Company Act, 2063 governs the provision related to meetings to be conducted by companies in Nepal and corporate governance is regulated through Annual General Meetings (AGMs) and Extraordinary General Meetings (EGMs). These meetings ensure transparency, uphold shareholder rights, and facilitate critical decision-making within companies.
Under Nepalese law, companies must hold their first AGM within one year of starting business operations. Thereafter, AGMs must occur annually within six months following the end of the financial year. Failure to convene an AGM within this period allows the Office of the Company Registrar (OCR) to intervene and direct the company to comply. If the company fails to respond within three months of receiving the directive, any shareholder may petition the court to order the AGM.
AGMs provide a platform for directors to present audited financial statements, auditors' reports, and directors' reports. Shareholders also approve dividend distribution, appoint directors, and select auditors during these meetings. Shareholders holding at least 5% of total voting rights may request additional matters for discussion by submitting an application prior to the AGM notice.
Dividend decisions are integral to the AGM, though the rate cannot exceed the recommendation of the Board of Directors. A 21-day notice, published twice in a national daily newspaper, is required to convene an AGM. If the meeting is adjourned, a seven-day notice suffices, provided no new agenda items are introduced.
Matters to be Presented and Decided in AGM (as per Section 77 of the Company Act, 2063)
When urgent or specific matters arise between AGMs, companies may convene an EGM. Section 82 of the Company Act, 2063, outlines conditions for EGMs. Shareholders representing at least 10% of paid-up capital or 25% of total shareholders may request an EGM. Similarly, if auditors identify critical issues during account reviews, an EGM can be convened to address them.
The Board of Directors can call for an EGM to discuss financial or structural changes, and the OCR can mandate an EGM based on findings from inspections or investigations. A 15-day notice period is required for convening EGMs.
Matters to be Presented and Decided in EGM (as per Section 82 of the Company Act, 2063)
The quorum for these meetings depends on the company type. Private companies adhere to their Articles of Association (AOA), while public companies require the presence of at least three shareholders representing more than 50% of total shares. If this quorum is unmet, the meeting can be rescheduled with a seven-day notice. For the rescheduled meeting, three shareholders representing at least 25% of total shares must be present.
Quorum Requirements (as per Section 73 of the Company Act, 2063)
Certain critical decisions require a special resolution passed by at least 75% of shareholder votes. These include increasing or decreasing authorized capital, altering company objectives, issuing bonus shares, and converting private companies to public or vice versa.
Special Resolutions (Section 83 of the Company Act, 2063)
AGMs and EGMs form the backbone of corporate governance in Nepal, fostering accountability and enabling shareholders to participate in key company decisions. By adhering to these legal requirements, companies promote transparency, ensuring their growth and sustainability in a structured manner.
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