Company and Corporate Law- Notes

 Unit-1 Origin and Development of Company and Corporate Law

1. First Phase: The Situation Before 1720

• Incorporation of companies by adopting the legal personality concepts seen in Britain before 1720.
• The practice of establishing religious and other institutions through orders issued by the King.
• East India Company, Hudson's Bay Company, and Levant Company are examples of chartered companies.
• British merchants trading in overseas countries used the word 'company' under the concept of Societas, and royal charters were granted for trading abroad.

2. Second Phase: The Situation Between 1720 and 1825

• The establishment of companies through a 'Deed of Settlement', which was similar to today's Memorandum of Association and Articles of Association.
• After realizing that the Bubble Act had failed regarding corporate regulation and control, it was repealed in 1825. By 1825, conceptual developments had formed around topics like limited liability, independent legal entity, and corporate articles of association.
• During this time, the Bubble Act of 1720 was completely repealed and the Bubble Companies Act of 1825 was enacted. This granted the King and Queen discretionary powers to determine under what circumstances and to what extent a company's liability would be limited or unlimited, establishing legal recognition from that period onward.

3. Third Phase: The Situation After 1825

• The Trading Company Act came in 1834, which created a somewhat easier and simpler environment for the company registration process.
• Following the enactment of the Trading Company Act, 1834, the development of companies created by incorporation (Company by incorporation) began alongside those created by charter.
• In 1841, a Parliamentary Committee on Joint Stock Companies was appointed. In 1844, the Joint Stock Company Act included several important provisions regarding modern company law in British company law, which are as follows:
1. Distinction between partnerships and joint stock companies
2. Simplification of company registration/incorporation
3. Provisions regarding control and publicity/disclosure
4. Attainment of limited liability

Origin and Development of Public Corporations and Public Companies in Nepal

The origin and development of Nepalese company law, starting with the Company Act, 2063, can be divided into three phases:

(A) Initial Period (Prarambhik Kaal)

• The formulation of company law was drafted in 1993 B.S. (1936 A.D.) during the regime of the then Prime Minister, Shree Juddha Shumsher Rana.
• It was published by the Gorkhapatra Printing Press in the pages of the Gorkhapatra newspaper.
• The "Company Law, 1993", which was formulated to establish, operate, and control companies in accordance with the objective of achieving business goals through joint stock, contained 15 sections.
• Since it was necessary to create a company law in Nepal modeled after the corporate laws of India and Britain, the drafting of the Company Law, 1993 aimed to follow the concept of the principle of independent legal personality.
• Although the Company Law of 1993 B.S. was unclear and incomplete compared to the Company Act, 2063, the Company Law, 1993 made several clear provisions regarding the incorporation, operation, control, and dissolution of companies.
• In 1992 B.S. (November 24, 1935 A.D.), it transformed into the Development Board (Udyog Parishad). This very Udyog Parishad prepared the Company Law of 1993 B.S.

(B) Medieval Period (Madhyakaal)

• The medieval era of company law covers the period between 2007 B.S. and 2021 B.S.
• During this period, efforts were made to amend, develop, modernize, and refine the company law that had been drafted in 1993 B.S.
• The company law formulated in 2007 B.S. and its subsequent amendments immediately introduced the following additional provisions, among other things:

ü  Clear legal provisions stating that a company possesses an independent legal personality, definitions of private and public companies, and distinct provisions regarding the incorporation, operation, and control of private versus public companies.

ü  It was implemented as a modified form of the Company Law of 1993 B.S., which was amended for the first time in 2016 B.S., for the second time in 2019 B.S., and for the third time on 2019/3/15 B.S. Along with this, private companies were exempted from several restrictive and regulatory provisions that applied to public companies. Thus, the 2007 B.S. law positioned private companies as privileged corporate entities.

(C) Modern Period (Aadhunik Kaal) - Three Phases:

1. First Phase of the Modern Period (2021 B.S. – 2053 B.S.)

Major Features of the Company Act, 2021:

• Regarding the termination of certain privileges of private companies, the Company Act, 2021 introduced regulatory provisions for private companies similar to those for public companies.
• The practice of having completely separate provisions for private and public companies was ended and integrated; instead, explicit clauses were inserted in specific places stating that those provisions would not apply to private companies.
• This Company Act, 2021 made auditing mandatory for private companies. Additionally, it maintained the provision that private companies must send their preliminary reports to shareholders or the governing department. It also strictly mandated the requirement to appoint at least two directors.
• The concept of "one share, one vote" when voting on any matter in the company's general meeting was established by the Company Act, 2021.
• The Company Act, 2021 set limits regarding the re-appointment of directors and auditors for public companies established a four-year tenure for directors, while providing a provision that an auditor could be appointed for up to 3 consecutive years.
• Through the fourth amendment of the Company Act, 2021, legal recognition was granted to the concept of the securities market (stock market) within company law.

2. Second Phase of the Modern Period (2053 B.S. to 2062 B.S.)

Some noteworthy provisions covered by the Company Act, 2053 are mentioned below:

• Provision allowing a single person to establish a private company.
• Provisions regarding subsidiary and holding (principal) companies.
• Provisions concerning the determination of qualifications for a company secretary.
• Provisions allowing a private company to customize its Articles of Association regarding general meeting procedures, board formation, number of directors, and board meetings.
• Provision allowing companies to send notices to shareholder directors via fax or telephone.
• Provision requiring bonus amounts to be distributed within 45 days of a bonus declaration, and if the bonus cannot be distributed within the specified timeframe, interest must be paid as designated.
• Under the Company Act, 2053, the registration and administration of all types of companies were centralized under a single entity, establishing the Office of the Company Registrar (OCR).

3. Third Phase of the Modern Period (2062 B.S. and onwards)

Major policy foundations and principles accepted by the Company Act, 2063:

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• Protecting investors.
• Promoting corporate governance.

Major Provisions Made in the Company Act, 2063:

• Adopting provisions to make the auditing of public companies effective.
• Embracing the provision that public companies must appoint independent directors.
• Making provisions to form a regular Commercial Bench (Banijya Ijalas) in court.
• Providing for a Company Advisory Board.
• Since conflict of interest can arise between the company and a director, providing a rule that such directors cannot vote.
• Providing a provision that allows private companies to conduct general meetings and board of directors meetings using communication media.
• Making detailed provisions regarding the company secretary.
• Providing an exemption where companies with low annual transaction volumes do not need to get their accounts audited.
• Providing a provision that a solvent company capable of paying its debts and liabilities can go into voluntary liquidation.
• Making it mandatory to form an audit committee for companies or public companies with a paid-up capital of 30 million Rupees (3 Crore) or more.

3. Major Provisions Added in the Company Act, 2063 (First Amendment, 2074):

• Applications must be submitted in the prescribed format to the Office of the Company Registrar by uploading them into the computer system via electronic media.
• Upon receiving an application for such registration, the Office of the Company Registrar shall conduct the necessary investigation, collect the prescribed fee, register the company within seven days of the application date, and issue the certificate of registration. Once a company is registered in this manner, its incorporation is considered complete.
• If the company cannot be registered within the prescribed time, the Office of the Company Registrar must provide a written explanation stating the reasons to the proposed company within three days.
• When authenticating documents related to applications and certificates, electronic signatures are also valid, and documents can be submitted via electronic media.
• If the name of the proposed company matches or is confusingly similar to the name or trademark of an already registered and existing company, the Office of the Company Registrar may refuse to register the company.
• Similarly, if the Office of the Company Registrar refuses to register any company due to any circumstance mentioned in sub-section (1) of Section 6 of this Act, a notice stating the reasons must be given to that person within fifteen days from the date of application for company incorporation in accordance with Section 4 of this Act.
• Telecommunication service provider companies or companies operating other prescribed businesses or transactions having a paid-up capital of more than 50 million Rupees (5 Crore) must be incorporated as a public company.
• If any director of a company is unable to attend the general meeting of the company in person due to circumstances beyond control, they may attend the general meeting and cast their vote via video conference or other similar technology.
• Special provisions regarding the cancellation of company registration.

Unit-2 Basic Legal Principles of Company and Public Corporations

Fundamental Concepts or Characteristics of Companies and Public Corporations

a.      Independent liability (Separate liability)

b.     Limited liability

c.      Legal liability

d.     Transferable shares

e.      Perpetual succession

f.      Capacity to own separate property

g.     Capacity to sue and be sued

h.     Professional management

i.       Having its own corporate seal

Procedures for Company Incorporation

The procedures to be adopted while incorporating a company are as follows:

General Procedure:

The general procedure includes the registration processes required for registering all types of companies.  These are provisioned in the Company Act, 2063. Except for those requiring special procedures, all types of companies are registered under this Act.

Special Procedure:

Companies dealing with banks and financial institutions, insurance companies, and securities-related businesses can apply for registration at the Office of the Company Registrar only after obtaining prior approval under the special procedure.

Unit-3 Nature (Characteristics) and Types of Companies and Public Corporations

 Fundamental Characteristics of a Public Company According to the Company Act, 2063

a.     A public company can openly sell and distribute its shares and debentures.

b.     There are inherent fundamental characteristics in a public company, which become known through the study of the Company Act, 2063.

c.      To register a public company, at least 7 promoters are mandatorily required, but if that same company opens another company, it is not mandatory or necessary that there must be 7 promoters.

d.     A public company can openly sell its shares and debentures.

e.      There are generally no restrictions regarding the transfer, sale, and distribution of public company shares.

f.      There is a mandatory provision requiring a public company to publish its Memorandum of Association (Prabandhapatra) and Articles of Association (Niyamavali) for public information.

g.     It must obtain approval from the Office of the Company Registrar to commence its business operations.

h.     Unless a higher paid-up capital requirement is provisioned in other specific related acts, the paid-up capital of all public companies must be at least 10 million Rupees (1 Crore).

According to the Company Act, 2063, the following types of companies must mandatorily be established as public companies:

a.     Companies conducting banking business

b.     Companies conducting financial business

c.      For pension fund management (Nibrittibharan)

d.     Companies conducting insurance business

e.      Entrepreneurs or entities conducting securities market-related business, etc.

Public Company

The Company Act, 2063 outlines the following characteristics of a public company:

a.      Placing 'Ltd.' (Li.) at the end of its name is a major characteristic of a public company.

b.     It must obtain approval from the Office of the Company Registrar for company operations.

c.      In the case of the Memorandum of Association and Articles of Association, they must be published for public information subject to the Company Act.

d.     In the case of a public company, the Company Act has made provisions ensuring there are no restrictions on the purchase, sale, and transfer of shares.

Private Company

Provisions under Section 7(2)(b), Section 3(1), Section 9, Chapter 14, and Chapter 15 of the Company Act, 2063:

1. The number of shareholders remains at a minimum of 1 and a maximum of 150 only, and it cannot exceed that number. This is one of the important characteristics of a private company.
2. The words "Pvt. Ltd." (Pra. Li.) must be written at the end of its name.
3. The Act has made provisions preventing private companies from openly selling and distributing shares and debentures.
4. Unless clearly specified and provisioned in the Articles of Association, there is no compulsion that the company's general meeting must be held only in a specific place, and the management and operational structure of the company can be according to the consensus agreement.
5. Its registration procedure is done through a very simple process.

Pre-emptive Right (Agraadhikaar ko Adhikaar)

Pre-emptive right means that if a company issues or distributes shares again, those who have already taken ordinary shares have the right to purchase the newly distributed shares on a proportional basis. After a company has distributed shares equal to its issued capital once, for any subsequent share distribution shares must be issued under the unissued authorized capital, or shares must be issued by increasing the company's capital.

Variation of Class Rights (Samoohik Adhikaarma Parivartan)

• Individuals who are members of a company by purchasing shares or obtaining membership through various methods possess certain fixed rights and duties.
• These cannot be changed without their consent.
• If a change is required, it is only possible if a resolution is passed by three-fourths (75%) of the total members of the company, or if they pass a resolution granting permission for the change.
• Otherwise, it is not possible.

Classification of Public Companies

Public companies can be divided into two types:

(1)   Unlisted Public Company (Asuchikrit public company)

(2)   Listed Public Company (Suchikrit company)

 Public Corporation with Charter

• During the time of the British Empire or colonialism, the practice of establishing companies through a royal charter existed in various countries across the world.
• As a result, the British East India Company was operated and regulated in accordance with such royal charters.
• The study of contemporary law reveals that religious institutions or similar public entities were established by issuing a special royal order (Crown Charter).
• No local laws applied to the East India Company, which was recognized as a foreign company in India.
• After India gained freedom from colonialism in 1947, the existence of such (East India) companies vanished from India.
• The East India Company never had any existence in Nepal.

Single Member Company

Private companies can be divided into two types based on the number of shareholders:

(1)   Single Shareholder Company (One Person Company)

(2)   Company with More Than One Shareholder

Provisions made in the Company Act, 2063 are as follows:

• In a private company with a single shareholder, there is exactly 1 shareholder.
• The company must write "Pvt. Ltd." (Pra. Li.) at the end of its name.
• According to Section 10(c), shares and debentures cannot be openly sold or distributed.
• There is no mandatory requirement to conduct an Annual General Meeting (AGM).
• According to Section 63(1), it is not required to obtain approval from the Office of the Company Registrar to commence business operations.
• It is not required to publish its Memorandum of Association and Articles of Association for public information.

Some Advantages of a Private Company:

• No requirement to obtain a separate license/permission to commence operations.
• No mandatory obligation to hold an Annual General Meeting (AGM).
• Simple registration process, etc.

Characteristics of a Profit-Not-Distributing Company

• To incorporate the company, the number of promoters must be at least 5 individuals, and the number of members can be any amount as long as it does not drop below 5 individuals.
• The membership of such an institution cannot be transferred in any manner. If any member dies, if their registration is canceled or dissolved, or if they are merged into another organization or company, the membership of that person or organization will automatically terminate.
• There is a provision that the words "Pvt. Ltd." (Pra. Li.) or "Ltd." (Li.) cannot be placed at the end of the name without obtaining prior approval from the Registrar's Office.
• Share capital is not required to incorporate the company.
• Members will not be held responsible for the company's debts or liabilities unless the member has accepted it in writing.
• Dividends, bonuses, or any other amounts out of the profits earned by the company shall not be distributed to its members or employees.
• The profit earned by the company must be spent to increase the company's capital or to achieve its objectives.

Unit-4 Organizational Structure and Management of a Company

 Allotment of Shares (Shareko Bandphant)

After a company issues shares to the general public, it processes legally received applications according to the prevailing rules. This is done based on their demand, or in cases where excess applications have been received in such situations, the act of distributing fewer shares than requested is referred to as Allotment of shares (Shareko Bandphant).

(1) Common Share (Sadharan Share):

Any company, when allocating returns, first sets aside dividends for preference shares and debentures after doing so, the financial instrument issued to distribute dividends from the remaining amount is called a Common Share (Sadharan Share).

 (2) Preference Share (Agraadhikaar Share)

a.     Cumulative preference share (Sanchit agraadhikaar share)

b.     Non-cumulative preference share (Sanchit nahune agraadhikaar share)

c.      Redeemable preference share (Phirta garine agraadhikaar share)

d.     Irredeemable preference share (Phirta nagarine agraadhikaar share)

e.      Convertible preference share (Parivartaniya agraadhikaar share)

f.      Non-convertible preference share (Aparivartaniya agraadhikaar share)

 From an Accounting Perspective, Share Capital can be Classified into 5 Parts:

(1)   Authorized capital (Adhikrit poonji)

(2)   Issued capital (Jaari poonji)

(3)   Subscribed capital (Praapta poonji)

(4)   Called-up capital (Maag gariayeko poonji)

(5)   Paid-up capital (Chukka poonji)

 Based on the Method of Distribution to Increase Capital, Shares can be Divided into 2 Parts:

(1)   Bonus share

(2)   Right share (Hakprada share)

 Based on the Accumulated Profit or Loss of the Company, Capital can be Divided into 2 Parts:

(1)   Primary capital (Prathamik poonji)

(2)   Supplementary capital (Poorak poonji)

 Based on Share Ownership, Shares can be Divided into Two Parts:

(1)   Promoter share (Sansthaapak share)

(2)   Public share (Sarvasadhaaran share)

 Debenture (Rinn Patra)

• A debenture is a long-term debt instrument for the company.
• A security issued by specifying a fixed interest rate and repayment timeline is called a debenture.
• In other words, it serves as a certificate issued to security holders detailing the various conditions of the debt. The certificate issued to provide that debt format is a Debenture (Rinn Patra). Under the Company Act, 2063, a debenture is defined as a debt instrument issued by a company, whether secured by creating a charge over the company's assets or unsecured.

Some Social Responsibilities of a Company:

1.    Not conducting activities contrary to environmental interests.

2.     Investing in national development.

3.     Protecting the investment of investors.

4.     Generating employment opportunities.

5.     Manufacturing and selling goods that do not cause harm to public interest.

6.     A company must operate its trade and business keeping the aforementioned responsibilities in mind.

Companies can remain committed to bearing their Corporate Social Responsibility (CSR) in the following areas:

1.    Responsibility toward the business or transaction itself.

2. Responsibility toward consumers and customers.
3. Responsibility toward employees.
4. Responsibility toward investors.
5. Responsibility toward similar businesses or competitors.
6. Responsibility toward society.
7. Responsibility toward the nation.
8. Responsibility toward the overall environment/geography.

 Worker Participation

1.    Worker participation in management is a modern management concept.

2.     In democratic countries, worker participation in management plays a vital role.

3.     To integrate the value of labor and management, this modern concept of worker participation can be adopted, which fosters a sense of responsibility toward the business and drives the mental and emotional involvement of the worker. It embraces the idea that workers (laborers) must be involved in the process of making decisions regarding business matters.

4.     Worker participation in management must involve workers both mentally and physically.

5.     When involving workers in management, participation can include the lower tier, middle tier, as well as the upper tier.

6.     Worker-employee participation must be encouraged to make decisions in the operations conducted by the company.

7.      Worker participation in management makes workers more responsible toward their work.

Objectives of Worker Participation in Management

1.    To make labor management robust and strong.

2. To make human resources dynamic and accountable.
3. To establish a democratic industrial environment.
4. To highlight and bring forward the needs of workers.
5. To make the business environment peaceful and well-organized.
6. To make workers responsible toward the business both mentally and physically.
7. To provide and ensure satisfaction for the workers attached to the business.

Classification of Worker Participation in Management...

·        Informational participation (Suchanatmak sahabhagita)

·        Administrative participation (Prashasanik sahabhagita)

·        Joint/Lump-sum participation (Ekamustha sahabhagita)

·        Decisive/Decision-making participation (Nirnayartmak sahabhagita)

Company Meeting

• Regularly calling a meeting of shareholders to discuss the business and affairs of the company is called a General Meeting (Sadharan Sabha).
• In other words, a company's general meeting is a formal assembly of shareholders who are entitled to attend and vote.
• According to the Indian Companies Act, 1956, the types of shareholder meetings are as listed below:

(i)              Statutory meeting (Kanooni sabha)

(ii)            Annual general meeting (Varshik sadharan sabha)

(iii)          Extraordinary general meeting (Vishesh sadharan sabha)

(iv)           Class meeting (Samoohik sabha)

Annual General Meeting

·        Every public company and profit-not-distributing company has provisions in its Articles of Association requiring an Annual General Meeting to be called.

·        Private companies must call an annual general meeting every year if required by their articles.

·        The general meeting called every year by the company in this manner is called the Annual General Meeting (AGM).

·        According to Section 67(1) of the Company Act, 2063, every public company and profit-not-distributing company must mandatorily hold an Annual General Meeting.

·        For a private company, it is not mandatory to hold an Annual General Meeting unless specified in its Articles of Association.

·        According to Section 152 of the Company Act, 2063, a private company having only one shareholder is not required to call an Annual General Meeting. Regarding matters that must be decided by a general meeting, a decision made in writing is sufficient.

Consequences of Failing to Call an Annual General Meeting:

Generally, if an Annual General Meeting is not called, the following consequences must be faced:

• Directors must personally pay a fine.
• The court can impose a fine ranging from 1,000 to 20,000 Rupees on the responsible directors and officers.
• If the Annual General Meeting is not held for 3 consecutive fiscal years, it can result in the disqualification of the directors.
• The company's registration can be canceled (deregistered).

Extraordinary General Meeting

A general meeting called in addition to or apart from the Annual General Meeting is called an Extraordinary General Meeting. If a special circumstance arises and it becomes necessary to immediately discuss and make a decision on an important matter, the meeting called is known as an Extraordinary General Meeting. This type of meeting is called when the demands of the situation cannot wait for a regular general meeting. Therefore, it does not perform the standard functions that an Annual General Meeting must perform.

Pre-incorporation Contract

Subject to prevailing laws, if a person or promoters executing the establishment of a company enter into an agreement with any party prior to or before the company's incorporation in a manner that addresses the company's name, it is called a pre-incorporation contract or agreement. Similarly, a mutual agreement made among the promoters regarding the registration of a company if such a mutual agreement is made among the promoters, it can be called a promoters' agreement.

Section 17 of the Company Act, 2063 provides the following rules regarding pre-incorporation contracts:

1.    Regarding any contract entered into before the incorporation of a company, such contract shall merely be a proposed contract, and the company shall have no obligation to implement or enforce it.

2. Regarding any borrowing, transaction, or business of any kind conducted by a person on behalf of a company prior to its incorporation, that person must bear personal liability for such matters.
3. To obtain release from personal liability, all promoters of the company, after its incorporation or within the timeline specified in the transaction, must pass a positive vote to grant approval toward that transaction. In that case, the contract shall become binding upon the company and the other party to the contract.
4. In the case of a private company, a unanimous agreement remains supreme regarding any contracts entered into prior to incorporation.

Organizational Structure of a Company

Generally, due to the principle of separation between ownership and management in a company, a Board of Directors is formed by the company's shareholders during the general meeting to operate the company. This board executes all management-related tasks of the company.

As provisioned under Section 152 of the Company Act, 2063, it is mandatory to have a Board of Directors in every public company and profit-not-distributing company. In a private company having a single shareholder there is no Board of Directors in the company. However, provisions state that the sole shareholder of the company must make decisions in writing regarding matters that require a board decision and maintain a record of those decisions.

According to Section 18 of the Company Act, 2063, the following matters must be stated in a company's Memorandum of Association (Prabandhapatra):

                 i.          Name of the company

                ii.          The address where the registered office of the company will be located

              iii.          Objectives of the company

               iv.          Activities to be conducted to achieve the company's objectives

                v.          The amount of authorized capital of the company, the share capital amount the company intends to issue immediately, and the amount the promoters have agreed to pay up

               vi.          Types of company shares, the rights and privileges inherent in those shares, the value of each share, and the total number of different types of shares

             vii.          Restrictions, if any, on the purchase or transfer of shares

            viii.          The number of shares the promoters have agreed to take immediately

               ix.          Terms of payment for the share amount by shareholders, and the provision stating that the liability of shareholders remains limited

Main Elements of the Articles of Association

1. Notice for calling general meetings, when, where, and the procedure of the general meeting.
2. Board of Directors, their number, tenure, meeting procedures, facilities, remuneration, and allowances.
3. Procedures regarding shares, and procedures for taking loans.
4. Appointment of a company secretary, provisions for experts, and advisors.
5. Accounts and auditing.
6. Corporate seal of the company.
7. Regulations/Bylaws (Binimay) can also be formulated based on the criteria specified by the Articles of Association.

Importance of the Articles of Association

1.      Provisions are made in the company's Articles of Association regarding the internal management and operations of the company.

2.      Once the Office of the Company Registrar registers the company and issues the registration certificate, the Articles of Association take the form of a special contract between the company and its shareholders. Both parties are bound to fulfill the liabilities mentioned therein.

3.      This is a contract that applies strictly to the shareholders and the company only.

4.      The Memorandum of Association (Prabandhapatra) and Articles of Association are considered equivalent to a constitution for the company. If any dilemma arises regarding any action or procedure, it is resolved with their assistance.

5.      It functions as a contract executed between the company and each individual shareholder. If the company fails to fulfill its liabilities according to the Memorandum or Articles of Association, shareholders can obtain an injunction (Nishedhajna) order against the company as needed.

6.      It also operates as an inter-se contract among the shareholders themselves. A shareholder can enforce the special provisions contained within it against another shareholder of the company.

Right of General Meeting

When speaking of the rights of a general meeting, the shareholders' general meeting possesses three distinct types of rights. Those rights are as follows:

1. Voting Right (Matdanko Adhikar)

Shareholders have the right to vote at the company's preliminary general meeting, annual general meeting, or extraordinary general meeting at the rate of exactly one vote for every ordinary share they hold.

There is no subject matter related to the company's business that cannot be discussed in the company's general meeting. The absolute right to discuss and deliberate on any matter relating to the company's business is vested in the general meeting. Furthermore, a two-thirds majority of the general meeting can pass special resolutions to make decisions on amending the company's Memorandum of Association and Articles of Association. Upon receiving the approval of the concerned department for such decisions, the Memorandum and Articles of Association are deemed to be amended.

By amending the Memorandum and Articles of Association, everything from the company's organizational structure to the directors' powers and company policies can be changed. Similarly, a majority of the general meeting can formulate necessary policies and programs related to the company's business, including the appointment and dismissal of directors.

2. Proprietary Right

Under proprietary rights, shareholders possess rights such as the right to receive dividends, the right to transfer shares, the right to purchase re-allotted shares as pre-emptive rights, and the right to convert preference shares into common shares in accordance with the regulations.

The company's general meeting declares the dividend or profit to be attached to the shareholders. It is the right of every shareholder to participate in the general meeting where such profit is declared. Even though the general meeting declares the profit, the actual rate of profit is recommended by the directors. The general meeting merely performs the task of providing legal validity to that recommendation. The general meeting does not override the Board of Directors' authority to determine the rate of profit.

If the director or the Board of Directors unlawfully restricts the transfer of shares, stops the purchase of pre-emptive shares, or stops the conversion of preference shares into common shares if they place a restriction on changing them into common shares, it constitutes oppression or injustice against minority shareholders.

3. Right to Inspection

Alongside voting rights and proprietary rights, shareholders possess the right to inspect various types of written documents and registration books of the company, as well as the right to raise questions if they are dissatisfied. By exercising this type of right, the following documents can be inspected:

(a)    Written contracts entered into by the company

(b)   Books containing details of the company's managers, directors, and other employees

(c)    Share detail logs of directors, employees, and other individuals

(d)   Appointment letters/contracts of managing directors and other employees

(e)    Shareholder registration book (Register of members)

(f)    Annual report

(g)   Auditor's report

(h)   Company accounts and profit-and-loss statements

(i)     Directors' report, and

(j)     Balance sheet

According to Sub-section (6) of Section 95 of the Company Act, 2063, the Board of Directors of a company is prohibited from delegating the following powers vested in the company.

Such powers must strictly be exercised only in accordance with the decisions passed in a meeting of the company's Board of Directors:

a.      The right to call upon shareholders to pay the remaining unpaid amount on their shares (Make share calls)

b.     The right to issue debentures

c.      The right to take loans or borrowings through methods other than debentures

d.     The right to invest funds held in the company's reserves/funds

e.      The right to grant loans

In the case of companies conducting banking and financial business, this provision regarding the right to grant loans shall not apply to loans extended or deposits received in the regular course of business transactions.

Right of a Member of a Company

In their capacity as a member of the company, a shareholder possesses the following rights:

• Voting in company meetings or assemblies.
• Appointing the directors of the company and participating in the management of the company through those directors.
• Seeking legal remedies or resistance in court if injustice/oppression is committed against the company.
• Earning profit from the company in the form of dividends.
• Becoming a stakeholder in the surplus assets remaining when the company is liquidated or dissolved.

These various types of rights can be divided into the following 3 categories:

1.    Right of Participation (Sahabhagitako adhikar)

2. Right of Supervision/Inspection (Suparibekshanko adhikar)
3. Proprietary Right (Sampattiko adhikar)

                           i.          Pre-emptive right (Agraadhikaar ko adhikar)

                          ii.          Variation of class rights (Samoohik adhikaarma parivartan)

Prospectus of a Company

A company wishing to collect capital from the general public can do so by presenting a factual statement regarding the company's objectives, the nature of its business, introductions of the company's directors, and the potential problems and risks associated with the company. The written document or statement presented to introduce the company for collecting capital in this manner is called a Prospectus (Vivaran Patra). The law itself clearly determines what specific matters must be mentioned in a prospectus. If the matters prescribed by law are stated in a false or misleading manner, the law has also made provisions for penalties to control such acts.

Issuance of Debentures

• The Debenture Trustee (Rinn Patra Sanchalak) can exercise the powers provisioned in the agreement entered into between the company issuing the debentures and the debenture trustee.
• Section 36(2) of the Company Act, 2063 provides for the matters that must be disclosed in such an agreement.
• In this sense, the agreement must disclose matters such as: the debenture trustee's ability to have the company's assets valued, project analysis, or management analysis conducted; the timeline for principal and interest repayment of the debenture, interest rate, and procedures relating to principal and interest repayment; if the debentures are issued against the collateral of the company's assets, the right to take possession of and sell such collateral in the event that the company breaches the agreement; and the right of the debenture trustee to initiate legal action against the company on behalf of the debenture holders.
• Thus, the limits of the debenture trustee's powers are determined by the terms mentioned in the agreement.

The Debenture Trustee is principally granted the following rights:

• To initiate necessary legal action for the protection of the rights and interests of the debenture holders.
• To demand the payment of principal and interest amounts due on debentures from the company in accordance with the agreement.
• To represent the debenture holders (debenture owners) in the event that the company undergoes liquidation or insolvency/bankruptcy (Damashahi).
• To take possession of or sell the property taken as collateral security in the event that the company fails to pay the principal and interest due on the debentures.

Foreign Company

A foreign company refers to a company that, prior to obtaining permission or a license to operate in Nepal, has already been established and incorporated in a country outside of Nepal and is already operating according to the laws of that country. Such a company, in accordance with its desire or wish to conduct trade and business in Nepal as well, carries out business or transactions in Nepal by remaining subject to the prevailing laws of Nepal and fully complying with the necessary legal provisions from the statutory bodies.

According to the provisions of Nepal's Company Act, 2063, a foreign company office registered in Nepal can be divided into two categories, which are as follows:

(1)   An office conducting business as a Branch Office (Shakha Karyalaya)

(2)   An office established as a Liaison Office (Samparka Karyalaya)

Share Transfer (Share Hastantaran)

If a person wishes to sell shares whose ownership rights are established in their name, or if the process of transferring the title to another person's name is carried out due to any other reason, that title-transfer process itself is called a Share Transfer.

shares are treated as a liquid asset. Therefore, shares are a liquid asset that a shareholder can convert into cash according to their needs. For this purpose, the shares must be sold, and during that process, the shares must be transferred from the ownership of one person to the ownership of another person.

Voluntary Transfer

If any shareholder wishes to sell the shares held in their name or wishes to give them away as a gift or donation (Dan/Bakas), they can voluntarily sell or donate them.

Transfer by Legal Process

The work of transferring share ownership title due to the process of collateral enforcement, or in the course of executing a court judgment, or in accordance with inheritance/succession laws by completing due legal procedures, is transferred through legal processes (transmission of shares).

Company Secretary

A company officer who is given the responsibility to act as a bridge or contact point between the company, its directors, its shareholders, and the management team handling its daily operations, as well as between the company and government bodies, is called a Company Secretary. In this sense, a company secretary is that individual who serves as a bridge between the directors and shareholders, the management team, and other entities to run the daily operations of the company, holding a key responsible managerial position (officer) within the company.

Functions, Duties, and Powers of a Company Secretary

According to Section 186 of the Company Act, 2063, the Functions, Duties, and Powers of a Company Secretary are as follows:

·       To implement or cause to be implemented the decisions made by the Board of Directors and the General Meeting, as well as matters directed by the Office or concerned bodies.

·       To submit the statements, documents, decisions, etc., required to be submitted by the company to the Office or any other body pursuant to the Company Act or prevailing laws within the prescribed timeframe.

·       To comply with and ensure compliance with the laws applicable to the business of the company in which they are serving, and to act as a compliance officer.

·       To act as a link of communication between shareholders, the Board of Directors, the company, and officers of the management team.

·       To act as a protective shield to prevent the violation of laws and rules related to the company's business.

·       To provide suggestions, advice, and assistance to the Chief Executive Officer (CEO) and officers of the management team regarding the corporate governance of the company.

Corporate Responsibility

Corporate responsibility can be understood as the work or duties that any business organization or legal entity must perform toward its relevant stakeholders, such as investors, consumers, employees, the community, and the government.

Corporate Responsibilities

1.    Responsibility toward investors

2. Responsibility toward employees
3. Responsibility toward customers/consumers
4. Responsibility toward society
5. Responsibility toward the government

Company Promoter

A promoter is an individual who initiates the incorporation or registration of any company by completing the necessary legal procedures. Therefore, any person who accepts and signs the matters written in the Memorandum of Association and Articles of Association is a promoter.

All the necessary steps required to register a company are as follows:

• Submitting an application
• Preparing the Memorandum of Association and Articles of Association
• Obtaining prior approval from the relevant regulatory body, if required
• Obtaining a license/permission to operate the business
• Arranging for witnesses, etc.

All necessary work and actions regarding company registration are performed by the promoters themselves.

Required Number of Promoters for Company Registration

                 i.          For a private company: At least 1 person

               ii.          For a public company: At least 7 people

             iii.          For a profit-not-distributing company: At least 5 people

Who Can Be a Promoter of a Company:

• An individual who has acquired Nepalese citizenship in accordance with prevailing laws (a Nepalese citizen), or
• A corporate entity/body corporate registered under prevailing Nepalese laws, or
• A foreign individual, company, or entity that has obtained permission to invest, do business, or conduct transactions in Nepal under prevailing Nepalese laws.

Every promoter must take the number of shares specified in the company's Articles of Association as a requirement to be a promoter. However, this provision does not apply to a profit-not-distributing company. Section 19(3) of the Company Act, 2063 provides that if the minimum number of shares required to be taken by a promoter is not specified in the Articles of Association, a promoter must take at least 100 shares.

According to the Company Act, the Following Individuals and Firms Cannot Be Promoters of a Company:

• A minor (an individual who has not reached 16 years of age)
• An individual who is disqualified from entering into a contract under prevailing laws
• A foreign individual, firm, or company that has not obtained the approval of the Government of Nepal to invest in Nepal

Not all individuals involved in the incorporation of a company can be promoters of the company. Employees, individuals providing professional services, legal practitioners who prepare the necessary Memorandum of Association and Articles of Association for company registration, auditors, etc., [cannot be considered promoters simply by virtue of providing their professional services] even if they are involved in the incorporation of the company, they are not counted as promoters.

Company Board

·       Section 169 of the Company Act, 2063 provides for the Company Board.

·       In accordance with the provisions made in this Act, until the Government of Nepal or a court specifies otherwise, the Government of Nepal shall, by publishing a notice in the Nepal Gazette, constitute a three-member Company Board consisting of a Chairperson and members as follows:

o   Chairperson: An individual who has a Bachelor's degree in Law and experience in the field of commercial law, and who is a District Judge, or has been a District Judge, or is qualified to become a District Judge.

o   Member: An individual who has been registered as an advocate under prevailing laws and has practiced law in the field of commercial law for at least ten years, or an individual who has worked for at least four years in a Gazetted Second Class post of the Nepal Judicial Service.

o   Member: An individual who has a Bachelor's degree in Management, Commerce, or Accountancy and has worked in the field of company management, tax administration, or accounting for at least ten years, or a professional accountant who has obtained a professional certificate in accounting and has at least five years of experience in the accounting profession.

Voluntary Winding Up

A company is considered a legal person. The incorporation of a company marks the beginning of the company's birth, and the dissolution of a company is the death of the company. Since a company is a legal person, the corporate life or legal personality of the company can be terminated or ended only by fulfilling the conditions, circumstances, and procedures prescribed by law. This itself is called the dissolution of a company.

According to the Company Act, 2063, the dissolution of a company can occur through the following methods:

1. Voluntary liquidation (Swechchhik khareji)
2. Cancellation of registration (Darta kharez)
3. Special provisions regarding the cancellation of registration
4. Compulsory liquidation in accordance with insolvency laws (Damashahi kanoon nusaar hune baadhyatmak khareji)

Doctrine of Ultra Vires

• Generally, any company operates its activities to achieve the objectives written in its Memorandum of Association. All acts performed to achieve those objectives are considered to be within the scope of the company's authority.
• If any act is performed to achieve an objective other than the objectives mentioned in the Memorandum of Association, such an act is considered to be beyond the powers of the company (ultra vires).
• If activities are carried out outside its scope of authority, the doctrine of ultra vires applies to those actions.

The doctrine of ultra vires is found to have been developed to achieve the following 2 fundamental goals:

1.    For the protection of the interests of the company's shareholders, and

2. For the protection of the interests of the company's creditors (Saahuharuko hit rakshako laagi).

Share Premium (Share Premium)

If shares are issued at a price higher than their face value (par value), such an amount is called a Share Premium. In other words, shares issued at a higher price are called shares issued at a premium value. For example, if a share with a face value (par value) of Rs. 100 is sold for Rs. 150, that excess amount of Rs. 50 is called a share premium. As provided under Section 2(l) of the Company Act, 2063, "shares at a premium value" means shares issued by a company to be sold at a price higher than the face value of the shares.

Shares can be issued in three ways, which are written below:

1.    Shares issued at face value (Par value)

2. Shares issued at a price lower than face value (Discount value)
3. Shares issued at premium (Premium value)

Office of the Company Registrar

• Established under the Ministry of Industry in the month of Magh, 2049 B.S. (1993 A.D.), the Office of the Company Registrar is a departmental-level office.
• Prior to the establishment of the Office of the Company Registrar, tasks related to company administration were executed by various bodies, including the Department of Industries, Department of Commerce, Department of Cottage and Small Industries, and the Department of Agriculture.
• With the objective of bringing uniformity to the application and compliance of company law, this office was established to execute all types of company administration tasks in an equal, standardized, and singular manner through a single body.
• The scope of authority and jurisdiction of this office extends throughout the Kingdom of Nepal. Branch offices of this office have not been established up to the present date.

Objectives of the Office of the Company Registrar

The objective of the Office of the Company Registrar is to support industrial and commercial promotion and further contribute to the development of the capital market. It achieves this by allowing individuals or groups wishing to operate an industry or business to raise capital through share sales under limited liability to register Private Limited (Pvt. Ltd.) and Public Limited (Ltd.) companies in accordance with the Company Act, while ensuring registered companies operate under strict economic and legal discipline.

Major Functions of the Office of the Company Registrar:

• To register Private Limited, Public Limited, and Profit-Not-Distributing companies in accordance with the Company Act, 2063.
• To investigate and maintain records of Public Limited companies before they publish their Prospectus (Vivaran Patra).
• To grant approval for increasing share capital, changing or amending company names, and making other amendments to the Memorandum of Association and Articles of Association.
• To monitor and investigate whether registered companies are operating according to the Company Act, and to deploy inspectors as necessary.
• To maintain records of amendments made to the Memorandum of Association and Articles of Association as required.
• To ensure that prescribed statements, notices, and information are submitted within the designated timeframe pursuant to the Company Act, 2063, and to impose prescribed fines or initiate deregulation/cancellation proceedings against non-compliant companies.

Right of a Creditor of a Company

According to Section 2(m) of the Insolvency Act, 2063 (Damashahi Sambandhi Ain), "Creditor (Saahu) means a person who has the right to receive payment from a company that has undergone insolvency or is on the verge of insolvency According to Section 2(t) of the same Act, "Secured Creditor" means a creditor who has advanced a loan to a company by taking collateral security.

Rights of Creditors

The rights of creditors are as follows:

1. Ability to file a petition to initiate insolvency proceedings: As provisioned under Section 4 of the Insolvency Act, a creditor or a group of creditors representing at least 10 percent of the total debt owed by an insolvent company holds the right to file a petition to initiate insolvency proceedings.
2. Mandatory understanding of creditors' views regarding the future plan of the insolvent company: [The law ensures that the creditors' perspectives must be evaluated regarding any restructuring plan for the company.]

Company Accounting System and Rules

• A company is a business entity established to operate an enterprise or business to earn a profit.
• Based on the books of accounts and records maintained by the company, every company's Board of Directors must prepare its financial statements every year. Under the annual financial statements, this includes:
• Balance sheet (Vatsalat)
• Profit and loss account (Nafa noksan ko hisab)
• Cash flow statements (Nagad pravaha ko vivaranharu)

Role of an Auditor (Role of Auditor)

• To verify whether the books of accounts and records maintained by the company's directors and relevant officers are kept in a proper and correct manner according to the law.
• Whether there is sufficient evidence/proof for income and expenses or not.
• Whether there has been any manipulation or misappropriation in the books of accounts with malicious intent or not.
• Whether the Board of Directors has honestly performed all the work that it ought to and could do for the benefit and interest of the company or not.

Liquidator (Liquidator)

• For carrying out all the work related to the winding up/liquidation of a company, an independent and impartial person is appointed, who is called a Liquidator.
• A liquidator is the person appointed to perform all tasks related to the liquidation of a company that is undergoing voluntary winding-up or has fallen into insolvency.
• The liquidator settles the accounts of the assets and liabilities of the company that has decided to go into liquidation, and sequentially distributes the proceeds to the company's creditors, debenture holders, preference shareholders, and ordinary shareholders, thereby managing the company's shareholders and certifies that both the assets and liabilities have become zero.

Functions of a Liquidator (Function of liquidator)

1.    To convert the company's assets into cash by selling fixed assets as per necessity following the valuation of all the company's property.

2. To ascertain all the loans and liabilities that the company needs to pay and settle.
3. To pay off the loans and liabilities in accordance with the priority order determined by law.
4. After paying off the loans and liabilities, if any property remains, to proportionally distribute the amount among the company's shareholders (in proportion to the shares held by the shareholders).

 

Unit-4 Established Legal Precedents (Pratipadit Muddaharu)

1. Bhuminanda Sharma Dawadi Vs HMG, 062/5/6 some landmark precedents of the supreme court on commercial law, 1st ed. (1959-2005), Supreme court, 2006

• Subject: Certiorari, Mandamus including others (Utpresan Paramadesh Samet).
• Petitioner (Nivedak): Bhuminanda Sharma Dawadi, Founder Principal of Ratna Shiksha Sadan Residential Secondary School, operated under B. And Sons Kathmandu Pvt. Ltd., located at Kathmandu District, Kathmandu Metropolitan City, Ward No. 35.

Versus (Biruddha)

• Opposing Party / Respondent (Bipakshi): His Majesty's Government (HMG), Office of the Company Registrar, Tripureshwar, Kathmandu, including others.
• Established Precedent / Principle (Pratipadit Najir/Siddhanta): When the law itself clearly mentions that directives can be issued only in a situation where actions have been performed, or not performed, contrary to the Memorandum of Association, Articles of Association, unanimous agreement, or contract—the decision of the Office of the Company Registrar that overrode the provisions contained in the Memorandum of Association, along with the letter issued to the petitioner based on that decision, does not appear to be compatible with Section 136 of the Company Act, 2053.

Pursuant to the Company Act, 2053, an order has been issued stating that the Office of the Company Registrar holds the authority to issue directives to a private company only if acts or actions have been carried out contrary to the company's Articles of Association, unanimous agreement, or against the law, in accordance with those statutory provisions.

2. Khem Chandra Chaurasia Vs HMG, Dept of industries, NKP 2065/507

• Petitioner (Nivedak): Khemchandra Chaurasiya, Shareholder and Director of Cable and Plastics Pvt. Ltd., residing at Kathmandu Metropolitan City, Ward No. 33.

Versus (Biruddha)

• Opposing Party / Respondent (Bipakshi): His Majesty's Government (HMG), Ministry of Industry, Department of Industries, Tripureshwar.
• Subject: Certiorari (Utpresan).
• Established Principles / Rulings:
• (1) A Board of Directors meeting held by directors whose tenure has already expired—meaning they are no longer actively holding office—is automatically illegal. Any decision made in such a meeting shall be voided pursuant to Section 144 of the Company Act, 2021.
• (2) When holding a meeting, due notice must be served properly. Since proper due notice was not given accordingly, and because the meeting was held based on the decision of an illegal Board of Directors, the decision of that Board meeting is also automatically illegal and cannot be sustained. Therefore, the petitioner's claim seeking to maintain the decisions of that general meeting cannot be sustained.

 

3. Piyus Raj Panday Vs Tax Office Kathmandu, NKP 2040/091

• Subject: Request to issue a writ of Certiorari or any other appropriate order/direction.
• Petitioner (Nivedak): Piyush Raj Pandey, residing at Raktakali, Kathmandu District, Kathmandu Metropolitan City, Ward No. 18.

Versus (Biruddha)

• Opposing Party / Respondent (Bipakshi):
• Tax Office, Kathmandu - 1
• Kathmandu Land Revenue Office, Dillibazar - 1
• Lalitpur Land Revenue Office, Patan - 1
• Bhaktapur Land Revenue Office, Bhaktapur - 1

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Established Precedent (Pratipadit Siddhanta) - Case 3 Continued

• There is no legal ground or basis to freeze or restrict the personal property of a company's Managing Director due to the business operations or transactions of the company, which is an organized institution operating as a separate legal person.
• When the restricted property appears to be immovable rather than movable, under such circumstances, the Tax Office's letter instructing to freeze the registration of the immovable property held in the name of the writ petitioner and his family—simply because the company failed to clear its due taxes—cannot be considered compatible with or pursuant to the law.

 

4. Prakash Bahadur Singh et al. V. Nepal Match co. et al., NKP 2045/655

• Petitioner (Nivedak): Prakash Bahadur Singh including others, residing at Indrachowk, Kathmandu Metropolitan City, Ward No. 4.

Versus (Biruddha)

• Respondent (Pratyarthi): Nepal Match Company (Pvt.) Ltd. including others.
• Subject: Request to issue a writ of Mandamus or any other appropriate order/direction.
• Established Principle / Ruling:
• (1) A company's shares can be transferred by relinquishing rights or placed as collateral/mortgage in the same manner as movable property, provided that due legal procedures are fully satisfied.

 

5. Prakash Shrestha V. HMG Nepal, NKP 2061/687

• Subject: Certiorari including others (Utpresan Samet).
• Petitioner (Nivedak): Prakash Shrestha including others, residing at Balaju, Kathmandu District, Kathmandu Metropolitan City, Ward No. 16.

Versus (Biruddha)

• Opposing Party / Respondent (Bipakshi): His Majesty's Government (HMG), Office of the Prime Minister and Council of Ministers, Singha Durbar, including others.
• Established Principle / Ruling:
• Through the exercise of the jurisdiction provisioned under Article 88, Sub-article (1) of the Constitution, a party approaching the court to have a certain law declared unconstitutional, null, and void due to a conflict with any clause of the Constitution must show that the disputed legal provision must be able to substantiate and clearly state exactly how and with which provision of the Constitution it conflicts.

• There is a major difference between the judicial review of administrative or executive decisions conducted pursuant to Article 88(2) and the judicial review of laws enacted under the authority of the legislature pursuant to Article 88(1).
• If a petition is filed in this court pursuant to Article 23 of the Constitution claiming that a decision made contrary to criteria based on Fair Play has affected one's legal rights, the decision must be made strictly within judicial standards or boundaries. The responsibility lies with the decision-maker to convince the court through their decision that the criteria were not overstepped.
• In a petition claiming that a law conflicts with the Constitution pursuant to Article 88(1), the burden of proof to substantiate exactly how the challenged law conflicts with the Constitution rests entirely upon the claimant seeking the declaration of invalidity.
• Since the required number of employees is necessary for the operation of any organization, and those provisions in the bylaws are found to have been formulated to apply equally to everyone for that purpose, such provisions cannot be deemed discriminatory or contrary to Article 11 of the Constitution. Therefore, they cannot be held to conflict with the Constitution.
• According to the provisions of Regulation 21 of the bylaws, the petitioners, at most, six months for temporary employment, and according to the provisions of Regulation 23, if workers are required for casual or seasonal work, the concerned head may hire them on a daily wage basis for that specific purpose. Given this arrangement, when the petitioners recruited in this manner were not continuously retained in service—in line with the provisions of the regulations—it cannot be argued that they were terminated from service in violation of the terms of service regulations.

• According to the provision in Regulation 22(1) of the Authority's Employees Terms of Service Regulations, 2050, when making temporary or time-bound appointments under Regulation 21, or contract appointments under Regulation 23, a notice must be published in local newspapers for at least seven days. Pursuant to this provision, no temporary, time-bound, or contract appointment can be made without publishing such a notice.
• Now, henceforth, even when filling vacant positions within the Authority through temporary, time-bound, or contract appointments, compliance with the provisions of Regulation 22(1) must be maintained by publishing a public notice before making any appointments. A directive order (Nirdeshanatmak Aadesh) is hereby issued to the respondent, Nepal Electricity Authority, to implement and ensure this practice.

 

6. Purusottam Acharya Vs Boris and Restaurant Pvt. Ltd., NKP 2044/934

• Case (Mudda): Partition/separation of land and enforcement of possession (Jagga Chhutyaee Chalan Chalaipaath).
• Appellant / Plaintiff (Punravedakarwaadi): Purushottam Acharya, residing at Battisputali, Kathmandu District, Kathmandu Metropolitan City, Ward No. [not visible].

Versus (Biruddha) - Case 6 Continued

• Opposing Party / Respondent (Bipakshi): Boris and Restaurant Pvt. Ltd., located at Battisputali, Kathmandu District, Kathmandu Metropolitan City, Ward No. [not visible], and Mrs. Idhar Likhane Bich, residing at Kathmandu Metropolitan City, Ward No. 10, Baneshwor.
• Date of Judgment: 2044/5/28 B.S.
• Established Precedent / Ruling:
• In the registration/deed document, it is clearly mentioned that the property was transferred and registered in the name of Boris Bar and Restaurant Pvt. Ltd. If they had purchased it in their personal joint capacity, the three-generation lineage details (Teenpuste) would have to be disclosed. Since there is no three-generation lineage entry for the plaintiff and respondents, the property mentioned in the deed is shown to have been purchased in the name of Boris Bar and Restaurant. Therefore, property purchased in the name of a company cannot be claimed as the personal property of the individual members of the Board of Directors mentioned in the deed.
• Since all members of the Board of Directors signed on behalf of the company to make the purchase, there was no requirement or necessity to separately delegate authority to any single individual.

 

7. Surya Narayan Das Vs Dairy Development Corporation Head Office, Kathmandu, NKP 2045/419

• Petitioner (Nivedak): Surya Narayan Das, residing at Rajbiraj Municipality, Ward No. 4.

Versus (Biruddha)

• Opposing Party / Respondent (Bipakshi): Dairy Development Corporation (DDC), Head Office, Lainchaur, Kathmandu.
• Subject: Request to issue a writ of Certiorari (Utpresan ko Aadesh Jaari Garipaath).
• Established Principle / Ruling:
• (1) Matters regarding what kind of employees to retain, in what numbers, and with what qualifications, after considering the institution's budget, staff size, and capacity, are decisions to be made by that institution itself. For the proper management and smooth operation of the institution, decisions regarding employee recruitment, transfer, promotion and dismissal etc., His Majesty's Government cannot simply issue directives, nor is the corporation legally bound to accept such directives by assuming they were issued for proper management and smooth operation.

 

8. Sushilrani Vs Hotel Jaya International, NKP 2040/901

• Case (Mudda): Execution/registration of deed (Likhat Paas).
• Appellant / Defendant (Punravedakarprativaadi): Sushila Rani Rana, residing at Vikram Bhawan, Lalitpur District, Lalitpur Municipality, Ward No. 5.

Versus (Biruddha)

• Opposing Party / Plaintiff (Bipakshirwaadi): Anand Bahadur Shrestha, residing at Kantipath, Kathmandu District, on behalf of Hotel Jaya International.
• Date of Judgment: 2041/3/16 B.S.
• Established Precedent / Ruling:
• Merely because a document does not explicitly state the phrase "to file a lawsuit/case," it cannot be argued or reasoned that tasks which ought to be performed strictly by the Board of Directors can be executed by anyone else.

 

9. Tarini Prasad Adhikari V. G.M. Surya Bahadur, NKP 2065/1093

• Appellant / Defendant (Punravedakarprativaadi): Tarini Prasad Adhikari, residing at Rautahat District, Gaur Panchayat, Ward No. 8.

Versus (Biruddha)

• Opposing Party / Plaintiff (Bipakshirwaadi): General Manager Surya Bahadur, on behalf of the Head Office of Nepal Food Corporation (Nepal Khadhya Sansthan).
• Case (Mudda): Misappropriation/recovery of cash or store inventory (Tahavil Maseet).
• Established Precedent / Ruling:
• Since Section 3(4) of the Corporation Act, 2021 (Sansthan Ain) provides that a corporation can sue or be sued in its own name, and Rule 2(5) of Chapter 1 of the Nepal Food Corporation Regulations, 2031 provisions that the responsibility to execute or cause to execute all functions of the corporation lies with the General Manager—it is evident that the responsibility to file and initiate a lawsuit where the corporation must act as the plaintiff rests entirely with the General Manager.

 

10. Tej Raj Pant Vs Board of Directors, Timber Corporation et. al., NKP 2044/895.

• Subject: Request to issue a writ of Mandamus or any other appropriate order, directive, or warrant.
• Petitioner (Nivedak): Tej Raj Pant, residing at Sripur Village Panchayat, Ward No. 6, Kailali District.

Versus (Biruddha)

• Opposing Party / Respondent (Bipakshi):
• Board of Directors, Timber Corporation, Babarmahal
• General Manager, Timber Corporation
• Personnel Administration, Timber Corporation
• Date of Order: 2044/9/7 B.S.
• Established Precedent / Ruling:
• Regarding the rights, powers, and liabilities of an institution, the very act or law under which that institution was established shall apply, unless provided otherwise.

Looking at the provision made in Section 137(kha) of the Company Act, 2021, the heading of that section states that a government company must comply with the orders and directives of His Majesty's Government. Within that section, it is mentioned that every government company must comply with the orders and directives issued by the concerned department.

In the present dispute, since it does not appear that any such directive was issued in accordance with that provision in the name of the respondent, The Timber Corporation Limited, it cannot be held or accepted that the respondent, The Timber Corporation Limited, is legally bound to comply with the disputed decision.