Reform agendas for enterprise facilitation

On January 31, 2017, Industry, Commerce and Consumer Welfare Committee organized a consultation meeting on reforming the existing Companies Act. The meeting was held among parliamentarians, representatives from think tanks and sectorial experts.

The discussion focused on provisions related to company entry and exit process in Nepal. The deliberation focused on the following questions:

  1. How to ease the process of company entry and exit?
  2. What changes are required in the existing regulations?
  3. What kind of reforms are required, in addition to those that exist in the Act?

Samriddhi Foundation was also a part of this consultation where we pitched a number of ideas to improve the Act: (all recommendations may/may not be reflected in the final Act)

Policy harmonization

According to the new directive issued by the Hon. Minister of Industries to the Office of the Company Registrar, incorporation procedure for companies with domestic investment is to be limited to 30 hours, and those operating with foreign investment is to be limited to 7 days of having submitted the application respectively.

Given Nepal’s political instability and differing policy priorities, stated reforms may not be considered top priority of the new government. Thus, policy harmonization should be engaged in immediately.

Devolution of administrative powers

Companies can only be incorporated through Office of the Company Registrar which means that people across the nation have to travel to Kathmandu for this purpose.

As Nepal moves steadily towards federalism, it will be pragmatic to house at least one set of regulators at each province and give them powers to regulate businesses falling under their jurisdiction.

Inter-department coordination

All agencies involved in the process of business incorporation to administering other required permissions should share their information with one another so that entrepreneurs do not have to begin each process from scratch.

ICT integration

The current system of digital integration has, in effect, only added a layer of compliance to the process of incorporating a company. These can be solved by integrating a system of digital signature verification and online payment into the administration process.

Single document incorporation

Office of the Company Registrar should develop a system that allows the incorporation of a one-man company based on one-page Article of Association (AoA) and build a model document for more-than-one-man private companies. Also, it should allow nominating agents to handle the entire incorporation process in case of a public company.