Introduction

The company capital increasing process in Nepal is a statutory procedure regulated by the Companies Act, 2063 (2006) and related rules. Share capital represents the financial foundation of a company, reflecting shareholder investment and corporate strength. Increasing company capital allows an entity to expand its operations, raise new investments, and comply with growth requirements. However, such increment cannot occur informally. The process requires formal approval, amendment of constitutional documents, and registration at the Office of the Company Registrar (OCR).

Medha Law and Partners, as a leading corporate law firm in Nepal, provides advisory services for companies seeking to increase authorized or paid-up capital. The process must follow legal steps, safeguard shareholder rights, and comply with prescribed timelines. This article presents a structured and factual explanation of the procedure, referencing relevant provisions of the Companies Act, 2063, and ensuring compliance with Nepalese corporate law.

1. Legal Basis of Company Capital Increase in Nepal

The legal foundation of capital increment lies in the Companies Act, 2063 (2006). Under Section 51, a company may increase its authorized or issued capital by passing a Special Resolution in a General Meeting and amending its Memorandum of Association (MOA) and Articles of Association (AOA). Such amendment is legally effective only upon registration with the Office of the Company Registrar (OCR).

The OCR, functioning under the Ministry of Industry, Commerce, and Supplies, supervises compliance with statutory requirements. Without proper filing and OCR approval, the resolution passed by shareholders has no binding effect.  This legal framework maintains transparency and accountability in Nepalese corporate governance.

2. Types of Company Capital Increase

The Companies Act recognizes two primary forms of capital increment:

• Authorized Capital Increase: This refers to the maximum capital a company can issue, as mentioned in its MOA. Increasing authorized capital requires amending the MOA and obtaining shareholder approval.

• Issued and Paid-Up Capital Increase: This involves actual shares subscribed by shareholders or additional investment. It requires allotment of shares to existing shareholders or new investors. Issued capital must always remain within the limit of authorized capital.

The distinction is significant because authorized capital sets the legal framework, while issued and paid-up capital represents real shareholder contributions.

3. Corporate Governance Requirement

Capital increment directly impacts ownership structure and shareholder rights. To prevent misuse, the Companies Act requires companies to follow strict corporate governance practices:

• Shareholders must be notified in advance of the agenda.

• A Special Resolution must be passed in a General Meeting.

• Proper minutes and resolutions must be recorded.

• Amended MOA and AOA must be filed at OCR.

These requirements ensure fairness to all shareholders, including minority interests.  Thus, governance compliance is essential for the validity of the capital increase.

4. Stepwise Process of Increasing Capital in Nepal

The process of increasing company capital involves sequential steps as prescribed by law:

1. Board Resolution – The Board of Directors passes a resolution recommending the capital increase.

2. Notice to Shareholders – A General Meeting is called with notice specifying the agenda.

3. General Meeting – Shareholders approve the proposal through a Special Resolution.

4. Amendment of MOA and AOA – The capital clauses in MOA and AOA are revised accordingly.

5. Preparation of Documents – Resolutions and amended documents are finalized.

6. Filing with OCR – Application with required forms, fees, and documents is submitted.

7. Approval and Registration – OCR verifies and registers the capital increase.

Only after OCR approval does the capital increment attain legal enforceability.

5. Required Documents for Capital Increase

The company must prepare and submit the following documents for capital increment:

• Application to the Office of the Company Registrar.

• Certified copy of the Board Resolution recommending the increase.

• Copy of the Special Resolution passed in General Meeting.

• Amended MOA and AOA showing revised capital clauses.

• Updated list of shareholders, if required.

• Tax clearance or compliance documents, if applicable.

• Copy of Certificate of Incorporation.

Incomplete or late filing may delay approval.

6. Role of Shareholders in Capital Increase

Shareholders hold decisive authority in the capital increment process. The Companies Act mandates that only a Special Resolution in a General Meeting can authorize the change. Minority shareholders are protected by the requirement of a qualified majority, preventing unilateral decisions by a small group. If irregularities occur, shareholders may seek remedies from the OCR or judiciary. Thus, shareholder approval forms the democratic foundation of company capital increase.

7. Role of Registrar of Companies (OCR)

The Registrar of Companies is the statutory body that validates capital increase decisions. Its role includes:

• Examining the application and supporting documents.

• Ensuring compliance with the Companies Act, 2063.

• Collecting prescribed government fees and revenue stamps.

• Registering the amended MOA and AOA.

Without OCR approval, a capital increase has no legal standing. The Registrar’s endorsement makes the increment official and enforceable.

8. Timelines for Capital Increase Procedure

Timeliness is essential in the capital increment process. Under the Companies Act, companies must submit filings to the OCR within 30 days from the date of passing the Special Resolution in the General Meeting.

Failure to meet the deadline may result in penalties or rejection of the application. Therefore, companies must coordinate board decisions, shareholder meetings, and document preparation within a strict timeframe. Legal advisors often play a critical role in ensuring timely compliance.

9. Costs and Fees Associated with Capital Increase

The process incurs several costs, including:

• OCR Filing Fees – Charged based on the revised amount of authorized capital.

• Stamp Duties and Revenue Fees – Required under prevailing laws.

• Professional Fees – Payment to legal advisors or company secretaries.

• Administrative Costs – Expenses for shareholder meetings and notarization.

Larger capital increments attract higher filing fees. Companies must budget for these expenses in advance to avoid procedural hurdles.

10. Challenges in Capital Increase Process

Companies often encounter difficulties in executing capital increments, such as:

• Insufficient notice to shareholders.

• Errors in drafting amended MOA and AOA.

• Late filing with OCR.

• Disputes among shareholders on dilution of control.

• Administrative backlog at OCR.

These challenges can delay approval or invalidate the process. Expert assistance from firms like Medha Law and Partners helps companies mitigate risks and complete procedures smoothly.

Frequently Asked Questions (FAQs)

Q1. What is the minimum requirement for increasing company capital in Nepal?
A company must pass a Special Resolution in a General Meeting, amend MOA and AOA, and file documents with the OCR to complete the process.

Q2. How long does the capital increase process take in Nepal?
The process usually takes 15–30 days, depending on shareholder meetings and OCR approval. Delays may occur due to incomplete filing.

Q3. Can private and public companies follow the same capital increase process?
Yes, both are governed by the Companies Act, 2063. Public companies may also need to comply with securities regulations when issuing shares.

Q4. Is shareholder approval mandatory for capital increase?
Yes, shareholder approval through a Special Resolution is compulsory. Without it, the increment is invalid.

Q5. Can a company increase only paid-up capital without raising authorized capital?
Yes, but only within the limit of existing authorized capital.

Q6. What happens if the capital increase is not filed with OCR?
The increase has no legal effect until OCR registers it. Shareholder resolutions alone do not make it valid.

Q7. What are the costs involved in capital increase in Nepal?
Costs include OCR filing fees, government duties, legal advisory fees, and administrative expenses.

Conclusion

The company capital increasing process in Nepal is a legally structured mechanism governed by the Companies Act, 2063. It requires shareholder approval, amendment of constitutional documents, and registration with the Office of the Company Registrar. The process ensures accountability, transparency, and compliance in corporate governance.

With proper documentation, timely filing, and legal guidance, companies can efficiently complete the procedure. Firms like Medha Law and Partners provide expert services to assist companies in managing compliance requirements, reducing risks, and supporting sustainable growth through legally valid capital increments.