After reading this article, you will know about the process of company conversion in Nepal.
A company is a group of people who come together or who have contributed money for some common objectives or enterprise and are incorporated as an entity.
A company is a voluntary association of persons who have come together to carry on some business and share the profits. A company is a business vehicle, an association of a number of people for economic purposes.
Public Company
A public company has seven or more members and can invite the public to subscribe to its shares. At least 7 members are required to start a public company.
There is no maximum number of members. The transferability of shares is not restricted. The extension of ‘Ltd.’ is used.
Private Company
A Private company is an organization that limits its number of members to 50 and cannot invite the public to subscribe to its shares. Minimum of 2 members and a maximum of 101 members.
No margin on capital formation. The extension of ‘Pvt. Ltd is used. The transferability of shares is restricted.
Process of Company Conversion in Nepal
Conversion of Private Company to Public Company
In the context of Nepal, the Company Act, 2063, section 13 mentions the provisions regarding the conversion of private companies to public companies.
- When the general meeting of a private company passes a special resolution to convert it into a public company. But certain conditions shall be fulfilled.
- If 25% or more than 25% of the shares of the private company are bought by one or more than one public companies.
- If a private company buys 25% or more than 25% of the shares of a public company.
In the case of condition (1), after the decision of the meeting is made, within 30 days of such decision, an application with the fee shall be given to the office.
After such an application is made, and if the company fulfills the conditions of a public company, it shall be registered in the company registration book, and within 60 days, a certificate shall be provided of such conversion.
In the case of conditions (2) and (3), the application shall be given within 7 days with the fee to the office.
After such an application is made, and if the company fulfills the conditions of the public company, it shall be registered in the company registration book, and within 60 days, a certificate shall be provided of such conversion.
According to the above-mentioned procedures, after the conversion of the head company to a public company, its branches shall also be ipso facto converted to a public company.
The application shall be made by the head company for registering those branches as public companies.
The laws applicable to the public company shall be applied from the same date when it is converted to a public company.
Conversion of Public Company to Private Company
In the context of Nepal, the Company Act, 2063, section 14 mentions the provisions regarding the conversion of a public company to a private company
Conditions for a Public Company to be converted into a Private Company
- If the shareholders of the public company are fewer than 7.
- If the capital cannot be maintained by the company as mentioned in sec 11, i.e., a minimum of 1 crore.
Within 6 months, the related public company shall make amendments to its resolution and regulation, and convert it into a private company.
After the amendment is made, within 30 days of such amendment, the application shall be given to the office in the prescribed format with a photocopy of such amendment, and the fee should be paid.
Within 60 days, the certificate shall be given after the registration of the conversion of the public company to a private company.
Conclusions
With the necessity and requirements of the situation, the public company can be converted into a private company, and the private one can be converted into a public company by following the legal provisions of the process of company conversion in Nepal.
For Answers and Questions
Can a private company be converted into a public company?
With the necessity and requirements of the situation, the private company can be converted into a public company by following the legal provisions of the process of company conversion in Nepal.
Can a public company be converted into a private company?
With the necessity and requirements of the situation, the public company can be converted into a private company by following the legal provisions of the process of company conversion in Nepal.
