A Director of the same company cannot be appointed as its Company Secretary (Section 185(3)) |
| Main Functions | Set company strategy and policies – Approve budgets and investments – Appoint senior management – Oversee financial health | Maintain statutory records – File documents with OCR – Organize board/shareholder meetings – Ensure legal compliance and support corporate governance |
| Decision making authority | Has voting power and decision-making authority in board meetings and corporate matters | Has no independent decision-making power; operates under the direction of the board |
| Liability and accountability | Personally liable for acts of mismanagement, fraud, non-compliance, or breach of fiduciary duty | Liable for non-performance of legal and compliance duties assigned under the Act |
| Legal identity | Holds a governing role, directly responsible to shareholders | Holds an executive role, responsible to the Board and accountable for compliance and administration |
| Focus area | Strategic leadership, risk management, and financial oversight | Legal compliance, governance support, and internal coordination |
The clear and structured explanation of the functions, duties, and powers of a Company Secretary as outlined in the Companies Act, 2063 (Nepal):
1. Duty to Implement Decisions and Submit Documents
According to the Companies Act, 2063, it is the primary duty of the Company Secretary to implement, or cause to be implemented, all decisions made by the Board of Directors and the General Meeting, as well as to carry out instructions given by the Office of the Company Registrar or other regulatory bodies. The Secretary is also responsible for submitting all returns, decisions, and documents that are required to be filed under the Act or prevailing law to the concerned authority within the prescribed time limit. This duty ensures that the company remains compliant and transparent in its dealings with regulatory institutions
2. Functions of the Company Secretary
Subject to the provisions of the Companies Act, and the company’s Memorandum of Association andArticles of Association , the Company Secretary is required to perform several key functions:
- Calling Meetings: The Secretary must call meetings of the Board of Directors and General Meetings as required.
- Preparing and Distributing Agendas: The Secretary prepares the agenda of such meetingsand circulates them to the relevant directors or shareholders.
- Maintaining and Authenticating Records: The Secretary keeps records of the resolutions and minutes passed in board and general meetings, ensures their accuracy, and is responsible for preserving them officially.
- Handling Share Allotments and Calls: Following board decisions, the Secretary must send notices regarding share allotmentsand calls on shares to the relevant shareholders.
- Maintaining Registers: The Secretary must accurately and properly maintain and authenticate the register of shareholders and debenture-holders, ensuring all records are up to date and legally valid.
- Pledge, Mortgage, Transfer, and Transmission: In cases involving the pledge or mortgageof shares ortransfer and transmission, the Secretary must forward the matter to the Board of Directors or the Chief Executive for necessary action.
- Communication with Stakeholders: If any grievance, claim, or suggestion is received from a shareholder or debenture-holder in writing, the Secretary must forward it to the Board, Chief Executive, Office, or other authority and also provide a written response to the concerned person regarding the actions taken.
- Other Duties: The Secretary is also required to perform any other duties prescribed by the prevailing law, or as instructed under internal company rules or legal provisions.
3.Restriction on Personal Benefit
The law explicitly states that, except when permitted by a decision of the General Meeting, the Company Secretary shall not perform any act on behalf of the company that is intended to personally benefit themselves. This restriction is imposed to prevent abuse of power and to maintain professional integrity and neutrality in the Secretary’s role.
4. Compliance with Code of Conduct
The Company Secretary must also observe the official Code of Conduct as prescribed under the prevailing law. This includes acting with honesty, confidentiality, professionalism, and in the best interest of the company. Any deviation from ethical standards can lead to legal consequences and disciplinary action.
Conclusion
The legal framework governing the appointment of company secretaries in Nepal is undergoing gradual refinement, highlighting the necessity for more precise and structured legislative provisions. Although the Companies Act requires the appointment of company secretaries, certain key aspects remain vague, leading to practical difficulties for companies and their boards. The option to appoint a company secretary either as a full-time employee or as an external consultant offers companies flexibility, yet it also introduces distinct legal and operational considerations.
The Supreme Court’s ruling in the case of Chilime Jalavidhyut Company Ltd v. Labour Court emphasizes the complexity of the company secretary’s legal status and reinforces the importance of following the specific procedural requirements laid out in the Companies Act. As businesses work through these legal uncertainties, adopting a well-considered and compliant approach whether through employment or consultancy becomes essential for maintaining sound corporate governance and fulfilling regulatory obligations in Nepal‘s evolving corporate environment.