The Office of the Company Registrar is preparing to enforce the latest amendment to the Companies Act, 2006, introducing a streamlined process for company dissolution. The provision, set to take effect by mid-March, aims to update the records of over 50 percent of registered companies that remain inactive.

Surya Prasad Chapagain, Information Officer and Sub-Registrar at the office, stated that preparations for implementing the new provision are in their final stages. He mentioned that the office plans to roll out this provision within a week and is also finalizing a new Company Administration Management Information System (CAMIS) to facilitate online services, eliminating the need for physical visits.

Currently, more than 350,000 companies are registered with the Office of the Company Registrar. However, fewer than half of them update their records regularly.

Sub-Registrar Devi Prasad Subedi explained that many companies fail to submit updates on time. Some have not updated their records for years, while others do so only once every two or three years. He noted that with the introduction of this provision, more companies are expected to update their records rather than opt for dissolution.

The office anticipates that some of the 175,000 inactive companies will proceed with dissolution, while most will choose to update their records. This provision was introduced by the government through an ordinance, published in the Nepal Gazette on January 13, as part of efforts to improve Nepal’s business environment.

Section 136(a) of the Companies Act, 2006, now allows companies to apply for dissolution if they have not conducted business, are inactive, have failed to submit records under Section 80, or have unpaid fines under Section 81. A company must make this decision through a general assembly meeting before applying to the registrar’s office.

Previously, a quorum was required for such decisions. However, the amendment removes this requirement, allowing the present directors or shareholders to decide on dissolution if a general assembly cannot be convened. Subedi explained that this change benefits those whose co-founders are unavailable. For instance, if five people formed a company and three are out of contact, the remaining members can now dissolve it instead of accumulating fines.

However, removing the quorum requirement also raises concerns about potential misuse. Subedi acknowledged that in some cases, one or two individuals could file for dissolution without full consensus. To mitigate this risk, the process includes safeguards such as public announcements of dissolution at least twice, providing an opportunity for objections before finalizing the decision.

To further prevent wrongful dissolution, the Office of the Company Registrar will issue public notices about company closures, allowing stakeholders to raise concerns. If a company is dissolved but another director submits the necessary documents within five years, the company can be reinstated.

The amendment also revises penalties for late record updates. Companies that fail to submit updates on time must pay fines, which can be substantial. Under the new provision, two options have been introduced for fines. If the fine amount is small, companies must pay it in full. If the fine is large, companies will pay an amount equivalent to 0.5 percent of their paid-up capital instead.

With these new measures, the Office of the Company Registrar expects a significant increase in record updates and a more efficient dissolution process for inactive businesses.