A Company Secretary (CS) plays a pivotal role in the governance and smooth operation of a company. While the position is often seen as a back-office role, the importance of a Company Secretary in Nepal cannot be overstated, particularly given the country’s legal and regulatory frameworks governing businesses. Under the Companies Act, 2063, the appointment of a Company Secretary is not only a statutory requirement for certain companies, but the role itself holds critical responsibilities for ensuring compliance with legal and corporate governance standards.
In this article, we will explore the significance of the Company Secretary’s role, the legal provisions regarding their appointment, and the benefits they bring to a business in Nepal.
What IS a Company Secretary?
A Company Secretary (CS) is a professional who ensures that a company complies with all legal and regulatory requirements.
In Nepal, a company secretary plays a crucial role in corporate governance, ensuring legal compliance and implementing company policies and procedures.
The CS acts as a bridge between the company, its board of directors, shareholders, and regulatory authorities.
While the title suggests administrative work, the Company Secretary carries substantial responsibility, ensuring the company operates within the law and adheres to best practices in governance, shareholder communication, and corporate management.
Relevant Legal Provisions for a Company Secretary in Nepal
The Companies Act, 2063, outlines several sections that govern the appointment and responsibilities of the Company Secretary.
These provisions are essential for companies to understand in order to comply with legal requirements. The Sections of the Companies Act, 2063 are:
- Section 184 - Defines the requirement for appointing a Company Secretary in public companies and private companies with significant capital.
- Section 185 - Covers the qualifications, appointment process, and dismissal of the Company Secretary.
- Section 186 - Outlines the roles, responsibilities, and penalties for non-compliance with the CS appointment.
Which Company Should Have a Company Secretary in Nepal?
Under the Companies Act 2063, the appointment of a Company Secretary is mandatory for certain types of companies, especially public companies, and private companies with a paid-up capital exceeding NPR 10 million.
Here are some thresholds for the appointment of a CS in Nepal:
1. Public Companies: Mandatory Appointment
For all public companies, the appointment of a Company Secretary is mandatory. Public Companies, which offer shares to the public and can be listed on a stock exchange, must ensure they have a qualified Company Secretary in place.
2. Private Companies: Based on Paid-Up Capital
For private limited companies, the appointment of a Company Secretary is mandatory only if the company’s paid-up capital is equal to or greater than NPR 10 million.
This ensures that larger companies with more complex legal and governance requirements have professional support to meet their compliance needs.
3. Qualifications of a Company Secretary
To be eligible for appointments, the Company Secretary must be a qualified professional. This typically requires holding a recognised degree in law or business, such as a master’s degree in business administration (MBA), a law degree, or other equivalent qualifications.
Additionally, they may need to hold certifications from recognised bodies or institutions in corporate governance and secretarial practices.
The Appointment Process of a Company Secretary in Nepal
As per the Companies Act, 2063, the process of appointing a Company Secretary in Nepal involves the following steps:
- Board Resolution - The Board of Directors of the company must pass a resolution to appoint a Company Secretary. This decision is typically made at the first board meeting after the company is registered or after it meets the threshold requirements for a CS.
- Filing with the Company Registrar - The appointment must be notified to the Office of the Company Registrar. The details of the appointment, including the qualifications of the Company Secretary, must be filed as part of the company’s records.
- Compliance with Qualifications - The appointed Company Secretary must meet the necessary qualifications and certifications as per the statutory requirements outlined by Nepalese law.
Key Responsibilities of a Company Secretary in Nepal
The Company Secretary in Nepal has a wide range of responsibilities, including ensuring compliance with corporate laws, assisting with corporate governance, and advising the board of directors on legal and regulatory matters. Some of the primary duties are as follows:
Legal Compliance and Corporate Governance
The CS ensures the company complies with all relevant laws, regulations, and statutes. This includes compliance with the Companies Act, 2006, tax regulations, labour laws, and other industry-specific rules.
The Company Secretary also advises the board on corporate governance best practices and ensures the company’s operations align with these standards.
Board of Support and Communication
A significant part of the Company Secretary’s role involves supporting the Board of Directors (BOD) by organising meetings, preparing agendas, and keeping minutes.
They serve as a link between the board and shareholders, ensuring clear, timely communication.
They are also responsible for maintaining the company’s records, including those related to shareholders and board members.
Annual General Meetings (AGMs)
The Company Secretary ensures the smooth conduct of Annual General Meetings (AGMs), which are essential for shareholder engagement and compliance.
The CS prepares financial reports, issues notices to shareholders and oversees the proper filing of resolutions and meeting minutes.
This transparency helps build trust with shareholders and regulatory authorities.
Filing Documents with Regulatory Authorities
The CS is responsible for filing necessary documents with the Office of the Company Registrar and other regulatory bodies in Nepal.
These documents include annual returns, financial statements, board resolutions, and other corporate filings required by law.
This ensures the company’s records are up to date and compliant with the legal framework.
Advisory Role
The CS advises the company’s board on matters related to corporate governance, legal implications of decisions, and risk management.
By providing legal insights, the CS helps prevent the company from making decisions that could expose it to legal liability.
Comparison Between Director and Company Secretary
Here is a clear breakdown of the key differences between a Director and a Company Secretary in a company:
| Aspect | Director | Company Secretary |
|---|---|---|
| Role | Policymaker, part of the board | Compliance and administrative officer |
| Appointed By | Shareholders (AGM) | Board of Directors |
| Qualifications | No specific academic requirements | Nepali citizen with a Company Secretary certification, more than 2 years’ experience, or a bachelor’s in law/management/commerce/economics with more than 3 years’ experience |
| Multiple Roles | Can be a director in multiple companies | Cannot serve in more than one company (except parent-subsidiary) |
| Disqualification | Fraud, insolvency, criminal offences | Cannot be a director of the same company |
| Main Duties | Strategy, budgeting, senior management oversight | Legal compliance, filing documents, organising meetings |
| Decision Power | Has voting rights and decision-making authority | No independent decision-making; follows board instructions |
| Liability | Accountable for mismanagement, fraud, and non-compliance | Responsible for legal and compliance duties |
| Focus | Strategic leadership and risk management | Governance support and compliance |
The Importance of Having a Company Secretary
While many small businesses in Nepal may not initially consider hiring a Company Secretary, the position becomes essential as the business grows and faces increasingly complex legal and regulatory requirements.
Here is why the role is indispensable:
Ensures Legal Compliance
As Nepal’s business laws and regulations become increasingly complex, the company secretary ensures the company complies with all statutory requirements.
This reduces the risk of legal issues, penalties, or even the company’s dissolution due to non-compliance.
Enhance Corporate Governance
A Company Secretary ensures that a company is managed transparently and ethically, which is crucial for maintaining shareholder trust and the company’s market reputation.
By following best practices in corporate governance, the CS contributes to the company’s overall credibility and stability.
Improve Shareholder Relations
The Company Secretary is often responsible for facilitating communication between shareholders and the management.
They handle shareholder queries, ensure shareholders are informed about key decisions, and manage shareholder meetings efficiently.
Professional Expertise
A Company Secretary brings expertise in legal and corporate governance matters, helping businesses navigate the complexities of regulatory frameworks, thereby improving decision-making processes.
Their input can be invaluable for structuring business operations, negotiating contracts, and protecting shareholders’ interests.
Risk Management
Through their advisory role, the Company Secretary assists companies in identifying and mitigating legal risks.
This proactive approach can protect the company from potential disputes and legal actions, allowing the business to operate smoothly.
Conclusion
A Company Secretary (CS) is essential for ensuring legal compliance and supporting corporate governance in Nepal.
As required by the Companies Act 2063, certain companies, especially public companies and those with a paid-up capital of over NPR 10 million, must appoint a CS.
The Supreme Court’s ruling in Chilime Jalavidhyut Company Ltd v. Labour Court highlights the complexities surrounding the legal status of a company secretary.
It emphasises the importance of adhering to the procedural requirements set out in the Companies Act.
In navigating these legal uncertainties, companies must adopt a thoughtful, compliant approach, whether by appointing a company secretary or hiring a consultant, to ensure robust corporate governance and meet regulatory obligations in Nepal’s dynamic corporate landscape.
