Companies act.

2008 Dec
Enumerate the major characteristics of a company.
Answer:

2016 Dec
Sri Nagar Construction Company couldn't pay loan amount Rs. 50 Lakh that is
taken from a bank. Bank may proceed to reimburse its investment with interest
and other amount as agreed and at any time in accordance with its rules. Mr.
Sanjay Sharma, being a shareholder of that company, holding Rs. 20 Lakh
amount share, asks you on the matter about the liability of such loan. Give your
opinion to him about the extent of liability of such loan of a shareholder referring
the concept and provision under the Companies act, 2063.
Answer:
A company, being a legal person, is the owner of its assets and is liable to its all debts.
Company is a separate legal entity. It has independent personality.
Companies Act, 2063, in its section 8, has made possible to establish only the company
having limited liability. It says that the liability of a shareholder of a company
incorporated under this Act, in respect of its transaction, shall be limited only to the
maximum value of shares which he has subscribed or undertake to subscribe.
In given case it should be examined that whether the loan is within the authority of the
company as mentioned in MOA and AOA of the Company.
In case of loan is within the authority of company. For above referred case, it is clear
that the first liability of the debt is of the company. Shareholders of a company have
secondary liability to the extent of the investment he/she made.
There is no direct right and interest of shareholders to the property of the company. Due
to such reason, members of a company are not compelled to bear debt liability.
Member's liability is confined only on to their shares to which they have paid or they
have to pay. Shareholders are eligible to take benefit in accordance with the investment
in their shares and are in a position to bear losses only losing their investment not
further more.
However in case the loan is not within the authority of company or ultra virus, the
protection of limited liability in not applicable in the case of lifting the corporate veil.
Accordingly, the directors or shareholders of company are made personally liable for
their work carried out by using the veil or mask of company to evade tax or commit
fraud. Likewise, the veil of company is lifted out in need of identifying the real controller
of company whether he is alien enemy.
2008 Dec
Short notes on: Lifting of Corporate Veil.
Answer:

2012 June
What is the doctrine of lifting of "Corporate Veil"? What are the causes of lifting
corporate veil? Illustrate your answer with court cases.
Answer:

Company is a structure comprised by its machinery like Board of Director, promoter,

executive personnel and so on. When it is incorporated it bears with its independent or
corporate personality. What this means is that the company has life of its own, can own
property, can sue and be sued in its own name, has perpetual life and existence to
name a few of the benefits of incorporation. This rule was laid down by the House of
Lords in Salomon v. Salomon & Co1, in 1897, in which it was held that even if one
individual held almost all the shares and debentures in a company, and if the remaining
shares were held on trust for him, the company is not to be regarded as a mere shadow
of that individual.
This doctrine is recognized by the law court when it is incorporated, operated and used
to attain legal objectives. However, court are not recognized being the independent
existence and personality when company is incorporated or operated and used to attain
illegal objectives, to defraud promoters or to do against national or social interest. At this
connection, in the sense of justice, company's corporate veil is lifted to find out reality of
the company and to render justice for the aggrieved parties. Who are in the company?
What are their functions and duties? Who has indulged in misconduct, illegal activities,
corruption and in doing against the interest of investors, shareholders are examined
having set aside the independent personality of the company. Persons indulge in said
activity is made personally liable. Such rule or doctrine is said to be the doctrine of lifting
the corporate veil.
The rule in Salomon lies at the heart of corporate personality. However, there are
situations in which the courts look beyond that personality to the members or directors
of the company: in doing so they are said to lift or pierce the corporate veil. There is no
single basis on which the veil may be lifted, rather the cases fall into several loose
categories, which are examined below.
i) Fraud: The courts have been more that prepared to pierce the corporate veil when it
fells that fraud is or could be perpetrated behind the veil. The courts will not allow the
Solomon principal to be used as an engine of fraud. The two classic cases of the fraud
exception are Gilford motor company ltd v. Horne and Jones v. Lipman . In order to
defeat this he incorporated a limited company in his wife's name and solicited the
customers of the company. in this case it was clear that the main purpose of
incorporating the new company was to perpetrate fraud. Thus the court of appeal
regarded it as a mere sham to cloak his wrongdoings.
ii) Group Enterprise: Sometimes in the case of group of enterprises, the Solomon
principal may not be adhered to and the court may lift the veil in order to look at the
economic realities of the group itself. In the case of D.H.N.food products Ltd. V. Tower
Hamlets it has been said that the courts may disregard Solomon's case whenever it is
just and equitable to do so. In the above-mentioned case the court of appeal thought
that the present case where it was one suitable for lifting the corporate veil. Here the
three subsidiary companies were treated as a part of the same economic entity or group
and were entitled to compensation.
iii) Agency: A company having power to act as an agent may do so as an agent for its
parent company or indeed for all or any of the individual members if it or they authorize
it to do so. In cases where the agency agreement holds good and the parties concerned
have expressly agreed to such a agreement them the corporate veil shall be lifted and
the principal shall be liable for an acts of the agent.
iv) Trust: The courts may pierce the corporate veil to look at the characteristics of the
shareholders. In the case of Abbey and Planning the court lifted the corporate veil. In
this case a school was run life a company but the shares were held by trustees on
educational charitable trusts. They pierced the veil in order to look into the terms on
which the trustee held the shares.
v) Tort: Usually the English courts have not lifted the veil on the ground of tort it is a
phenomenon not witnessed in most common law jurisdictions apart from Canada. vi)
Enemy character: In times of war the court is prepared to lift the corporate veil and
determine the nature of shareholding as it did in the Daimler Co. Ltd v. Continental
Tyres and Rubber Co. case where Germen shareholders held the shares of an English
company during the time of world war 1.
vii) Tax: Corporate Veil is lifted or pierced when a company is incorporated, operated or
used to evade tax or defraud. In Income Tax Commissioner V. Sri Meenakshi Mills case
it has hold that: The income tax authorities are entitled to pierce the veil of corporate
entity and to look at the reality of the transactions. It is true that from the juristic point of
view the company is a legal personality entirely distinct from its members and the
company is capable of enjoying right and being subjected to duties, which are not the
same as those enjoyed or borne by its members. But in exceptional cases the court is
entitled to lift the veil of corporate entity and to pay regard to the economic realities
behind the legal facade.

2015 July
CEO of Himalaya Heights Pvt. Ltd was dismissed as against the service contract.
He filed a case for damages against the wrongful dismissal Shortly thereafter, the
company ceased trading; it paid of all its creditors and then transferred its
remaining assets to Park View Ltd. When he obtained a judgment against the
company, it had no assets and stood dissolved. Therefore, he charged against the
Park View. Decide whether the transferee company is liable.
Answer:

Section 7 of the Companies Act, 2063 recognises that when a company is incorporated,
it is treated as an autonomous and a separate legal person than of its member with
perpetual succession. A company, as a separate legal person has full right to hold
assets and run business in its name. Further it can sue and be sued and the member's
property is not liable to meet the liabilities of the company.
The separate legal existence of a company cannot be used as a means to achieve
some illegal or fraudulent purposes. The courts will refuse to uphold the separate
existence of the company where it is formed to defeat or circumvent law, to defraud
creditors or to avoid legal obligations. In such situations the corporate personality can
be disregarded and its veil can be lifted and the natural person behind it can make
liable. This case of the doctrine of lifting the corporate veil was accepted by the court in
Creasey v. Breachwood Motors Ltd. 1993 BCLC 480.
In this case, therefore, the transferee company is liable to pay compensation to the
plaintiff. In fact, the takeover of the company’s assets had been carried out without
regard to the separate entity of the company and the interests of its creditors,
particularly the plaintiff and the purpose of the act of transferring the assets to the Park
View Ltd. is to avoid its liabilities. As being created unjust result to the interest of the
plaintiff. The transferee company cannot be treated as a separate legal person than its
transferor company.

2009 June
What do you mean by nonprofit making company? Explain.
Answer:

2009 Dec
Explain the Holding and Subsidiary Company as per the Companies act, 2063.
Answer:

A Company, which controls another company is called a holding Company. According to

section 2(d) of Nepalese companies Act, 2063 'Holding company means a company
having control over subsidiary company '. From this definition it is clear that a company
which controls any company by holding the management of board of directors or
holding more than half of shares of company is a holding company. Similarly, section
2(e) of Nepalese companies Act states that 'subsidiary company means a company
controlled by a holding company ' . It means principal company either holding control
over the composition of he Board of Directors or taking majority of its shares such
company can control subsidiary company .

2004 June
Explain about incorporation of companies' in Nepal.
Answer:

2009 June
Under what circumstances the registration of company is refused?
Answer:

2006 Dec
What are the restrictive clauses the Articles of a private company must contain?
Answer:

2012 Dec
What are the terms to be abided by any company incorporated under the
companies act, 2063 in addition to those set forth in the companies act, 2063,
memorandum of association or articles of association?
Answer:

A company incorporated under this Act shall abide by the following terms, in addition to
those set forth in this Act, memorandum of association or articles of association: Section
10
(a)The company shall carry on all of its activities and transactions by its name.
(b) A private company shall add the words “private limited’’ to its name as the last words
and a public company shall add the word “limited” to its name as the last word.
However, this provision shall not apply to a company not distributing profit.
(c) A private company shall not sell its shares and debentures publicly.
(d) A private company shall not pledge, or otherwise transfer title to, its securities to any
person other than its shareholder without fulfilling the procedures contained in the
memorandum of consensus agreement,
(e) A company shall not open a partnership or private firm.
(f) Except as otherwise provided in this Act, a company not distributing profits shall not
distribute dividends among its members or pay, directly or indirectly, any amount to a
member or his/her close relative.

2014 Dec
A Proposed Sagarmatha silk public limited company applied to the Company
Register's Office (CRO) for the registration of a public company with authorized
capital Rs.50 lakhs only. After scrutinizing all the relevant papers Company
Registrar refused to register the company. Answer, what was the reason to refuse
registration of that proposed company.
Answer:

Refusal of registrar to register the public limited company is valid in pursuance to

Section 11(1) of the Companies Act, 2063. Pursuant to this section,the paid up capital of
a public company shall be a minimum of ten million rupees, except as otherwise
provided in the prevailing law or in a notification by the Government of Nepal in the
Nepal Gazette that the paid up capital of any particular company shall be in excess of
the said required minimum.
The Company Registrar’s Office(CRO), pursuant to section 6(1)(d) of the Companies
Act, 2063 may refuse to register a company if the requirements for the incorporation of
a company under this Act are not fulfilled. So the CRO refused to register this proposed
public Company for not fulfilling the requirement of section 11(1) of the above Act.

2008 June
State the circumstances under which a public company can be converted into a
private company under the Companies act, 2063.
Answer:

2009 June
Under what circumstances a public company shall be converted into private
company?
Answer:

2012 Dec
When does a public limited company converse into a private limited company?
Explain the provisions.
Answer:

Section, 14 of the Companies Act, 2063 under different clauses has stated the
provisions for the conversion of a public company into a private company. Sub-section 1
of section 14 reads thus:
In the following circumstance, a public company shall be converted into a private
company under this section:
-If the number of shareholders of the public company becomes less than seven,
-If the public company fails to maintain its paid-up capital under section 11 or the
paid-up capital as referred to in section 11 is not maintained because of reduction in
capital pursuant to section 57. Provided, however, that this provision shall not apply to
the company as referred to in sub-section (2) of section 11.
In the event of occurrence of a circumstance as referred to in sub-section (1), the
concerned public company shall make necessary amendments to its memorandum and
articles of association and convert it into a private company within six months. After
making the necessary amendments in the memorandum and articles of association, the
company, within 30 days after the making of such amendment, shall make an
application to the Office of the Company Registrar with the prescribed fees for being
converted into a private company. The Office on the receipt of an application shall
mention in the company register the contents of conversion of such company into a
private company and give a company conversion certificate within sixty days.

2015 Dec
Blue Sky Air Public Company is a leading airways company with notable profits.
The majority of shareholders have intended to convert their company into a
private limited company, but no idea about the relevant legal provisions;
therefore, the company wants your advice. Advise them on the issue of
conversion of a public limited company into a private limited company under the
provisions of Companies act 2063.
Answer:

Blue Sky Air Pvt. if wants to convert it into a public company, must proceed with Section
14 of the Companies Act, 2063. As this Section 14 under different clauses has stated
the provisions for the conversion of a public company into a private company.
Sub-section 1 of section 14 of this Act reads thus:
In the following circumstance, a public company shall be converted into a private
company:
If the number of shareholders of the public company becomes less than seven,
If the public company fails to maintain its paid-up capital under section 11 or the paid-up
capital as referred to in section 11 is not maintained because of reduction in capital
pursuant to section 57. Provided, however, that this provision shall not apply to the
company as referred to in sub-section (2) of section 11.
In the event of occurrence of a circumstance as referred to in sub-section (1) above, the
concerned public company shall make necessary amendments to its memorandum and
articles of association and convert it into a private company within six months. After
making the necessary amendments in the memorandum and articles of association, the
company, within 30 days after the making of such amendment, shall make an
application to the Office of the Company Registrar (CRO) with the prescribed fees for
being converted into a private company. The CRO on the receipt of an application shall
mention in the company register the contents of conversion of such company into a
private company and give a company conversion certificate within sixty days. Pursuant
to section 14(5) of this Act, all the assets and liabilities of the public company so
converted shall devolve on the successor Blue Sky Air private Ltd. company.

2002 Dec
Write short notes on Pre-incorporation contracts.
Answer:

2012 June
'A' borrows money from 'B' on behalf of the company pursuant to the contract
made between A and B prior to incorporation of the company. At this situation,
what is the status of the contract? Whether such contract is mandatory to the
company or not? Who is responsible to that transaction and borrowing? How
does 'A' release from personal liability? Discuss briefly referring to the provisions
of the companies act, 2063.
Answer:

This questions' concern is pre-incorporation contract. It should be assessed whether

pre-incorporation contract is mandatory to the company or not with the reference of the
Companies Act, 2063. Section 17 of the Companies Act, 2063, has made provision on
pre-incorporation contract as follows:
i) A contract made prior to the incorporation of a company shall be a proposed contract
only.
ii) such contract shall not be binding on the company.
iii) Any person, prior to the incorporation of the company, carries on any transaction or
borrows money on behalf of the company, such person shall be personally liable for any
contract related with the transaction so carried on.
iv) If, within the time mentioned in any transactions or within the reasonable time after
the incorporation of a company, the company, through its act, action or conduct, accepts
any act, action or conduct, to borrowing done or made prior to the date of authorization
to commence its transactions or endorses such act or action, that transaction shall be
binding on the company and the other contracting party.
v) The person carrying out such act or action shall be released from the personal liability
to be borne pursuant to the above provision.
vi) For the private company the consensus agreement of a private company shall
govern any contracts made prior to the incorporation of such company.
A contract made prior to the incorporation of a company is called pre - incorporation
contract. According to above provision of the Act such contract is remain only proposed
contract. Company could not bear responsibility only because the contract is concluded
for and on behalf of company. For this, A is personally liable. However, company is
liable when it, within the time mentioned in the contract and within the reasonable time
with the act, actions or conduct accepts such transactions or borrowing. A can escape
or get rid from the liability of B.
In the context of private company, the consensus agreement of a private company shall
govern any contracts made prior to the incorporation of such company pursuant to
Sub-section (4) of section 17 of this Act.

2004 June
Explain Service of notice under the companies act.
Answer:

2004 Dec
Explain Service of notice under the companies act.
Answer:

2010 Dec
Koirala Ltd has not sent reports to registrar office for a long period, including
change of registered office address. Registrar office issued public notice in
newspaper intending to cancellation of name from company roster, but the
company could not answer it because the notice published date was called for a
Nepal Banda" and newspaper were not reached to the company. After three years
of cancellation, director of company got knowledge that their company was
cancelled three years before. What shall be the impacts of transactions done on
that period? Can it be revive again? Explain with reference with Companies act,
2063.
Answer:
Companies Act 2063: Power of Office to cancel registration (Section 136):
(1) The Office may cancel the registration of a company in the following circumstance:
(a) If the promoter of the company makes an application, showing a reason for the
failure to commence the business of the company, and accompanied by the prescribed
fees, for the cancellation of the registration of the company:
(b) If the company is in default in submitting to the Office the returns as referred to in
Section 80 or fails pay the fine as referred to in Section 81 for three consecutive
financial years; or
(c) If based on the proofs received in the course of administration of the company, the
Office has a reasonable ground to believe that the company is not carrying on its
business or the company is not in operation.
(2) If it is required to cancel the registration of any company pursuant to Sub-section (1),
the Office shall, prior to the cancellation of registration, give a notice, accompanied by
the reason for such registration, to the concerned company.
(3) while sending a notice to a company pursuant to Sub-section (2), the notice shall be
sent to the company at its registered office or to any officer of such company if the
address of the registered office of such company is not registered with the Office or if
the office of the company is not located at the address registered and to the address of
every Promoter as mentioned in the memorandum of association of the company if
even the address of such officer is not available to the Office or is not known.
(4) A notice given pursuant to Sub-section (2) shall also be published in a national daily
newspaper, as per necessity.
(5) If the company fails to make an application, specifying the reasons that the
registration of the company should not be canceled, within two months from the date of
receipt by the company of a notice pursuant to Sub-section (2) or, despite the making of
such application, the reasons specified are not found reasonable, the registration of
such company may be canceled.
(6) If the registration of a company is canceled pursuant to Subsection (5), information
thereof shall be given to the concerned directors and shall also be published in a
national daily newspaper.
According to Sec. 137 of Company Act, 2063, deregistration of company by Registrar of
Companies can be challenged within 5 years from date of decision of deregistration in
one case only. In case Registrar of Company issued a notice, having reply period of 2
months intending to deregister and the company, if not replied or replied but Registrar is
unsatisfied with registration, Registrar itself can deregister the company. In the given
case of Koirala Ltd., ROC has sent the notice, but registered office has shifted from
there where it was registered. The public notices were issued but director were
unknown of it and the ROC decided to deregistration. The transactions were done
without noticed of deregistration for three years.
In those cases, any member of or creditor of company may apply for court to revive the
company within 5 years. The company can be revived upon the decision of court in this
favour. If court decided so, all the transactions were deemed as done by a normal
company and valid for law. The legal status of company shall be deemed as perpetual
within the period of deregistration as normal company.

2009 June
“The Memorandum of Association (MOA) is the fundamental law or a charter
defining the objects and limiting the power of Company. Explain.
Answer:
The MOA of a company is its charter which contains the fundamental conditions upon
which alone the company can be incorporated. It sets forth the objects of the company‘s
formation and the utmost possible scope of its operation beyond which its action cannot
go. Thus MOA is said to be a charter of the company. It defines as well as confines the
powers of the company. If anything is done beyond these powers that shall be ultra
vires of the company and so void.
The MOA serves two-fold purposes. It enables shareholders/creditors and all those who
deal with the company to know what their powers are and what are the range of
activities. Thus, the intending shareholders can find out the field in, or the purpose for
which his money is going to be used by the company and what risk he is taking by
making the investment. Also, any one dealing with the company, say a supplier of goods
will know whether the transaction he intends to make with the company is within the
objects of the company and not ultra vires its objects.

2006 Dec
What do you understand by Memorandum of Association? What are the contents
of the MoA?
Answer:

2002 Dec
Explain Memorandum and Articles of a company.
Answer:

2005 June
Explain Memorandum and Articles of a company.
Answer:
2008 June
Differentiate between Memorandum and Articles of Association.
Answer:

2011 June
What are the procedures for amending the MoA of a limited liability company as
per the companies act, 2063?
Answer:

According to the provision of Sec. 21 of Company Act, 2063, procedure for amending
the Memorandum of Association is as follows:
1.Company at its general meeting with special resolution may change the clauses of
MOA.
2. The name of the company can be changed upon special resolution and if
pre-authorised by the Registrar. Pre-authority can be taken upon payment of prescribed
fees.
3. The resolution, so passed shall be laid to the notice of the Registrar within 30 days of
date of resolution and the Registrar shall record it within 7 days of notice so received.
4. In case any aggrieved shareholder (holding not less than 5%of the paid up capital)
applied to the court, the resolution shall be suspended till date of court‟s final verdict.

2012 June
State the procedures for changing the company name as per Companies act,
2063.
Answer:
According to Sec. 21(3) of Company Act, 2063, if any existing company wants to
change its name, the new name to be passed from its shareholders' meeting under
special resolution mechanism. Company need to apply to the Registrar of the
Companies' for the new purposed name with fee prescribed for the time being. If ROC
approves the proposed name, new name shall be allowed for. Until the ROC approves
the new name, company shall operate its business under old name.

2007 June
A, the secretary of a company, issues a share certificate in favor of B purporting
to be signed by two directors and a secretary, and has the seal of the company
affixed to it. In fact, the secretary has forged the signatures of the directors and
has affixed the seal without authority. Can B hold the company liable for the share
covered in the share certificate? How can B recover his loss?
Answer:
2013 June
Explain the doctrine of "Indoor management" in brief. The secretary of a
company, issues a share certificate to Mr. A purporting to be signed by two
directors and a secretary, and has the seal of the company affixed to it. In fact, the
secretary has forged the signatures of the directors and has affixed the seal
without authority. A borrowed money from Mr. B on the strength of this certificate.
B wanted to realize the security and requested the company to register him as
holder of the shares. Explain whether B will succeed in getting his name in the
share register?
Answer:

The doctrine of Indoor Management is discussed in the Royal British Bank vs.
Turquand(1956) 6E&B 327. In this case the directors of Royal British Bank also gave a
bond toTurquand. The Article empowered the directors to issue such bonds under the
authority of a proper resolution. In fact no such resolution was passed. Notwithstanding
that, it was held that Turquand could sue on the bonds on the ground that he was
entitled to assume that the resolution had been duly passed. Thus the persons dealing
with the company are entitled to assume that the acts of the directors or the officers of
the company are validly performed, if they are within the scope of their apparent
authority. But this doctrine is not applicable where the person dealing with the company
has notice of irregularity or where the person dealing with the company is put upon on
inquiry or when an instrument purporting to be enacted on behalf of the company is a
forgery.
In the instant problem the doctrine of Indoor Management can apply only in case of
irregularities which might otherwise affect the transaction, but it cannot apply to forgery
which must be regarded as nullity. Hence ‘B’ will not succeed in getting the share
registered in his name as this is decided by House of Lord of England in Ruben v Great
Fingall Consolidated [1906] AC 439.

2014 June
The directors of a company borrowed a sum of money from a bank. The
companies" articles provided that the directors might borrow on bonds such
sums as may from time to time be authorized by a resolution passed at a GM of
the company. There was no such resolution passed at a GM of the company
authorizing the directors to borrow the loan. When the company failed to repay
the amount, the bank filed a case. The shareholders claimed that there had been
no such resolution authorizing the loan and therefore it was taken without their
authority. Decide whether the company is bound to repay the loan to the bank.
Answer:

This issue is related to the doctrine of indoor management which is opposed to that of
the rule of constructive notice. Constructive notice seeks to protect the company against
the outsider the doctrine of indoor management operates to protect outsiders against
the company. The rule of constructive notice is confined to the external position of the
company and therefore, it follows that there is no notice as to how the company‘s
internal machinery is handled by its officers. If the contract is consistent with the public
documents, the person contracting will not be prejudiced by irregularities that may beset
the indoor working of the company. This implies that the outsiders are not bound to
inquire whether the act of the directors which is related to internal management, had
been properly and regularly performed. Even where the directors exceed their powers
or infringe the restrictions imposed upon them, the company may be bound, for an
outsider dealing with the company. This rule was recognized in the case of Royal British
Bank v. Tarquand: (1856) 6 E.&B 327.
Following this rule of Tarquand, it is thus stated that ―if the directors have power and
authority to bind the company, but certain preliminaries are required to be gone through
on the part of the company before that power can be duly exercised, then the person
contracting with the directors is not bound to see that all these preliminaries have been
observed. He is entitled to presume that the directors are acting lawfully in what they do.
Thus, where the directors of a company having the power to allot share only with the
consent of the general meeting, allotted them without any such consent, the company
was held liable.
In this case, the company is bound to repay the loan. Once it was found that the
directors could borrow subject to a resolution, the plaintiff had the right to infer that the
necessary resolution must have been passed. When third party has dealt with the
company through the board of directors which is not ultravires to the Articles and
Memorandum of the company, the company cannot avoid liability to pay the loan to the
bank on the ground that such resolution never been passed at the general meeting of
the company.

2016 June
Distinguish between Shares and Stock.
Answer:

2008 Dec
Mention the conditions in which a company may issue shares at premium.
Answer referring the provisions as per the Companies act, 2063.
Answer:
2014 June
Distinguish between Right Shares and Issue of shares at premium.
Answer:

Rights shares
Section 56 of Company Act, 2063 has made certain provisions where that company
alters its shares. The company can increase its capital by issuing rights shares.
A rights issue is an issue of rights to buy additional securities in a company made to the
company's existing security holders. When the rights are for equity securities, such as
shares, in a public company, it is a way to raise capital under a seasoned equity
offering.
Rights issues are sometimes carried out as a shelf offering. With the issued rights,
existing security-holders have the privilege to buy a specified number of new securities
from the firm at a specified price within a specified time. In a public company, a rights
issue is a form of public offering (different from most other types of public offering,
where shares are issued to the general public). Rights issues may be particularly useful
for closed-end companies, which cannot retain earnings, because they distribute
essentially all of their realized income and capital gains each year; therefore, they raise
additional capital through rights offerings. As equity issues are generally preferable to
debt issues from the company's viewpoint, companies usually opt for a rights issue
when they have problems raising equity capital from the general public and choose to
ask their existing shareholders to buy more shares.

Share issue at premium

Section 29 of Company Act, 2063 has made provision to issue shares at premium. Each
who fulfilled these conditions could apply for issuance of shares at premium.
A term is used when a company issues shares of its stock at price above its par value.
The excess cash, or premium received by the company is place in a shared premium
account and can be used to pay up unissued shares for distribution as bonus shares; to
pay a premium on the redemption of preferred stock ; writing down company expenses
or expenses incurred in the issuance of the shares.
A company issues its shares at a premium when the price at which it sells the shares is
higher than their par value. This is quite common, since the par value is typically set at a
minimal value, such as Rs. 100 per share. The amount of the premium is the difference
between the par value and the selling price.
If shares do not have a par value, then there is no premium. In this case, the entire
amount paid is recorded in the common stock account (if the payment is for common
stock, rather than for some form of preferred stock).
For example, if ABC Company sells a share of common stock to an investor for Rs. 110,
and the stock has a par value of Rs. 100, then it has issued the share at a premium of
Rs. 10.

2014 Dec
POR Company is making profit for the last two years, the Board of Directors
(BOD) of PQR Company wants to issue premium shares. The BOD consults you
regarding the pre-conditions to and the procedures for the issue of premium
shares under the Companies act 2063, and also subject to it whether PQR
Company premium shares or not.
Answer:

Section 2(z2) of the Companies Act, 2063 defines the term “premium share”as a share
issued by a company as to sell it for a value in excess of its face value.
Section 29 of the Companies Act, 2063 provides the pre conditions of and procedures
to issue premium shares, which are as follows:
(1) any company fulfilling the following conditions may, with the prior approval of the
Company Registrar’s Office (Office), issue shares at a premium:
a) the company has been making profits and distributing dividends for three consecutive
years,
b) the company's net worth exceeds its total liabilities,
c) the company's general meeting has decided to issue shares at a premium
As PQR Company has been making profit for the last two years only, it doesn't meet the
pre-condition mentioned above under section 29(1)(a) of the Companies Act,
2063.Therefore, PQR Company cannot issue premium shares.

2016 Dec
Sagarmatha Ltd. a public limited company is making profit for the last two years,
the Board of Directors (BOD) of the Company wants to issue premium share. The
BOD consults you regarding the pre-conditions of and the procedures for issuing
premium shares. Suggest the BOD of the company about the pre-issuing
premium shares. Suggest the BOD of the Company about the pre-conditions and
the procedure the procedures for issue of premium shares under the companies
act, 2063.
Answer:

Section 2(la) of the Companies Act, 2063 defines the term “premium share” as a share
issued by a company as to sell it for a value in excess of its face value.
Section 29 of the Companies Act, 2063 provides the pre conditions of and procedures
to issue premium shares, which are as follows:
(1) any company fulfilling the following conditions may, with the prior approval of the
Company Registrar‟s Office (Office), issue shares at a premium:
a) the company has been making profits and distributing dividends for three consecutive
years,
b) the company's net worth exceeds its total liabilities,
c) the company's general meeting has decided to issue shares at a premium
As Sagarmatha Ltd has been making profit for the last two years only, it doesn't meet
the pre condition mentioned above under section 29(1)(a) of the Companies Act,
2063.Therefore, Sagarmatha Ltd cannot issue premium shares.

2015 Dec
XYZ Pvt Ltd has classified and issued shares with differential voting rights
amending its memorandum and articles, but some of the shareholders are not
satisfied with the classification. What are the provisions to obtain shareholders
rights in the share back? Explain referring the provisions of the Companies act
2063.
Answer:

Section 30 of the Companies Act, 2063 has provided shares with different rights of
shareholders. Also it has explained the procedures to get back their rights in shares.
This section has not provided the authority to the company management to alter the
rights in shares of the shareholders of any particular class in a manner to adversely
affect the rights of the shareholders of any other class. Pursuant to section 30(2) of this
Act, approval of the shareholders of any particular class shall be required to make any
alternative in the right of those shareholders.
Pursuant to sub section (3) of the above section if the shareholders of XYZ Pvt. Ltd.
representing at least ten percent share of any particular class who are not satisfied with
a decision to make alteration in the rights attached to the shares of that class pursuant
to subsection (2) of this section file a petition in the court to have the decision to make
such alteration void, the decision made to make alteration in the rights of the
shareholders of such class shall not be enforced unless and until otherwise decided or
ordered by the court.
Pursuant to section 30(4) of this Act, a petition shall be made pursuant to sub-section
(3) above within thirty days after the decision made to make alteration in the rights
attached to the shares of any particular class; and any decision as referred to in
sub-section (2) above shall not be enforced pending the expiration of that time limit.
Pursuant section 30(5) of this Act if it appears that alteration in the rights conferred to
the shareholders of the class concerned is prejudicial to the rights of the petitioner
shareholders, the court may quash the decision made on the alteration in the rights of
the shareholders of that class.
In pursuance to section 30(6) of this Act the board of directors shall submit a proposed
resolution on the alteration in the rights of the shareholders of any particular class
pursuant to sub-section (2) above to the general meeting of the shareholders of the
concerned class; and such resolution has to be adopted as a special resolution by the
general meeting.
Pursuant section 30(7) of this Act, notwithstanding anything contained elsewhere in this
Section, in privatizing a company fully or partly owned by the Government of Nepal, as
a shareholder, in accordance with the prevailing law on privatization, the Government of
Nepal may have special voting right in making decision on the following matters, as
provided in the articles of association, so long as the investment to the Government of
Nepal is retained in such company:
(a) In making decision on a resolution to relinquish the title to an undertaking pursuant
to Clause
(a) of Sub-section (1) of Section 105,
(b) In making decision on voluntary liquidation of the company,
(c) In making decision to amalgamate the company into another company

2008 June
What is "Share Certificate'? When and within what time it should be issued? What
is the duty of the shareholder when the share certificate is lost or destroyed?
Answer:

2016 June
Who is Debenture Trustee? What are the matters to be included in the agreement
to be concluded between Debenture Trustee and company under Companies act,
2063?
Answer:

Section 2 (t) of the Companies Act 2063 defines Debenture-Trusteeas a body corporate
undertaking the responsibility for the protection of interests of debenture-holders at the
time of issuance of debentures by a company.
Section 36 of the Companies Act 2063 states the matters to be included in the
agreement to be concluded between debenture trustee and company, which are as
follows:
(a)That the debenture trustee is entitled to carry out, or cause to be carried out,
valuation of the company's assets, project analysis or management analysis,
(b) The period of repayment of the principal and interest of debentures subscribed by
the debenture-holder, interest rate, mode of repayment of the principal and interest, and
matters of conversion of debentures into shares, if there is such provision,
(c)Matters relating to a provision made on the rights of other creditors over the assets of
the company and liabilities that may arise there from in the future.
(d) A provision that, in the event of violation or non-fulfillment of the terms mentioned in
the agreement or for any other reasonable reason, if it is required to take the control of
financial transactions of the security as referred to in the agreement, the debenture
trustee may take in his possession the assets or property that he has taken as the
security or guarantee or hold the security or guarantee or hold the security or guarantee
with himself or sell the same by auction or in any other appropriate manner,
(e)Procedures for payment by the company of the service charges and other direct
expenses of the debenture trustee,
(f)That the debenture trustee shall not be liable to any loss or damage caused to the
company or the debenture-holder from any act done by the trustee in the capacity,
(g) That, in the event of occurrence of any circumstance necessitating the liquidation of
the company, the debenture trustee is entitled to take such legal action as may be taken
on behalf of the debenture-holder and exercise the powers of the debenture-holder,
(h) Other necessary matters on the protection of interest of the debenture-holder.

2014 June
Distinguish between Right Shares and Issue of shares at premium.
Answer:

Rights shares:
Section 56 of Company Act, 2063 has made certain provisions where that company
alters its shares.

The company can increase its capital by issuing rights shares. A rights issue is an issue
of rights to buy additional securities in a company made to the company's existing
security holders. When the rights are for equity securities, such as shares, in a public
company, it is a way to raise capital under a seasoned equity offering. Rights issues are
sometimes carried out as a shelf offering. With the issued rights, existing security
holders have the privilege to buy a specified number of new securities from the firm at a
specified price within a specified time. In a public company, a rights issue is a form of
public offering (different from most other types of public offering, where shares are
issued to the general public). Rights issues may be particularly useful for closed-end
companies', which cannot retain earnings, because they distribute essentially all of their
realized income and capital gains each year; therefore, they raise additional capital
through rights offerings. As equity issues are generally preferable to debt issues from
the company's viewpoint, companies' usually opt for a rights issue when they have
problems raising equity capital from the general public and choose to ask their existing
shareholders to buy more shares.
Share issue at premium:
Section 29 of Company Act, 2063 has made provision to issue shares at premium.

Each who fulfilled these conditions could apply for issuance of shares at premium. A
term is used when a company issues shares of its stock at price above its par value.
The excess cash, or premium received by the company is place in a shared premium
account and can be used to pay up unissued shares for distribution as bonus shares; to
pay a premium on the redemption of preferred stock; writing down company expenses
or expenses incurred in the issuance of the shares. A company issues its shares at a
premium when the price at which it sells the shares is higher than their par value. This is
quite common, since the par value is typically set at a minimal value, such as Rs. 100
per share. The amount of the premium is the difference between the par value and the
selling price. If shares do not have a par value, then there is no premium. In this case,
the entire amount paid is recorded in the common stock account (if the payment is for
common stock, rather than for some form of preferred stock). For example, if ABC
Company sells a share of common stock to an investor for Rs. 110, and the stock has a
par value of Rs. 100, then it has issued the share at a premium of Rs. 10.

2016 June
Wild Fibers Ltd. has intended to issue right shares but there was no unanimity
within the Board of Directors. Hence, the Directors who were opposed to issue
right shares asked you for your opinion regarding the benefits of rights shares.
How can you give your opinion regarding the benefits of right shares?
Answer:

Right Shares are those types of shares which are issued to existing shareholders only.
The right shares help the company to raise its share capital without increasing the
number of shareholders and the existing shareholders can get opportunity to increase
their shares in the company. Benefits of Issuing Right Shares:

1. More control on existing shareholders

Because right shares are issued to existing shareholder, so there is no risk of losing of
control of existing shareholders. Existing shareholders" share will increase in company
and they can take decision without any compromise with the principles of company. It is
very helpful to achieve the missions of company.

2. No loss to existing shareholder

By issuing shares to existing shareholders, value of share will increase due to stability in
controlling power of company. So, there will not be any loss to existing shareholders
with right shares.

3. No cost for issuing shares to public

Company has not to give any invitation to public, so advertising cost and other new
issue cost will decrease with right shares.

4. Capital formation
Company can get capital at any time without any delay because company can easily
issue shares to existing shareholders just sending right shares offer notice. Further, it is
also way to increase the goodwill and reputation of company in industry.

5. More scientific
Distribution technique of right shares issue is more scientific. Not all shares will get by
single shareholders but it will be in the proportion of existing shares which is in the hand
of old shareholders at this time.

2008 June
PQR Limited has a paid up capital of Rs. 30 lacs, reserves of Rs. 10 lacs and total
loans of Rs. 70 lacs in its balance sheet. The company desires to buy back its
capital amounting to Rs. 10 lacs. Examine the legality of the extent of the
proposal buyback by POR Limited.
Answer:

2010 Dec
ABC telecom Ltd., a debt free company having a fully paid up equity share capital
of Rs. 15 billion, cash and bank balance of Rs. 20 billion and free reserves of Rs.
20 billion wants to improve the profitability of the company through reduction of
capital. Advise the company regarding the po of the company to purchase its own
securities as per provisions of the Companies act, 2063.
Answer:

The provision section 77 A (1) & (2) of the Companies Act, 1956 in respect of power of
company to purchase its own securities are as follows:
1) Notwithstanding anything contained in this Act, but subject to the provisions of
subsection (2) of this section and section 77B, a company may purchase its own shares
or other specified securities (hereinafter referred to as "buy-back") out of-
(i) its free reserves; or
(ii) the securities premium account; or
(iii) the proceeds of any shares or other specified securities: Provided that no buy-back
of any kind of shares or other specified securities shall be made out of the proceeds of
an earlier issue of the same kind of shares or same kind of other specified securities.
(2) No company shall purchase its own shares or other specified securities under
sub-section (1) unless-
(a) the buy-back is authorized by its articles;
(b) a special resolution has been passed in general meeting of the company authorizing
the buy-back:
Provided that nothing in this clause shall apply in and case where-
(A) the buy-back is or less than ten percent of the total paid-up equity capital and free
reserves of the company; and
(B) such buy-back has been authorized by the Board by means of a resolution passed
at its meeting:
Provided further that no offer of buy-back shall be made within a period of three
hundred and sixty-five days reckoned from the date of the preceding offer of buy-back, if
any; Explanation: For the purpose of this clause, the expression "offer of buy-back"
means the offer of such buy-back made in pursuance of the resolution of the Board
referred in the first provision;
(c) the buy-back is or less than twenty five percent of the total paid-up capital and free
reserves of the company: Provided that the buy-back of equity shares in any financial
year shall not exceed twenty-five percent of its total paid-up equity capital in that
financial year;
(d) the ratio of the debt owed by the company is not more than twice the capital and free
reserves after such buy-back: Provided that the Central Government may prescribe a
higher ratio of the debt than the specified under this clause for a class or classes of
companies; Explanation- For the purposes of this clause, the expression "debt" includes
all amounts of unsecured and secured debts;
(e) all the shares or other specified securities for buy-back are fully paid –up;
(f) the buy-back of the shares or other specified securities listed on any recognized
stock exchange is in accordance with the regulations made by the Securities and
Exchange Board of India in this behalf;
(g) the buy-back in respect of shares or other specified securities other than those
specified in clause (f) is in accordance with the guidelines as may be prescribed.
Considering the above mentioned provisions of the Companies Act the buy-back can be
arranged up to 25 percent of the paid up capital and free reserves of the company
complying the conditions as specified in the above mentioned section.

2011 Dec
A public company proposes to purchase its own shares. State the sources of
funds that can be utilized by the company for purchasing its own shares and the
requirements to be complied with by the company under the Companies act,
2063.
Answer:

Section 61(2) of the Companies Act, 2063 allows a company to buy its own shares out
of its free reserves available for being distributed as dividends. The conditions for buy
back under this section are as follows:
(i) Where the shares issued by the company are fully paid up;
(ii) Where the shares issued by a public company have been listed in the Securities
Board;
(iii) Where the buy-back of shares is authorized by the articles of association of the
concerned company;
(iv) Where a special resolution has been adopted at the general meeting of the
concerned company authorizing the buy-back;
(v) Where the ratio of the debt owed by the company is not more than twice the capital
and general reserve fund after buy-back of shares;
Explanation: For the purpose of this Clause, "debt" means all amounts of secured or
unsecured debts borrowed by a company.
(vi) Where the value of shares to be bought back by a company is not more than twenty
percent of the total paid up capital and general reserve fund of that company;
(vii) Where the buy-back of shares is not in contravention of the directives issued by the
Office in this respect.
A resolution to be presented at the general meeting shall state the following matters;
(a) The reason and necessity for the buy-back of shares.
(b) A statement of the evaluation of possible impacts of the financial situation of the
concerned as a result of the buy-back of shares,
(c) The class and number of shares intended to be bought back;
(d) The maximum or minimum amount required to buy-back shares as referred to in
Clause (c) and financial sources of such amount;
(e) The time limit for the buy-back of shares;
(f) The mode of the buy-back shares;
(g) Such other necessary matters as specified by the office and as required to be
disclosed under the prevailing law, in respect of the buy-back of shares;

2006 Dec
Explain "Issue of Shares at a discount".
Answer:
2007 Dec
Can a company issue shares at a discount? Answer based on the provisions of
the Companies act, 2063.
Answer:

2006 Dec
Complaint Company Ltd. having its registered office in Birgunj, calls its AGM at
Kathmandu. A notice mentioning the Place, date and agenda was published by
the company in the Kathmandu Post on 8th Mangsir, calling the meeting on 30th
Mangsir. No other communication was made by the company for its AGM. 57% of
the shareholders of the company attended the meeting in person and decided on
the agenda. Explain Quorum under Companies act, 2063.
Considering the meeting was not adjourned, state your findings on the following
issues referring to the provisions of the Company Act, 2063:
i. Irregularities committed by the company on entire proceedings mentioned
above.
ii. Validity of the resolutions passed by the meeting.
Answer:

2007 June
What are the essential conditions for the conduct of a valid AGM? Explain.
Answer:

2010 Dec
A consensus agreement concluded between Mr. A, B, C and D the promoters of
Babarmahal Resort Pvt. Ltd. making a provision that the AGM of the company
shall not be held. The consensus agreement was submitted to the company
registrar office with the application of incorporation of the company. What shall
be the consequence of the above provision?
Answer:

Yes. Shareholders can reach such consensus agreement. Where a consensus

agreement concluded between the shareholders of a private company that the general
meeting shall not be held, such private company shall not required to hold its general
meeting during the period of such agreement; however, Company shall also make
provisions on the procedure of making decision on such matters required to be decided
by the general meeting and authority of making such decision.

2012 Dec
Who is the chairperson of a general meeting? A General Meeting was called for
changing the company's memorandum for facilitating an amalgamation. A fairly
large number of members wanted to oppose the move. The meeting became
overcrowded. The venue provided became too small. The members were seated
in the adjoining rooms and a sound system was installed to enable them to hear
and to participate. That system failed. Then there was a bewildering confusion
and in that state of things the chairperson arranged for an alternative venue and
resolved to adjourn the meeting to meet again in the evening at the new venue.
There was opposition to this move also. However, the meeting in evening was
held in the new venue. Decide the validity of the meeting with reference to the
provisions of the Companies act and legality of adjourned meeting.
Answer:

"Chairperson" is the person who has been designated or elected to preside over and
conduct the proceedings of a meeting. He is usually a member of the body over which
he is to preside. For the proper conduct of business at a meeting, a chairperson is
necessary. His/her appointment is usually regulated by the articles of association. But if
there is nothing in the articles the members personally present at the meeting shall elect
one of themselves to be the chairman.
Section 175(1) of the Companies Act, 1956 provides that, unless the articles of the
company otherwise provide, the members personally present at the meeting shall elect
one of themselves to be the chairman thereof on a show of hands.
Section 175(2) of the Companies Act, 1956 provides that, if a poll is demanded on the
election of the chairman, it shall be taken forthwith in accordance with the provisions of
this Act, the chairman elected on a show of hands exercising all the powers of the
chairman under the said provisions. If some other person is elected chairman as a
result of the poll, he shall be chairman for the rest of the meeting.
The above fact of the case is similar to a British case - Bying Vs. Rondan Life Assn
Limited( 1989) where the meeting in the evening at the new venue was held to be
invalid and the chairman's adjournment of the morning meeting without taking a sense
of the meeting was held to be not lawful. The court recognized that it is not necessary
that all the members should be present in one room but that if the members are seated
in different rooms here should be an audio visual link between all the rooms. In this
case the system having failed, the gathering could not be constituted into a valid
meeting except for rudimentary purpose of adjourning itself. Under the articles of the
company the chairperson could adjourn a meeting only with the consent of the meeting.
But even so the court was of the view that a residuary power of adjournment would
survive because circumstances may develop as they did in this case, where it is
impossible to ascertain the view of the majority. Finally the court came to the conclusion
that the chairman's power of adjournment was not fairly exercised. He failed to take in to
account the relevant factors such as member attempts adjournment their objections to
the temporary adjournment and that there was no such urgency. The court said that for
testing the reasonableness of the conduct of a chairman, the same test is applicable
which is generally applied in all cases of judicial review namely whether the chairman
reached a conclusion which no reasonable chairman could have reached having
regarded to the purpose of his power to adjourn.

2012 Dec
Professional Solution Ltd. announced 5th annual general meeting of the company
in Kantipur daily published on 23rd Kartik 2069. There is no mention any date,
time, duration, place and agenda of the meeting. Company published a notice for
presence of shareholders in AGM only. IS this meeting valid under the Companies
act, 2063? Is there any provision regarding the process of calling AGM of public
company? Explain.
Answer:

Professional solution ltd company announced a general meeting by publishing a notice

in Kantipur Daily newspaper. In this notice there is no any information regarding the
business of the meeting. According to companies' act, 2063, section 67 (2) A public
company shall a notice specifying the place, date, and agenda of meeting to every
shareholder at the address supplied by that shareholder to the company, in advance of
at least 21 days to hold the annual general meeting A notice thereof shall also be
published at least twice in a national newspaper. Section 67 (3) No decision shall be
taken in any general meeting on any matter which has not been notified in advance
pursuant to subsection (2) except in the following circumstances;

Except as otherwise provided in the other sections of this Act, if the shareholders
representing sixty-seven percent of the total shares of the company who rare entitled to
vote at the general meeting attend in person or by proxy and vote in favor of taking
decision on any matters. If the matter was already notified for being transacted in any
general meeting which has been adjourned.

Company Act, 2063 make compulsion to call annual general meeting before 21 days
with mentioning the information about the date, time, place and agenda for the meeting
that must be send to every shareholders of the company. This is mandatory for the
company management. This is not optional. Here the professional solution limited does
not fulfill the criteria for calling the annual general meeting of the company according to
companies' act, 2063. So the validity of the meeting is not there and that meeting should
not be accepted by the company Registrar office.

2015 Dec
Kanchanjunga Public Company, having its registered office in Kathmandu, calls
its AGM at Kathmandu. A notice mentioning the Place, date and agenda was
published by the company in the Himalayan Times on 15th October 2015, calling
the meeting on 8th November, 2015. No other public notice was made by the
company for its AGM. 7% of the shareholders of the company attended the
meeting in person and decided on the agenda. Considering the meeting was not
adjourned, state your findings on the following issues referring to the provisions
of the Company Act, 2063:
i. Irregularities committed by the company on entire proceedings mentioned
above.
ii. Validity of the resolutions passed by the meeting.
Answer:

Kanchanjanga Public Company, as a legal entity must follow the legal procedures for
convening its Annual General Meeting (AGM) pursuant to the Companies act, 2063.
The notice must be given by the proper authority which would normally be the Board of
Directors following proper procedures. Accordingly, in pursuance to Section 67 (2) of the
Companies act, 2063 a general meeting of a public company may be called by giving
not less than 21 days' prior notice in writing with mentioning the place, date and agenda
of AGM, at least two times general notice in the national daily newspaper which is
mandatory.

In this case only one-time notice was published, i.e. only on 15 Oct. 2015 calling the
meeting will be held on 8th November 2015. At least another notice was not published
in any national daily newspaper. So there is a mistake on the part of this company not to
publish another public notice. Further, only seven percent out of total of the
shareholders of the company attended in the meeting. As per the legal provision under
Section 73 of this Act, there must be at least three shareholders of the total
shareholders representing more than fifty percent out of total distribution of the shares
of the company. If the quorum is less, then the entire proceedings of the company
cannot go ahead by the meeting. It becomes a mistake of procedure for AGM. So,
firstly, there is an irregularity committed by the Company for not issuing at least another
notice calling for AGM, so it is an invalid AGM. Secondly, in above case, only seven
percent shareholders were present in the meeting, whereas, as legal provision under
Section 73(2) of the Act, unless the section provides for a large number at least three
members or shareholders must represent more than fifty percent of total allotted shares
by personally presenting or by proxy in the case of this public company. Therefore, the
meeting was invalid for the want of required quorum. Hence the meeting was against
the legal provision; the resolutions so passed were invalid for that reason.

Note: 7% of the shareholders of the company attended can be considered as valid or

invalid as per reasonable assumption of the examinees.

2011 June
What are the circumstances where attendance or voting of shareholders in
General Meeting is restricted under the Companies act, 2063? Explain briefly.
Answer:

The companies Act, 2063, provides the following cases where attendance or voting in
meeting is restricted (Section 70):
(1) No person shall be entitled to attend and vote in any general meeting, in the capacity
of a shareholder, either in person or by proxy on any discussion to be held in respect of
any terms and conditions entered into or to be entered into between him/herself and the
company.
(2) No director or his/her partner or his/her proxy shall be entitled to vote on any
discussion to be held at any General Meeting in respect of the responsibility for any act
done or omitted to be done or done wrongfully by him/her or in respect of his/her own
appointment, dismissal, transfer or confirmation, with respect to the provision of, or
reduction or increment in remuneration, allowance or bonus or in respect of any
agreement, contract or arrangement regarding his employment or anything in which his
interest or concern is involved.
(3) Any shareholder who has not paid calls on the shares shall not be entitled to attend
and vote in the general meeting.
(4) Where any shareholder appoints a director of the concerned company as his proxy
pursuant to Sub-section(2) of Section 71, such director shall not be entitled to vote in
the general meeting ,as a proxy of any one , on any matter in which his/her interest or
concern is involved or on the matter of his/her appointment.
(5) Notwithstanding anything contained in this Act or the prevailing law, where a bank or
financial institution incorporated under the prevailing law, which institutes legal action
against a shareholder, who has borrowed a loan from such bank or financial institution
against the pledge or security of the shares held by him, for his default in repaying the
loan, writes to the concerned company to prevent him from exercising voting right in
respect of shares, then the company shall prevent such shareholder from exercising
voting right in respect of the shares held by him/her for a period until he/she repays the
loan.

2009 June
The directors of Hydrangea Ltd. a recently incorporated company selling garden
furniture wishes to increase the authorized share capital of the company to Rs. 2
crore and to change the name of the company to Motormowers Ltd. Referring to
the provisions of the companies act, 2063 decide:
i. The directors seek your advice on the statutory requirements for calling the
meeting and resolution required to give effect to the above proposals.
ii. The first AGM of Hydrangea Ltd. is due to be held in September 2009 and the
directors seek your advice on how the votes of members and proxies should be
taken and counted at the meeting.
Answer:

Calling of the meeting

It must call an extraordinary general meeting (EGM) in order that both resolution might
be passed in that meeting.
Notice of the meeting
Notice of the EGM must be sent to every members of the company who is entitled to
attend and vote at the meeting. It should also be sent to the directors and auditors. The
notice should:
a) Give adequate information concerning the date, time and place of the meeting.
b) Describe the proposed special business as such,
c) Give sufficient details of the proposed business at the meeting to enable recipient of
the notice to understand what it is proposed to be done at the meeting.
Length of notice
The length of notice requires is 15 days because of the special resolution.
Increasing the authorized share capital
Under S.83 (a) authority to increase the authorized share capital of a company needs to
be given by a special resolution of the company in general meeting.
Changing the company‘s name
Authority to change the name of a company requires a special of the company in
general which means a 75% majority of votes cast is needed to pass it.
Voting Right:
The rights of members to vote and the number of votes to which they are entitled will be
determined by the company‘s articles.
Proxies
Every member entitled to attend and vote at a meeting may instead appoint a proxy to
attend and vote for him. The proxy need not be a member. An appointment of a proxy is
revocable by the member. It will be deemed to have been revoked where the member
himself attends the meeting in person and vote.

2010 June
Who are directors? Discuss the provision of the Companies act, 2063 relating to
voting on election of Directors.
Answer:

Though a company is legal entity in the eye of the law, it cannot, act in its own person. It
must act through human agency. Persons through whom it acts and does its business
would be its agents. Such persons are usually called directors. They are appointed by
shareholders. Under Section 2(y) of Companies Act, 2063 ―Director‖ means any
director of a company and this term includes any alternate director.
Section 72 of the Companies Act, 2063 (Provision on voting in election of director):
(1) Except as otherwise provided in the articles of association, on a poll in election of
directors, every shareholder shall be entitled to cast such number of votes as may be
set after multiplying the number of shares held by him/her by the number of directors to
be appointed; and the director who casts such votes may cast all his/her votes for a
single candidate or may cast votes in a manner that his/her votes are divided for more
than one candidate as indicated by him.
(2) A corporate body entitled to appoint a director pursuant to this Act or articles of
association may appoint directors in proportion to its share holding and in such a case,
it shall but be entitled to cast vote in the election.
Provided, however, that a corporate body which is not able to appoint even a single
director in proportion to the number of shares and the total number of directors or which
fails to appoint a director in exercise of the power conferred by this Subsection may, like
other shareholder, take part in the election of directors representing shareholders, cast
vote or file candidacy up to the number of directors that can be elected in proportion to
the shares held by that body in such election.

2006 Dec
Complaint Company Ltd. having its registered office in Birgunj, calls its AGM at
Kathmandu. A notice mentioning the Place, date and agenda was published by
the company in the Kathmandu Post on 8th Mangsir, calling the meeting on 30th
Mangsir. No other communication was made by the company for its AGM. 57% of
the shareholders of the company attended the meeting in person and decided on
the agenda. Explain Quorum under Companies act, 2063.
Considering the meeting was not adjourned, state your findings on the following
issues referring to the provisions of the Company Act, 2063:
I. Irregularities committed by the company on entire proceedings mentioned
above.
ii. Validity of the resolutions passed by the meeting.
Answer:

2008 June
Explain Quorum of General Meeting.
Answer:

2010 Dec
What are the provisions regarding quorum required for a GM as per the
companies act, 2063?
Answer:

Quorum for a general meeting as per Companies Act 2063 (Section 73)
(1) A quorum for the general meeting of a private company shall be as specified in the
articles of association of such company.
(2) Unless the articles of association of a public company provides for a larger number
for the quorum, no proceedings of the meeting of the public company shall be
conducted unless at least three shareholders of the total shareholders, representing
more than fifty per cent of the total number of allotted shares of that company, are
present either in person or by proxy.
(3) Where a meeting cannot be held because of quorum as referred to in sub-section
(2), and the meeting is called for the second time by giving a notice of at least seven
days, nothing shall prevent the holding of such a meeting if at least three shareholders,
representing twenty five per cent of the total number of allotted shares of the company,
are present either in person or by proxy.
(4) Notwithstanding anything contained elsewhere in this Section, in the case of a
company incorporated under the proviso to sub-section (2) of Section 3 or a company
incorporated under subsection(1) of Section 173, the presence of three shareholders as
mentioned in sub-section (2) or (3) shall not be mandatory.

2007 Dec
In a proposal put up for voting in a General Meeting; 6 members are in favor while
7 members are against it, without considering the chairman's vote. If the
chairman is in favor of the proposal, can he get the resolution passed in the
meeting? Decide citing provisions of the Companies act, 2063.
Answer:
2003 Dec
Differentiate AGM Vs Special General Meeting
Answer:

2004 June
Differentiate: AGM Vs EGM.
Answer:

2012 Dec
D Itd. had incorporated in accordance with the Companies act, 2063. It has 100
shareholders. The articles provide the quorum for the proceedings of the meeting
at least 10 shareholders of the total shareholder representing more than 60% of
the total numbers of allotted shares of that company present either in person or
by proxy. Further, it also provides that the matters relating to increase the
authorized capital of the company should be presented in general meeting of the
company as a special resolution. It has got its licour to commence the business
in February 1, 2011. As the company law and its rules, company intended to
increase its authorized capital. However, AGM of the company could not hold
except first AGM even on pressure of the shareholders. It is said that
shareholders are the owners of a company so, in relation to the Companies act,
2063, solve the following problems with the help of the facts or legal provisions of
the Act L. How can the shareholders compel to the company to hold AGM?
Explain the legal provisions. it. The company called AGM due to the pressure of
the shareholders and passed a resolution to increase authorized capital having
presence of 6 in numbers that represents only 40% shareholders of the total
numbers of allotted shares of that company. Is the resolution validly passed?
Answer

Shareholders of the Company have certain rights and liability only to the maximum
value of shares which may have subscribe or undertaken to subscribe.
D Ltd. could not hold the annual general meeting. In this connection, section 76 of the
Companies act, 2063 (2007) has provided about the procedure of the calling annual
general meeting. This section provides alternative way if any public company could not
manage to hold annual general meeting.
1) Directions of Company Registrar Office:
Every public company shall hold its annual general meeting every year within six
months after the expiry of its financial year. If such annual general meeting could not be
held within six months after the expiry of its financial year, the company registrar office
may give direction to call the annual general meeting of such company
2) Making a petition by any shareholder:
Even the company falls to call the annual general meeting within three months after the
receipt of the direction as referred to above any shareholder may make a petition for,
setting out the matter, to the court. Where such petition is made, the court may either
cause to hold the annual general meeting or issue any other appropriate order.
According to the above legal provisions, if any company couldn't hold annual general
meeting within time mentioned above the company registrar office may give direction to
call the general meeting. Any shareholder may make a petition setting out the matter to
the court if the company unable to hold the annual general meeting within three months
from the date of receipts of the direction.
Here, the second question is testing the validity of increasing authorized capital. This
resolution is passed by the shareholder's meetings with the presence of 6 members that
represents only 40% shareholders of the total members of allotted share of that
company. This quorum is less than the provision of the companies" AOA In another
side, section 73(2) of the Companies act, 2063 (2007) has given right to state required
quorum of large number. Unless the article of association of a public company provides
for a larger number for the quorum, the proceeding of the meeting of the public
company shall be conducted unless at least three shareholders of the total
shareholders, representing more than fifty percent of the total number of allotted share
of that company are present either in person or by proxy." However, company is facing
an extraordinary situation that is the resolution of increasing authorized capital could not
pass. So, the provision provided in the section 76(4) is the way-out of solving the
extraordinary situation. It has provided circumstantial quorum despite the provision of
AoA or in the section 73(2). The shareholders present in the General meeting called
pursuant to the order of the court under Sub-section (3) shall be deemed to be a
quorum. Hence, it is clear that the resolution increasing anithorized capital with fewer
quorums is valid

However, such exemption has not been provided in case of meeting called as per the
direction of the Company Registrar Office

2003 Dec
Differentiate AGM Vs Special General Meeting
Answer:
2004 June
Differentiate: AGM Vs EGM.
Answer:

2004 Dec
M/s ABC, a public limited company incorporated in 1st of Shrawan 2058 with
office of the registrar and getting certificate of commencement of business on 1st
Magh 2058. Due to severe condition and financial burden the company not
holding any GM for the financial year 2059/60. Considering the situation the
Board of Directors called an EGM on 30th Poush 2060, giving 21 days notice.
Discuss the validity of the meeting with reference to the provisions of the
Companies act, 2063.
Answer:

2008 June
During the course of Audit, Auditors of XYZ and Co. come across serious matters
that need to be brought to the notice of the shareholders. Your advice is sought
as to how an EGM can be called to communicate the findings. Advice.
Answer:

2010 June
G. Upadhyaya & Co., the auditor of XYZ Company in course of its audit comes
through mass irregularities in the accounts of the company but due to certain
reasons it is unable to provide an adverse opinion. The auditors feel that the
shareholders need to know about the matter hence requested the Board of the
company to convene an EGM. The board refuses to convene the meeting on the
ground that the auditor can present its observations in the audit report which
shall be placed in the AGM. Provide your opinion whether the audit firm can
convene an EGM, clearly stating the circumstances for conducting an EGM as
provided in the Companies act, 2063.
Answer:

The circumstances in which and EGM can be convened as specified in the Companies
Act 2063 are as follows:
Extra-ordinary General Meeting (Section 82):
(1) The board of directors of a company may convene an extra-ordinary general
meeting if it deems necessary.
(2) If, in the course of examining the accounts of a company, it is deemed necessary to
call an extraordinary general meeting for any reason, the auditor may request the board
of directors to call such meeting; and if the board of directors fails to call the meeting
accordingly, the auditor may make an application, setting out the matter, to the Office;
and if an application is so made, the Office may call the extra-ordinary general meeting
of the company.
(3) If the shareholders holding at least ten per cent shares of the paid-up capital of a
company or at least twenty five per cent shareholders of the total number of
shareholders make an application, setting out the reasons thereof, to the registered
office of the company for calling an extraordinary general meeting, the board of
directors shall call the extra-ordinary general meeting of the company.
(4) If the board of directors does not call the extraordinary general meeting within thirty
days from the date on which an application is made pursuant to sub-section (3), the
concerned shareholders may make a petition to the office setting out the matter; and if
such petition is made, the Office may cause to call such meeting.
(5) If the Office deems necessary to call an extraordinary general meeting in view of the
findings of any inspection or investigation or for any other reason, it may itself call or
cause the board of directors to call such meeting.
Considering the provisions of Section 82 (2) as mentioned above the auditor can
approach the Office of the Company Registrar for convening the EGM to report the
irregularities to the shareholders.

2013 Dec
Auditor of company ABC found out some irregularities during the course of audit
and would like that the shareholders know about these irregularities, therefore,
he wants to convene EGM. He doesn't know how to convene EGM and
approaches you. Explain how EGM can be convened on the basis of the
Companies act, 2063
Answer:

The circumstances in which and EGM can be convened as specified in the Companies
Act 2063 are as follows:
Extra-ordinary General Meeting (Section 82):
(1) The board of directors of a company may convene an extra-ordinary general
meeting if it deems necessary.
(2) If, in the course of examining the accounts of a company, it is deemed necessary to
call an extraordinary general meeting for any reason, the auditor may request the board
of directors to call such meeting; and if the board of directors fails to call the meeting
accordingly, the auditor may make an application, setting out the matter, to the Office;
and if an application is so made, the Office may call the extra-ordinary general meeting
of the company.
(3) If the shareholders holding at least ten per cent shares of the paid-up capital of a
company or at least twenty five per cent shareholders of the total number of
shareholders make an application, setting out the reasons thereof, to the registered
office of the company for calling an extraordinary general meeting, the board of
directors shall call the extra-ordinary general meeting of the company.
(4) If the board of directors does not call the extraordinary general meeting within thirty
days from the date on which an application is made pursuant to sub-section (3), the
concerned shareholders may make a petition to the office setting out the matter; and if
such petition is made, the Office may cause to call such meeting.
(5) If the Office deems necessary to call an extraordinary general meeting in view of the
findings of any inspection or investigation or for any other reason, it may itself call or
cause the board of directors to call such meeting.
Considering the provisions of Section 82 (2) as mentioned above the auditor can
approach the Office of the Company Registrar for convening the EGM to report the
irregularities to the shareholders.

On the basis of above provision , the auditor can not himself convene EGM. But the
auditor may request the board of directors to call such meeting; and if the board of
directors fails to call the meeting accordingly, the auditor may make an application, to
the Office of the Company Registrar; and if an application is so made, the Office may
call the extra-ordinary general meeting of the company.

2014 Dec
Auditors of company ABC found out some irregularities during the course of
audit and would like the shareholders to know about the irregularities, therefore,
he wants to have the company's Extra Ordinary General Meeting (EGM)
convened. But he doesn't know it would be convened, so he approaches you.
Could you explain how the EGM of Company ABC can be convened pursuant to
the Companies act,2063?
Answer:

Section 82 of the Companies Act, 2063 has included provisions relating to a Company’s
EGM,which are as follows: Pursuant to section 82(1) of the Companies Act, 2063, the
board of directors of a company may convene an extra-ordinary general meeting (EGM)
if it deems necessary.
Pursuant to section 82(2) of this Act, if in the course of examining the account of the
Company ABC, it is deemed necessary to call an extra ordinary general meeting for
discussion of the irregularities at the EGM, the auditor may request to the board of
directors to call such meeting; and if the board of directors fails to call the meeting
accordingly, the auditor may make an application, setting out the matter, to the Office of
Company Registrar (Office) and if an application is so made, the Office may call the
extra-ordinary general meeting of the company.

2004 June
Differentiate: Special Resolution Vs Ordinary Resolution.
Answer:

2003 Dec
What are the cases under which special resolution is required to the company
under the Companies act, 2063?
Answer:

2008 June
Mention the ordinary businesses that are transacted at the AGM of a company.
What kind of resolution does the companies act 2063 requires for the approval of
issue of Bonus Shares?
Answer:

2011 Dec
What is the procedure on deciding a resolution at a general meeting and mention
the matters requiring Special Resolution at the general meeting of a company as
per the Companies act, 2063.
Answer:

Procedure for taking decision at a general meeting:

Section 74(3) of the Companies Act, 2063: The opinion of majority of the shareholders
present in the meeting shall be deemed to be the decision of that meeting on every
matter put to vote. Such voting may be taken in such manner including a show of
hands, voice voting, division of shareholders in groups or poll as well as other
appropriate method as prescribed by the chairman.
Provided, however, that in the case of a special resolution, the resolution shall be
deemed to have been adopted by the meeting only if the shareholders representing
seventy five per cent shares out of the shareholders present in the meeting vote in favor
of the resolution.
The matters requiring Special Resolution at the general meeting of a company is
specified in Section 83 of the Companies Act 2063 as follows:
Section 83: Special resolutions to be presented:
Special resolutions shall be presented in the general meeting of a company for decision
on the following matters:
(i) Increasing the authorized capital of the company,
(ii) Decreasing or altering the share capital of the company,
(iii) Altering the name or main objects of the company,
(iv) Amalgamating one company into another company,
(v) Issuing bonus share, (vi) Buying back of own shares by the company,
(vii) Selling shares at a discount,
(viii) Converting a private company into a public company or vice versa,
(ix) Such other matter in respect of which the company is required by this Act or the
articles of association to adopt a special resolution.

2013 Dec
What is the procedure of making decisions on the agendas at a GM and mention
the matters requiring Special Resolution at the GM of a company as per the
companies act, 2063?
Answer:

As per the provision of the section 77 of the Companies Act 2063 the procedures on
deciding a resolution at a general meeting are as follows:
(1) The directors shall present the annual financial statements as audited,
auditor’sreport and director’s report at the annual general meeting of a public company.
(2) If the shareholder or shareholders representing at least five per cent of the total
number of votes shall so desire, he/they may, by submitting anapplication to the
directors prior the issue of a notice under Sub-section
(2) of Section 67, cause any matter to be presented at the annual general meeting for
discussion and decision.
(3) At least twenty one days prior to the holding of the annual general meeting, every
public company shall make arrangement so that the shareholders can inspect and
obtain copies of the annual financial statement, directors’ report and auditors’ report as
referred to in Section 84 and publish a notice in a national daily newspapers for
information thereof.
(4) Information of the statements and reports as referred to in Subsection (3) may also
be disseminated through electronic communication media as per necessity.
(5) If any shareholder makes a request for a copy of the annual financial statement,
directors’ report and auditor’s report as referred to in Sub-section (3),the company shall
provide a copy of such reports or statements to such shareholder.
(6) Except as otherwise provided in this Act, matters of distribution of dividends to
shareholders, appointment of directors and their remuneration, appointment of auditor
and his/her remuneration of such other items as required by this Act or the articles of
association to be decided by the annual general meeting of the company can be
presented at the decided by the annual general meeting of the company can be
presented at and decided by that meeting.
Provided, however, that on the rate of dividends to be distributed to the shareholders
shall be made in a manner to exceed the rate of such dividendsfixed by the board of
directors.
As per the provision of Section 83 of the companies Act 2063 the Special resolutions
must be presented in the general meeting of a company for decision on the following
matters;
(a) Increasing the authorized capital of the company,
(b) Decreasing or altering the share capital of the company,
(c) Altering the name or main objectives of the company,
(d) Amalgamating one company into another company,
(e) Issuing bonus share,
(f) Buying back of own shares by the company,
(g) Selling shares at a discount,
(h) Converting a private company into a public company or vice versa,
(i) Such other matter in respect of which the company is required by this Act or the
articles of association to adopt a special resolution.

2016 June
Some of the shareholders of Transnational Works Pvt. Ltd. objected the
resolution relating to issue bonus shares forwarded by the Board of Directors
stating that resolution should be presented as a Special Resolution. Advice the
directors in the following issues.
i. What matters should be presented as a Special Resolution?
ii. Whether the resolution to issue Bonus Shares is Special Resolution?
Answer:

i) Regarding the special resolution, Section 83 of the Companies Act, 2063 mentions
that the following matters shall be presented as special resolutions in the general
meeting of a company:
1. Increasing the authorized capital of the company,
2. Decreasing or altering the share capital of the company,
3. Altering the name or main objectives of the company,
4. Amalgamating one company into another company,
5. Issuing bonus share,
6. Buying back of own shares by the company,
7. Selling shares at a discount,
8. Converting a private company into a public company or vice versa, Such other matter
in respect of which the company is required by this Act or the articles of association to
adopt a special resolution.
ii) As mentioned above, issuing a bonus share should be forwarded as a special
resolution. Therefore, BoD has to present a special resolution to issue bonus share.

2015 July
ABC public Company decided to hold election for constituting a new Board of
Directors of the company. The article of association of the company is silent
about the number of shares required to be held by a person for his appointment
as director of the company. Mr. Prahalad having 90 shares of the company filed
his candidacy for the appointment of director of the company. The election officer
refused his application. How far the decision of the election officer is valid? Is
there any exception in the concerned Law where share qualification is not
required for being appointed in the post of director of the company? Answer with
reference to the Companies act, 2063.
Answer:

Section 86 (2) the Companies Act, 2063 provides for the constitution of a board of
directors in a public Company. Accordingly, every public company shall have a board of
directors consisting of minimum three to maximum of eleven numbers of directors.
Section 88 of this Act, 2063 contains provision share qualification of directors.
According to which if the articles of association of a company specify any number of
shares required to be held by a person for his appointment as director of the company,
the person who becomes director shall hold such number of shares. Failing to specify
such number of shares to be held by any person, one hundred shares should be held by
the person willing to become a director.
On the basis of above provision the refusal of election officer is valid, as Mr. Prahalad
doesn't hold one hundred shares.
However, the provisions of sections 86(3) and 87(2) of the Companies Act do not apply
in this case. The section further states that this criteria is not applicable to the
independent director appointed under section 86(3) and alternate director under section
87(2) of this Act.

2011 Dec
Mr. Sharma was convicted by the Supreme Court of an offense of corruption and
was sent to imprisonment for the period of 5 years in the year 2050. In the year
2060, he was appointed as a director of Jagadamba Traders Ltd. Do you think his
appointment was valid under Companies act, 2063? Would your answer be
different in case it was the case of Jagadamba Hydropower Private Limited?
Answer:

Under Section 89(1) (d) of the Companies Act, 2063: Person convicted of an offense of
corruption or of an offense involving moral turpitude shall not be eligible to be appointed
to the office of director.
Provided, that in the case of a private company, a period of three years has not lapsed
from the date of such sentence.
Since Mr. Sharma was appointed in the post of director of public limited company. He
was disqualified to be appointed in the post. He has disqualified to be appointed in the
post of director of public company forever once he was convicted of an offense of
corruption. The completion of five years imprisonment does not matter. If he were
appointed in the private limited company, it would have been valid because in case of
private limited company the limitation even the case is an offense of corruption shall be
extended only upto three years from the date of offense. On the basis of above
observation, Mr. Sharma could not be appointed in the post of director of Jadamba
Traders Ltd. However, he could be appointed in the post of director of Jagadamba
Hydropower Pvt. Ltd. as the period of three years has been completed.

2016
Mount Everest Ltd. has decided to appoint independent director(s) to the
company. Advice the company on the following legal issues as to the
appointment of independent director(s) pursuant to Companies act, 2063.
i. What is the legal provision of appointment of independent director(s)?
ii.Who are the persons eligible to be appointed as independent director(s)?
Answer:

Section 64 of Company Act, 2063 makes provision regarding the prohibition on issue or
sale of share at a discount. Provision of Section 64 of Company Act, 2063 is as follows:
Section 64 - Prohibition on issue or sale of share at a discount
(1) A Company shall not issue or sale its share at a discount.
(2) Notwithstanding anything contained in sub-section (1), a company may, for the
following purpose, issue or sell shares at discount by adopting a special resolution at
the General Meeting to that effect, not being less than the percentage specified in that
resolution. (3 for a, b, c, d)
(a) for issuing or selling shares pursuant to a capital restructuring scheme of the
company.
(b) for issuing or selling shares pursuant to a scheme of converting loans borrowed by
the company into shares with the consent of creditors.
(c) for issuing or selling shares pursuant to an employee share scheme.
(d) for issuing shares on such other conditions/purposes as approved by the office.
As the company has passed a special resolution to convert the loan borrowed by the
company from the commercial bank to equity share, resolution passed is valid as per
the provision above mentioned.

2016 Dec
A resolution presented to the meeting of the Board of Directors of Act Finance
Ltd. to appoint Mr. Raman Pandey as an independent Board of director where the
directors are divided regarding his qualification as he was convicted for six
months' jail punishment is a case of assault. Give your advice to the company
that:
i. What persons shall not be eligible to be appointed as an independent director?
ii.Is Mr. Pandey eligible as he was convicted for six months is jail?
Answer:

Pursuant to Sub-section (2) of Section 86 of the Companies Act, 2063, every public
company shall have a board of directors consisting of a minimum of three and a
maximum of eleven directors. And in forming the board of directors at least one
independent director, in the case of the number of directors not exceeding seven, and at
least two independent directors, in the case of the number of directors exceeding seven,
shall be appointed from amongst the persons who have the knowledge as prescribed in
the articles of association of the company and gained knowledge and experience in the
subject related to the business of the company concerned.
Pursuant to Sub-section (2) of Section 89 of the Companies Act, 2063, the following
persons shall not be eligible to be appointed to the office of independent director:
i. A person as referred to in Sub-section (1) of section 89.
ii. A shareholder of the concerned company.
iii. Who has not obtained at least bachelor degree in a subject that is related to the
business to be carried on by the concerned company and gained at least ten years of
experience in the related field or in the company management affairs or who has not
obtained at least bachelor degree in finance, economics, management, accounts,
statistics, commerce, trade or law and gained at least ten years of experience in the
related field.
iv. An officer, auditor or employee of the concerned company or a period of three years
has not lapsed after his/her retirement from any such office.
v. The close relative of the office of the concerned company;
vi. An auditor of the concerned company or his/her partner.

2015 July
Naini Musahar is appointed as director in Sarnath Community Agro Limited. After
her appointment she is interested to know the duration of director in a company
under the Companies act. Explain the duration of director in a company referring
Section 90 of the Companies act, 2063.
Answer:

Section 90 of the Companies Act, 2063 has defined the term of office of directors as
follows:
(1) The tenure of office of a director of a private company shall be as provided in its
articles of association
(2) The tenure of office of a director of a public company shall be as specified in its
articles of association, which shall not exceed four years.
It is also provided that:
(1) A director appointed by the Government of Nepal or a corporate body shall hold
office so long as the Government of Nepal or the appointing body desires.
(2) A director appointed pursuant to Clauses (1) and (2) of the proviso to Section 87
shall hold office only until the holding of the annual general meeting.
(3) The term of office of a director appointed to the office of any director which has fallen
vacant before the expiry of his/her term of office shall be only the remainder of the
tenure of office of that director whose office has so fallen vacant and in whose place one
is appointed.
(3) Notwithstanding anything contained in the prevailing law or articles of association , a
person retired from the office of director on expiry of his/her tenure of office shall be
eligible for reappointment to the office of director.

2006 June
What are the powers of the Board of Directors in a Public Limited Company in
Nepal?
Answer:

2015 Dec
The Annual General meeting of Nirman Engineering Pvt. Ltd. with more than 2/3
majority passed resolution directing the Board of Directors to carry on the
business of manufacturing high voltage turbines in join venture with Benjamin
Electrical Accessories Ltd. The majority of directors opposed this resolution and
they disapprove the resolution. Advice the directors about the validity of their
action.
Answer:
The division of powers between the board of directors and the company in general
meeting depended in the case of registered companies' entirely on the construction of
the articles of association and that, where powers had been vested in the board of
directors, the general meeting could not interfere with their exercise. Hence, the
directors were entitled to refuse to carry out a joint venture agreement adopted by
resolution in general meeting. Thus, in Shaw & Sons Ltd. v. Shaw, [193512 K. B 113, a
resolution of the general meeting disapproving the commencement of an action by the
directors was held to be a nullity.

A company is a legal entity distinct alike from its shareholders and its directors. Some of
its powers may. according to its articles, be exercise by directors; certain powers may
be reserved for the shareholders in general meeting. If powers of management are
vested in the directors, they and they alone can exercise these powers. In line with with
the contemporary modern Companies' Laws, section 95(1) of the Nepalese Companies
act, 2063 requires subject to provisions contained in this Act and the articles of
association and the decisions of the general meeting, the directors shall manage all
transactions exercise powers and perform duties of the company through the Board of
Directors collectively.

In this case, the board of directors is not bound to implement or follow the resolution
though it has been passed by the general meeting by more than 2/3 majority of the
shareholders of Nirman Engineering Pvt. Ltd. to carry on the business of manufacturing
high voltage turbines in joint venture with Benjamin Electrical Accessories Ltd. As the
business of the company rest on the powers of the board of directors, it cannot be
usurped by the general meeting.

2005 Dec
Mr. X, a director of M/s XYZ Limited was unable to attend the 10th AGM of the
company and in his place he appoints Mr. A proxy to attend in the capacity of
director. Is the appointment of proxy valid? What is the quorum required for the
GM of the Private Company? Explain in the light of the provisions of the
Companies act 2063.
Answer:

2015 Dec
Mr. A, a director of Palpasa private limited unable to attend the 10th AGM of the
company and in his place appoints Mr. B, proxy to attend and vote in the AGM in
the capacity of director. Is the appointment of proxy valid? How? Explain what
quorum is required for holding a general meeting of the Private Company under
the provisions of the Companies act 2063.
Answer:

A proxy is an instrument in writing executed by a shareholder authorizing another

person to attend a meeting and to vote on his behalf in his absence. Section 71 of the
Companies act, 2063 provides every shareholder. who is entitled to attend and vote a
statutory right to appoint another person as his proxy to attend and vote for him. But the
proxy so appointed has no right of audience, i.e, he cannot speak.

But in this case, the issue is related to Mr. A's directorship, but not to his shareholder
ship, because he cannot exercise both rights at a time He is entitled to exercise his
authority of director only once he is elected as a director from shareholders for the term.
As a director he can only exercise his legal rights or authority to perform only right
/correct/ valid functions conferred by the Companies act, 2063.

In the above case, Mr. A as a director of Palpasa Private Limited is unable to attend the
AGM, he cannot appoint his proxy to attend, cast vote in that AGM in his behalf
pursuant to section 70(2) of this Act. If any issue arises in the AGM with the interest of
the director (such as appointment, depart from the official post, transfer, wages,
allowance, bonus etc.), no one can attend as a director or through proxy. Therefore, Mr.
A being a director of the company he himself cannot attend the AGM or cannot appoint
proxy on behalf of him to attend the AGM and cast vote in his behalf. The appointment
of proxy is invalid pursuant to section 68 of the Companies act, 2063 also, because this
section requires every director of a company must always be present at the AGM as far
as possible except only in the case of force majeure. As concern of quorum required for
the general meeting of the private company, it is as per mentioned in the articles of
association of the company under provision of Section 73 (1) of the Companies act,
2063

July 2015
The board of directors of Gagan Aviation Ltd. decided to operate Aircraft
Maintenance, Repair and Overhaul (MRO) Service in joint venture with London
Aeronautics and to sell its 55% shares. The majority of the shareholders opposed
this resolution and in the general meeting, with more than 2/3 majority, they
disapprove the directors' action. Advise the directors about the validity of their
action and the dealing with London Aeronautics.
Answer:
The division of powers between the board and the company in general meeting
depended in the case of registered companies' entirely on the construction of the
articles of association and that, where powers had been vested in the board, the
general meeting could not interfere with their exercise. Hence the directors were entitled
to refuse to carry out a șale agreement adopted by ordinary resolution in general
meeting. Similarly, in Shaw & Sons Ltd. v. Shaw [193512 K. B 113in which a resolution
of the general meeting disapproving the commencement of an action by the directors
was held to be a nullity. A company is an entity distinct alike from its shareholders and
its directors. Some of its powers may, according to its articles, be exercise by directors;
certain powers may be reserved for the shareholders in general meeting. If powers of
management are vested in the directors, they and they alone can exercise these
powers. They cannot themselves usurp the powers which by the articles are vested in
the directors any more than the directors can usurp the powers vested by the articles in
the general body of shareholders.

In this case, the decision of the majority of board of directors of Gagan Aviation Ltd. to
operate Aircraft Maintenance, Repair and Overhaul (MRO) Service in joint venture with
London Aeronautics and to sell its 55% of shares cannot be invalid though the majority
of shareholders opposed this resolution and in the general meeting, with more than 2/3
majority, they disapprove. It is because transacting the business deal or contract with
the outsiders on behalf of the Company and at its best interest is the basic responsibility
of the board of directors under section 103(2) of the Companies act, 2063. Thus this
section provides that it shall be the duty of every director to do such transaction within
the ambit. Of jurisdiction specified in the memorandum of association of the company.

2012 June
A loan of Rs. 15,00,000 has been sanctioned by Laxmi Bank Ltd. to Loktantra
Resort Pvt. Ltd. having authorized capital of Rs. 1,00,00,000 and paid up capital of
Rs. 10,00,000. The board of directors of Loktantra Resort Pvt. Ltd. resolved to
obtain loan from the bank. The chairperson of the company before obtaining the
sanctioned loan wants to know with you that whether the loan which the
company is going to borrow as stated above is as per the companies' act, 2063.
Advise him as per the provisions of The Companies act, 2063 about its legality
and formality or consequences if any.
Answer:

Under section 105(1)(b) of the Companies act, the board of directors of a public
company, or of a private company receiving loans from any bank or financial institution,
shall not, except with a special resolution being adopted by the general meeting of
shareholders, do or cause to be done the following act: borrowing moneys, where the
moneys to be borrowed will exceed the aggregate of the paid up capital of the company
and its free reserves, apart from any loans and faculties with a term of less than six
months obtained by it from a bank or financial institution in the ordinary course of
business transaction; As per above provision the loan to be borrowed exceeds the paid
up capital. The question is silent about the free reserves. It the money to be borrowed
exceeds special resolution in the general meeting should be passed. Thus the loan
which is going to be borrowed by the Loktrantra Resort Pvt. Ltd is not void in the sense
that it has not passed special resolution.

Consequences
Under section 180 of the Act where any act or action required to be done or taken under
this Act has not been done or taken or any act or action prohibited has been done or
taken by any company or in respect of such company, such act or action shall be void.
Under section 160(y) of the Act director or officer who acts contrary to Section 105 shall
be punished with a fine from twenty thousand rupees to fifty thousand rupees or with
imprisonment for a term not exceeding two years or with both punishments.

2016 June
Mr. XYZ was appointed as a director of a company in an Annual General Meeting.
He took over the office and carried out his functions as director. Subsequently, it
was found out that there were some irregularities in the appointment and hence
the appointment was declared invalid. Would the duties performed by Mr.XYZ.
while in office as director, be binding upon the company? Also mention when a
company be bound by the decision or action taken by its director under
Companies act, 2063.
Answer:

Section 106 of the Company Act, 2063 provides for the validity of acts already done by
a director whose appointment comes to be invalid. According to it if it is afterwards
discovered that any provision under this Act has not been complied with in respect of
the appointment of any director, the acts already done by such director before the
discovery of such fact does not become invalid by that fact.
Moreover, Section 104 prescribes the provision regarding company to be bound by the
act done by a director. It states that any act done or action taken by or document signed
by at least one director authorized by a company or any person authorized to act for the
company shall be valid and binding for the company.
Where any person does any transaction with a company in good faith, such transaction
shall be binding for the company; and nothing contained in memorandum of association,
articles of association of the company or in any resolution adopted by the general
meeting or in any agreement concluded between the company and its shareholder shall
be deemed to have made any limitation in or restriction on the authority of the director
or the authorized person to do such transaction.
Provided, however, that if any officer does any act or transaction mentioned above in
excess of his/her authority, such officer shall be personally liable for such act or
transaction unless such authority is ratified by the general meeting pursuant to this Act;
and the company may also recover from him/her the loss or damage, if any caused to
the company from such act or transaction.

2016 Dec
The board of directors of Nepal Cell Pvt. Ltd. passed a resolution to purchase 4G
mobile network from Vodafone Inc. for $ 50,000,000. Accordingly, a deep of
contract drafted and duly signed. Afterwards, some of the shareholders of Nepal
Cell file a case against the validity of contract as four out of seven directors
found disqualified. Answer the following questions:
i. What are the disqualifications of board of directors?
ii. Is the contract valid?

Section 89(1) of the Companies Act, 2063 has listed the various circumstances where a
person becomes disqualified to be a director. It states that any of the following persons
shall not be eligible to be appointed to the office of director:
a. Person who is below Twenty one years of age, in the case of a public company;
b. Person who is of unsound mind or is insane;
c. Person who is a declared insolvent and a period of five years has not lapsed;
d. Person who is convicted of an offense of corruption or of an offense involving moral
turpitude. Provided, that in the case of a private company, a period of three years has
not lapsed from the date of such sentence,
e. Person who is convicted of an offense of theft, fraud, forgery or embezzlement or
misuse of goods or funds entrust to him/her, in an authorized manner, and sentenced in
respect thereof, a period of three year has not elapsed from the expiry of the sentence;
etc.
f. Who has personal interest of any kind in the business or any contract or transaction of
the concerned company;
g. Who is already a director, substantial shareholder, employee, auditor or adviser of
another company having similar objectives or has personal interest of any kind in such
company; Provided, however, that such person of a private company may become a
director of another private company having similar objectives.
ii) Further, Section 106 of the Companies Act, 2063 provided that if it is afterwards
discovered that any provision under this Act has not been complied with in respect of
the appointment of any director, acts already done by such director him /her before the
discovery of such fact shall not be rendered invalid by that fact. Therefore, the
resolution passed by the directors though disqualified, is valid and contract with
Vodafone Ltd. valid and binding.

June 2014
What is Board's Report? State the matters to be included in it.
Answer:

Board Reports means the BoD"s of every public or private company with the paid up
capital of one crore rupees or more or with an annual turnover of ten crores rupees or
more shall also proper a separate report of the Board of directors".

Under section 109(4) of the Companies act, 2063, the directors must prepare a report
for each financial year. This must contain a fair view of the development of the business
of the company and its subsidiaries during the financial year and the position at the end
of it, they must state what amount if any, they recommend should be paid as dividend,
and what amount if any, they proposed to carry to reserves. In addition, it must give the
name of all persons who at any time during the financial year were director of the
company and describe the principal activities of the company and its subsidiaries and
any changes therein during the course of the year.
The board of directors in addition to the annual financial statements shall prepare a
separate report stating the following matters: -
• Review of the transaction of the previous year.
• Impacts, if any, caused on the transactions of the company from national and
international situations.
• Achievements in the current year as at the date of report and opinions of the board of
directors on matters to be done in the future.
• Industrial or professional relation of the company.
• Alterations in the board of directors and the reasons thereof.
• Amount recommended for payment by way of dividend.
• Details of forfeiture of shares and the event of buy back of shares, the reasons and
number of shares.
• Details of total management expenses during the previous financial year.
• Any other matters required to be set out in the board's report under the Companies act
or other prevailing laws.
• Other necessary matters in the opinion of the board of directors.

2009 June
Total paid up capital of Siddhababa Cargo Pvt. Ltd. is Rs. 100000. Mr. Jhamaklal a
CA holds 900 share @ Rs. 100 each. The GM of the company appoints Mr.
Jhamaklal as auditor of the company. Answer the following questions with
relevant provisions of the Companies act, 2063.
i. Is the appointment of Mr. Jhamaklal valid as per the provisions of the
Companies act, 2063?
ii. If his appointment is invalid by the above reason or any other reasons, what
steps must be taken by him.
iii. If his appointment is declared invalid and he has audited the books of
accounts, what would be the validity of the audit report signed by him?
Answer:

i) Under Section 112(e) a shareholder holding one percent or more of the paid up capital
of the company or his close relative shall be disqualified for appointment as auditor, and
shall not continue to hold office, if appointed as auditor. Under Section 112(2) the
auditor shall, prior to his appointment, give information in writing to the company that he
is not disqualified pursuant to sub-section(1) As he holds less than one percent of the
paid up capital of the company and Mr. Jhamaklal's his appointment is valid.
ii) Under Section 112(3) where any auditor becomes disqualified to audit the accounts of
a company or there arises a situation where he becomes disqualified for appointment or
can no longer continue to act as an auditor of the company, he shall immediately stop
performing audit which is required to be performed or is being performed by him and
give information thereof to the company in writing.
iii) Under Section 112(4) the audit performed by an auditor who has been appointed in
contravention of this section shall be invalid

2012 June
Discuss in detail the conditions for the disqualifications of the company statutory
auditor as per the provisions of the Companies act, 2063.
Answer:

2014 June
The AGM of Cee Limited has appointed Shreenath, as an auditor of the company
for the year 2069/70 During the course of audit, it was found that Shreenath is the
son-in-law of T. Shivam, who holds 1.02% of paid up capital of the company. Do
you think this appointment is valid? What types of persons or the firms or
companies in which such persons are partners shall be disqualified for
appointment as auditor? Explain referring the provisions of Company Act, 2063.
Answer:
According to the provisions of Company Act, 2063, Section 112 various disqualifications
to be an auditor of the company. Sub Section (1)(e) has clarified the substantial
shareholder of the company or his relative, both of them are disqualified to become the
auditor of the company. In a given case T.Shivam is close relative of Mr. Shreenath who
is a substantial shareholder of the company as his shareholding in the company is more
than 1%. Under this section section has further defined other conditions of
disqualification as follows:
(a) A director, advisor appointed with entitlement to regular remuneration or cash
benefit, a person or employee or worker involved in the management of the company or
a partner of any of them or and employee of any of such partners or a close relative of a
director or partner, out of them, or and employee of such relative;
(b) A debtor who has borrowed moneys from the company in any manner, or a person
who has failed to pay any dues payable to the company within the time limit and is in
such arrears or close relative of such person;
(c) A person who has been sentenced to punishment for an offense pertaining to audit
and a period of Three years has not elapsed thereafter;
(d) A person who has been declared insolvent;
(e) A substantial shareholder of the company or a shareholder holding one percent or
more of the paid up capital of the company or his/her close relative;
(f) A person who has been sentenced to punishment for an offense of corruption, fraud
or a criminal offense involving moral turpitude and a period of five years has not elapsed
there after;
(g) A person referred to in Sub-section (3) of Section 111;
(h) In the case of a public company, any person who works, whether full time or part
time , for any governmental body or anybody owned fully or partly by the Government of
Nepal or any other company or a partner of such person or a person who is working as
an employee of such partner or a person who is authorized to sign any documents or
reports to be prepared by the engagement of the company;
(i) A company or corporate body with limited liability;
(j) A person having interest in any transaction with the company or his/her close relative
or a director, officer or substantial shareholder of another company having any interest
in any transaction with the company.

2014 Dec
Miss Sita Sharma, a chartered accountant licensed by ICAN has been appointed
as the auditor of XYZ Trading LTD. for the fiscal year 2071/72. It has been revalued
that she was appointed by general meeting of the company of the fiscal year
2070/71 on the basis of recommendation of her maternal uncle's son who has
been working in the company as a general manger since the last several years.
Later, the appointment was questioned as the close relatives of an employee
cannot be appointed as an auditor in the company pursuan to the Companies act,
2006. Discuss referring to the relevant provision of companies' act,2063 the
validity of her appointment with disqualification of the auditor along with its
consequence.
Answer:

Section 2(29) of Companies act, 2063 defines the term "close relative" which means a
partition shareholder in a joint family or husband, wife, father, mother, mother-in-law,
father-in-law, elder brother, younger brother, elder sister, younger sister, sister-in-law,
(elder or younger brother's wife), brother in-law, sister in-law, brother in law (husband of
elder sister), uncle, aunt, maternal uncle, maternal aunt, son, daughter. daughter-in-law,
grand-son, grand-daughter, grand-daughter in law or son-in-law.

On the basis of the above legal provisions the of the Companies act, 2063 maternal
uncle's son does not include under the definition of close relative, therefore, Miss Sita
Sharma is not disqualified to be appointed as director of XYZ Trading Ltd., though she
was recommended for appointment by her maternal uncle's son who was working as
General Manager in that Company.

Section 112(2) of the Companies Act, 2063, states that the auditor shall, prior to her
appointment give information in writing to the company that pursuant to Section 112(3)
of this Act she is not disqualified.So Miss Sita Sharma’s prior information to the
company is also okay.

2016 Dec
Total paid up capital of M/s Siddhartha Movers Pvt. Ltd. is Rs. 1, 00,000. CA
Pradhalad Pradhan a chartered accountant holds 900 share of Rs. 100 per shares.
The annual general meeting of the company appoints CA Pradhalad Pradhan as
auditor of the company for fiscal 2072/73. Answer the following question with
relevant provisions of Companies' of the Companies act, 2063.
i. Is the appointment of CA Pradhalad Prahan valid as per provision of Companies
act, 2063?
ii. If his appointment is invalid by the above reason or any other reason, what
steps must be taken by him?
Answer:

i) Section 112 of the Companies Act, 2063 makes provision regarding the
disqualification of auditor.
Section 112 (1) states that none of the following persons or the firms or companies in
which such persons are partners shall be qualified for appointments as an auditor.This
section mentions various grounds for disqualification, among them a substantial
shareholder of the company or a shareholder holding one percent or more than the
paid-up capital of the company or his close relative is one ground for disqualification to
become an auditor.
In the given case CA Pradhalad Pradhan a chartered accountant holds 90 percent
shares of M/S Siddhartha Movers Pvt Ltd, so as per the section 112 (1) of the
Companies Act, 2063 CA Pradhan is disqualified to be appointed as the auditor of M/S
Siddhartha Movers Pvt Ltd.
Appointment of CA Pradhalad Pradhan as auditor of the company for fiscal year
2072/73 by annual general meeting is not valid.

ii) Section 112 (3) of the Company Act, 2063 makes provision regarding steps must be
taken by auditor appointed, whose appointment is invalid as per Act.
Section 112 (3) Where any auditor becomes disqualified to audit the accounts of a
company or there arises a situation where he becomes disqualified for appointment or
can no longer continue to act as an auditor of the company, he shall immediately stop
performing audit which is required to be performed or is being performed by him and
give information thereof to the company in writing.
So in the given case CA Pradhalad Pradhan shall immediately stop performing audit
which is required to be performed or is being performed by him and give information
thereof to the company in writing