Company Closure, Deregistration and Liquidation in Nepal

Voluntary Liquidation — Solvent Company

Section 126 allows a company that is not in insolvency proceedings to undergo voluntary liquidation where the statutory conditions are satisfied.

The shareholders must generally pass a:

Special Resolution

to liquidate the company.

This route is appropriate only where the company is capable of fully settling its liabilities.

Solvency Condition

Before using Section 126, the directors must be able to make a written declaration that, after appropriate inquiry:

• the company is capable of paying all debts and liabilities; and

• those liabilities can be fully settled within:

one year from the liquidation resolution or otherwise completely resolved within that period.

The declaration should be presented to the General Meeting considering the liquidation.

Important

If the company cannot pay all its debts:

Do not use solvent voluntary liquidation merely to avoid insolvency proceedings.

The Insolvency Act may apply instead.

Filing the Liquidation Resolution

A copy of:

• the Special Resolution; and

• directors' written solvency declaration

must be submitted to OCR within: 7 days after the resolution is passed.

This is an immediate post-resolution deadline.

Appointment of Liquidator

When the liquidation resolution is passed, the company must appoint a: licensed insolvency practitioner as liquidator

and determine the liquidator's remuneration.

OCR maintains a directory of licensed liquidators/insolvency professionals through its public data facilities.

Notify OCR of Liquidator

The company must notify OCR of the liquidator's appointment within: 7 days after appointment.

The liquidator’s appointment and statutory authority should be documented and notified within the required period. The company should then hand over management, assets and records in accordance with section 127.

Effect of Liquidator Appointment

Once the liquidator assumes control:

• directors/officers cease to exercise ordinary management authority;

• management powers pass to the liquidator;

• employee service generally terminates automatically, except employees retained/appointed by the liquidator as needed.

This is a material legal transition.

Do not continue to operate the company as though the old Board remains fully in control.

Liquidator Takes Control of Assets and Records

Section 130 requires the liquidator to take custody/control of:

• company assets;

• accounts;

• records;

• documents.

The company should therefore prepare a formal handover of:

• bank accounts;

• books;

• contracts;

• fixed assets;

• inventory;

• receivables;

• tax records;

• legal cases;

• company registers.

Liquidator's Main Responsibilities

Section 131 requires the liquidator to perform functions including:

• collect amounts/assets receivable by the company;

• pay creditors and settle liabilities;

• prepare liquidation accounts;

• report progress to shareholders;

• distribute remaining assets to shareholders after creditors are paid;

• submit final liquidation report to OCR.

The liquidator must also prepare and submit liquidation income/expenditure accounts to OCR at least every: 6 months during the process.

Creditors Are Paid Before Shareholders

The general sequence is: Collect company assets → Pay liquidation costs → Settle creditors/liabilities → Distribute remaining assets to shareholders

Section 131 allows distribution of residual assets according to the liquidation plan where shareholders holding at least: 75% of paid-up share capital

approve the relevant distribution proposal.

Shareholders should not withdraw company assets before creditor liabilities are properly settled.

Secured Creditors

Voluntary liquidation does not eliminate the rights of secured creditors.

Section 135 preserves the rights of creditors holding security over company assets under applicable law.

Secured loans should therefore be reviewed before the company resolves to liquidate.

What if the Company Turns Out to Be Insolvent?

If the liquidator discovers that the company:

• is insolvent; and

• cannot fully pay its debts/liabilities,

Section 129 requires the liquidator to apply for insolvency review under the prevailing insolvency law.

This reinforces the distinction: Solvent company

→ Companies Act voluntary liquidation.

1. Insolvent company
2. Insolvency Act process.

Final Liquidation Report

After liquidation is completed, the liquidator prepares the final report covering matters such as:

• assets realised;

• creditors paid;

• liabilities settled;

• residual assets distributed.

The final report is submitted to OCR together with the auditor's report and certification that the liquidation process has been completed.

Final OCR Deregistration After Liquidation

After receiving the liquidator's final report under Section 131, OCR removes the company's name from the company register and issues the deregistration/dissolution order under Section 132.

OCR must also publish notice of the dissolution in a national daily newspaper.

Only at that point is the Companies Act liquidation/dissolution process complete.

OCR Administrative Deregistration — Section 136

Section 136 is different from voluntary solvent liquidation.

OCR may deregister a company where, among other conditions:

A. Business never started

Founders apply because the company could not commence business.

B. Annual compliance default

The company fails to submit Section 80 information for: 3 consecutive financial years or fails to pay the applicable Section 81 penalty.

C. Company not operating

OCR has reasonable grounds from company-administration information to believe the company is not conducting business or is not in operation.

Notice Before Section 136 Deregistration

Before deregistration, OCR must provide notice stating the grounds.

The notice is sent to the company's:

• registered office;

• officer; or

• founders

according to the statutory hierarchy, and may also be published in a national daily newspaper where necessary.

The company then generally has: 2 months from receipt of notice

to show why its registration should not be cancelled.

Deregistration Does Not Erase Liabilities

This is crucial.

Section 136 provides that even after deregistration:

liabilities of officers/shareholders may continue where company liabilities remain.

The Act expressly states that deregistration does not prevent legal action to enforce such liabilities.

Therefore:

Company deregistered ≠ debts automatically forgiven.

Assets and Liabilities Under Section 136

Where a company is deregistered under Section 136, the Act provides for remaining company:

• property;

• rights;

• benefits; and

• liabilities

to pass to shareholders in proportion to their shareholdings under the statutory framework.

This differs fundamentally from the orderly liquidator-led creditor settlement under Sections 126–132.

Special Deregistration — Section 136क

Current section 136क(1) applies where, at commencement of the provision, a company had not started business, was not operating, had not submitted section 80 information, or had not paid section 81 penalties, and wishes to cancel registration. These are disjunctive statutory grounds.

The company normally obtains a general-meeting decision and applies to OCR. If the meeting cannot be called or cannot sit for lack of section 73 quorum, subsection (2) permits the attending directors or shareholders to decide and apply. Establish the actual facts and decision record before selecting this route.

General Meeting decision

The replaced section 136क contains no old two-year application period. Do not infer a filing deadline from the repealed wording. Check the operative Act and current OCR implementation instructions for the particular application.

Under subsection (4), OCR publishes a national-daily notice allowing 30 days for an objection. OCR may cancel after that period where no valid reason against cancellation is established, then informs the director and publishes the outcome on its website. The section 136 liability framework continues to apply.

Reduced Amount Under Section 136क

Section 136क(3) requires section 80 information and the lower of the applicable section 81 penalty or 0.5% of paid-up capital. For paid-up capital of NPR 10,000,000, 0.5% is NPR 50,000; that mathematical comparison alone does not establish eligibility or the final assessment.

Finance Act 2083 section 48 separately provides historical remission for qualifying registered companies seeking continuation or cancellation: file the FY 2082/83 statements and pay the legally applicable FY 2082/83 tax, fee and charge by the end of Asoj 2083. Determine whether its exact conditions apply before quoting a cancellation amount. It does not waive every ordinary new registration or transaction fee.

OCR Forms / Authentication

The Special Deregistration Directive 2082 requires evidence of the meeting-call notice, the cancellation decision, section 80 information through the current financial year and the applicable payment particulars. Reconcile company liabilities and assets before approving the decision. The attending directors and shareholders provide a written declaration accepting outstanding liabilities, with verification under the applicable Companies Directive procedure.

OCR checks the documents and can require missing information or steps. It then publishes the 30-day objection notice and considers any claim before deciding on cancellation. Retain the decision, declaration, filed information, payment or remission assessment, notices and final cancellation outcome. Use the current OCR identification or verification format for the actual submission.

Restoration of Deregistered Company

Section 137(1) now covers cancellation under section 136(5) or section 136क(5). The company, shareholder or creditor may apply to court within five years after publication of the cancellation notice, with the statutory grounds for restoration.

The court’s order determines the restoration. Outstanding section 81 penalties may need payment before restoration is entered in the register, subject to applicable relief. Preserve the order and accepted restoration record.

Tax Closure Is Separate

OCR liquidation/deregistration does not automatically close tax registrations.

The closing company should separately address:

Income Tax

• final accounts;

• final return;

• tax payable;

• TDS;

• tax clearance.

VAT

• VAT deregistration;

• closing stock;

• capital-goods adjustment;

• final VAT return.

PAN

• taxpayer status/closure procedure.

Other

• customs/excise;

• local taxes;

• SSF/payroll;

• sector licences.

A company should not seek final OCR closure while large unresolved tax liabilities remain.

Employees and SSF

Before closure, deal with:

• employee termination;

• final salary;

• leave/overtime;

• gratuity/SSF treatment;

• payroll TDS;

• SSF contributions;

• employment records.

In ordinary voluntary liquidation, Section 127 also changes employee status once the liquidator takes over.

Bank Accounts

Bank accounts should ordinarily remain available while the liquidator/company needs to:

• collect receivables;

• pay tax;

• pay creditors;

• distribute residual assets.

Do not close the bank account at the beginning of liquidation merely because business operations have stopped.

Choosing the Correct Route

Solvent Liquidation Checklist

• Confirm company is solvent

• Confirm no insolvency proceeding

• Prepare directors' solvency declaration

• Pass Special Resolution

• File resolution/declaration within 7 days

• Appoint licensed liquidator

• Notify OCR within 7 days

• Hand over assets/records

• Notify creditors/stakeholders as required

• Recover receivables

• Pay creditors

• Settle taxes

• Complete employee liabilities

• Prepare periodic liquidation accounts

• Distribute residual assets

• Obtain auditor report

• Submit final liquidator report

• Obtain OCR deregistration/dissolution

Special Deregistration Checklist

• Establish the applicable section 136क ground at commencement.

• Document the general-meeting decision or lawful subsection (2) alternative.

• Prepare section 80 information and the company’s liabilities file.

• Calculate the section 81 penalty and 0.5% comparison; separately test Finance Act 2083 remission and its deadline.

• Use the current application and verification instructions.

• Track the 30-day objection notice and final OCR outcome.

• Complete tax, employee, licence and bank matters separately.

• Preserve accepted documents and cancellation evidence.

Common Errors

Using solvent liquidation where the company cannot pay creditors

Assuming business closure automatically cancels the company

Stopping tax filings before tax deregistration

Ignoring the 7-day filings after liquidation resolution/appointment

Paying shareholders before creditors

Using Section 136 deregistration to assume liabilities disappear

Using repealed section 136क wording or assuming a fee concession applies without satisfying its conditions

Closing company bank account before liabilities are settled

Further guidance and practical checks

Company closure should begin with a solvency and liability review. The legal route chosen determines creditor protection, liquidator involvement, tax closure, asset distribution and OCR procedure.