Share Issue and Allotment in Nepal — Rights Issue, Allotment & OCR Filing

Check Available Capital

Before issuing shares, determine:

Authorised Capital

Maximum share capital authorised by the company's constitutional documents.

Issued Capital

Amount of authorised capital actually issued.

Paid-up Capital

Amount actually paid by shareholders on the issued shares.

A company cannot simply allot shares beyond its authorised capital.

If authorised capital is insufficient:

Authorised capital must first be increased.

Increase Within Existing Authorised Capital

Where authorised capital is sufficient but the company wants to increase issued capital, Section 56 permits the company to increase issued capital within the authorised limit by:

Ordinary Resolution of the General Meeting.

If authorised capital itself needs to increase, a different Special Resolution process applies.

Existing Shareholders' First Right

Section 56 generally gives existing shareholders a first right to purchase newly issued shares in proportion to their existing holdings.

The company must provide at least: 35 days for existing shareholders to exercise the right.

If the existing shareholders:

• do not subscribe; and

• do not transfer their right

within that period, the remaining shares can be dealt with according to the Board's decision and statutory framework.

Exceptions to Existing Shareholder Priority

Section 56 contains exceptions where existing shareholders do not have the ordinary first right.

These include specified shares issued:

• for non-cash consideration;

• under contractual rights/facilities;

• pursuant to merger arrangements;

• other statutory categories.

The exception should be identified before bypassing existing shareholders.

Public Issue

Where a public company invites the general public to subscribe for shares:

• Companies Act;

• Securities Act;

• SEBON requirements;

• prospectus/public-issue rules

apply.

OCR states that where the public is invited to subscribe, allotment should normally be completed within: 3 months after closure of the share issue.

Where the statutory minimum subscription/allotment conditions are not met, allotment restrictions and extension/refund rules apply.

Public Issue Minimum Subscription

OCR's current guidance states that where there is no underwriting arrangement covering at least 50% of the public issue, the company should not allot shares unless at least: 50% of the publicly issued shares

are subscribed.

If allotment cannot be made within the statutory period, OCR can permit an additional period in the circumstances described by the Act.

Allotment Return to OCR

Section 31 requires the company to file information including:

• number of shares issued/allotted;

• total value;

• names/addresses of allottees;

• amount paid on each share;

• amount unpaid;

within: 30 days after allotment.

Where shares are paid wholly or partly by non-cash consideration, additional agreement/evidence must be submitted under the statutory process.

Initial Share Allotment

After incorporation, founders' subscribed shares must be properly reflected in:

• shareholder register;

• paid-up capital records;

• bank evidence;

• share certificates;

• CAMIS.

CAMIS separately supports: Initial Share Allotment / शुरु शेयर बाँडफाँड.

Initial subscription should not remain permanently as an unverified figure appearing only in the MOA.

Share Payment

Maintain the subscription agreement, payment evidence, shareholder ledger and authorised non-cash consideration. Reconcile receipts to the shares allotted and the paid-up amount in the company records.

For a new public company, section 63 requires evidence of full payment of the amount called from founders and the statutory minimum paid-up capital. OCR’s administration guidance requests founder-payment, shareholder-register and bank-statement evidence. An already operating private company converting to public is exempt from obtaining fresh commencement approval.

Premium Shares

Current section 29 distinguishes the route for a public securities offer from other premium issues. A public company making the relevant public offer must satisfy securities law. A private company, or public company not making that public offer, may issue premium shares where assets exceed liabilities and the general meeting approves.

Record the amount above face value in a separate premium account and apply it only to uses permitted by section 29. Retain the approval, financial evidence, pricing basis and allotment records.

OCR’s older administration list includes a profit/dividend history. Do not present that history as a universal current statutory condition; establish the route under the amended Act and the applicable securities rules.

Bonus Shares

Bonus shares are issued from qualifying:

• profits; or

• reserves created from profits,

subject to company-law requirements.

Section 56 prohibits increasing share capital or issuing bonus shares merely by revaluing company assets rather than from profit/profit-created reserves.

Bonus shares require their own corporate/tax analysis.

Non-cash Share Issue

Shares can be issued against authorised non-cash consideration where law permits.

Examples may include:

• asset contribution;

• contractual rights;

• merger consideration.

The company should obtain:

• agreement;

• valuation;

• legal authority;

• Board/shareholder approval;

• Section 31 filing.

Non-cash allotment must not be used merely to create unsupported paid-up capital.

Share Register and Certificates

After allotment, update the shareholder register, issued and paid-up capital and the relevant OCR record. Section 33 ordinarily requires a share certificate within two months after allotment, subject to its listed-company and securities-intermediary exceptions.

Review beneficial ownership and reconcile the legal records to bank receipts and accounting entries. Keep the allotment return acknowledgement, certificate record and supporting payment file together.

Example — Rights Issue

Existing issued shares: 10,000

Existing shareholder: A owns 6,000
B owns 4,000

Company issues: 5,000 new shares proportionately.

First right: A → 3,000 shares
B → 2,000 shares

Existing shareholders should be given at least the statutory 35-day period to exercise their rights, unless a statutory exception applies.

After full subscription: Issued shares:

15,000

This is an increase in issued capital—not a transfer.

Allotment Checklist

• Check authorised capital

• Check issued capital

• Determine share class/face value

• Determine required resolution

• Check existing shareholder pre-emptive rights

• Give 35-day offer period where applicable

• Check regulatory approval

• Check foreign-investment approval

• Receive subscription/payment

• Pass allotment resolution

• Update shareholder register

• File Section 31 details within 30 days

• Complete CAMIS allotment event

• Issue share certificate

• Update beneficial ownership

• Reconcile bank/accounting capital

Common Errors

Issuing shares beyond authorised capital

Ignoring existing shareholder first rights

Missing the Section 31 30-day filing

Recording capital without receiving actual subscription amount

Treating share allotment as share transfer

Issuing premium shares without checking Section 29

Further guidance and practical checks

A valid share allotment requires alignment among capital authority, shareholder rights, subscription/payment, allotment decision, shareholder register, Section 31 filing and CAMIS.