Annual Compliance for a Pvt. Ltd. in Nepal

The Year in One Table

Nepal’s fiscal year runs Shrawan 1 to Ashad end. So for a standard company the income tax return falls due around Ashwin end and the OCR filing around Poush end. They are different deadlines to different offices, and meeting one does nothing for the other — a point worth labouring, because “my accountant filed the taxes” is the most common reason a company is nonetheless years behind at the OCR.

The Filing That Actually Matters: Section 80(2)

The operative words of Section 80(2) are these: every company shall present to the Office, within six months of the completion of the financial year, a copy of the annual financial statement certified by an auditor along with the audit report.

Three things follow, and each one catches somebody:

• “Every company.” Not every trading company. A company with no transactions files too — see nil audit.
• “Certified by an auditor.” You cannot file management accounts. The statement must come through an audit, which means the audit is on the critical path and must be started early enough to finish.
• Six months from your year end. For the standard Shrawan–Ashad year that lands around Poush end.

Section 80(1) separately requires a company holding an AGM to send the Office, within thirty days of it, the number of shareholders present, the financial statement, the board and auditor reports, and the decisions taken. Section 80(3) permits electronic submission, which is how this is now done in practice.

Does a Private Company Need an AGM At All?

Probably not — and this is the single most commonly misstated point in Nepali company compliance.

Section 76 imposes the annual general meeting requirement on public companies: every public company holds its first AGM within a year of being permitted to commence business, and thereafter within six months of each financial year end.

Section 148 then provides that where a consensus agreement between the shareholders of a private company says the AGM shall not be held, that company is not required to hold one for the period of the agreement. The condition attached is sensible: the agreement must also provide how the decisions the general meeting would otherwise make will be made instead. Section 149 goes further and lets private companies adopt written resolutions.

Appointing the Auditor — and the 15-Day Rule

Section 110: every company shall appoint an auditor. Section 111(1) sets how, and it differs by company type. For a public company the general meeting appoints. For a private company the appointment follows the memorandum, articles or consensus agreement, and only failing any such provision does it fall to the general meeting. The board may appoint the auditor before the first AGM.

Then the part that gets missed: the auditor’s name must be forwarded to the Office within fifteen days of the appointment.

And s.111(2): an auditor holds office only until the next annual general meeting. Appointment is an annual act, not a standing arrangement you set up once at incorporation and forget.

Who cannot be your auditor

Section 112 disqualifies, among others:

• a director, or an advisor on regular remuneration;
• any person or employee involved in the management of the company, or a partner or employee of such a person;
• a close relative of a director or partner, or an employee of such a relative;
• anyone who has borrowed money from the company or failed to pay dues to it.

Small companies routinely appoint a cousin or brother-in-law who happens to be a chartered accountant. That appointment is disqualified under s.112, and the auditor must in any case hold a practising licence — see our note on accounting and audit practice.

The Fines — and Who Actually Pays Them

This is the part worth reading twice. Section 81(2) provides that the director of a company or its officer who is in default shall be punished by the Registrar with a fine — and s.81(4) says that director, officer or shareholder pays it to the Office.

The fine is not a company liability that sits on the balance sheet. It attaches to people. Directors of dormant companies are often surprised to learn they are personally in default for a company that never traded.

The amounts escalate with delay and with paid-up capital:

Note the last row: once you are past roughly a year late, the fine repeats every year, indefinitely, until you file. That is the mechanism by which an abandoned company quietly accumulates a five-figure liability against its directors. A profit-not-distributing company is treated at the middle rate under s.81(3).

A Practical Annual Rhythm

Frequently Asked Questions

What must a private limited company file each year?

Under s.80(2), the audited financial statement and audit report to the OCR within six months of year end. Separately, the income tax return to the IRD within three months, and monthly VAT/TDS by the 25th where they apply. Different offices, different deadlines — one does not cover the other.

Does a private company have to hold an AGM?

Often not. s.76 imposes the AGM on public companies. Under s.148, a private company whose shareholders’ consensus agreement says no AGM shall be held is not required to hold one, provided the agreement sets out how those decisions get made instead. s.149 allows written resolutions.

What is the penalty for filing late?

Under s.81, from NPR 1,000 to NPR 5,000 for the first three months depending on paid-up capital, rising to NPR 5,000–20,000 per year once you are more than about a year late. The fine is imposed on the director or officer in default, who pays it personally.

When must I tell the OCR who my auditor is?

Within fifteen days of the appointment (s.111(1)). And the auditor holds office only until the next AGM, so it is an annual appointment.

Can a relative who is a CA audit my company?

No. s.112 disqualifies a close relative of a director or partner, as well as directors, people involved in management, and anyone who owes the company money.