JOINT STOCK COMPANY

The increased need of modern industry and commerce could not meet by sole trading and
partnership firms. They were favorable till the trading and industry could be run small scale and
high capital was not needed. After industrial revolution, use of machines increased, production
was undertaken on a large scale, and production was undertaken with the expectation of high
demand. Capital investment was needed much as unit became bigger, risk element increased, in
these circumstances form having unlimited liability did not remain favorable. Need for establishing
a type of business organization arose which could sustain high risk so joint stock company emerged
from this.
A joint stock company or simply company is a voluntary association of person generally formed
for undertaking some big business activity. It is established by law and can be dissolved by law.
The company has a separate legal existence so that even if its members die, the company remains
in existence. Its members contribute money for some common purpose. The money so contributed
constitutes the capital of the company. The capital of the company is divided into small units called
shares. Since members invest their money by purchasing the shares of the company, they are
known as shareholders and the capital of the company is known as share capital.
According to Haney “A company is an incorporated association which is an artificial person
created for by law, having a separate entity, with a perpetual succession and a common seal.”
According to H.L Haney “A joint stock company is a voluntary association of individual for
profit, having its capital divided into transferable shares, the ownership of which is condition of
membership.”
Lond Lindy” By a company is meant an association of many person who contribute money and
money’s worth to a common stock and employ it for common purpose.”
In conclusion we can say that joint stock company is a voluntary association of individual
established for the purpose of carrying on some business or undertaking usually with limited
lability. It has a separate legal existence, common seal, and limited liability. It is a legal person
created by law, so it has separate entity from the entity of shareholders. It issues share to raise
capital and these share can easily transfer from one person to another.

Characteristics of Joint stock company

1. Artificial person: A joint stock company is an artificial person in the sense that it is created by
law and does not possess physical attributes of a natural person. It cannot eat or walk, smile, read
or write. However, it has a legal status like a natural person, so it can purchase assets in its name
and also can enter into contract with others.

2. Formation: The formation of a joint stock company is time consuming and it involves preparation
of several document and compliance of several legal requirements before it starts its operation. It
needs to prepare article of association; memorandum of association and prospectus and these
 documents can only be prepared by experts, so it cost extra money. A company comes into
existence only when it is registered under the companies act.

3. Separate Legal Entity: Being an artificial person, a company exists independent of its members,
it can make contracts, purchase and sell things, employ people and conduct any lawful business in
its own name. Shareholders can file a case against a joint stock company as well as joint stock
company can also file a case against shareholder. A shareholder cannot be held responsible for the
acts and activities of company because in joint stock company there is separation of ownership
and management. For example, while conducting business if company need to pay certain amount
to creditor then shareholder will not be liable to pay that debts of creditors and vice versa.

4. Common Seal: Since a company has no physical existence, it must act through its Board of
Directors. But all contracts entered by them shall have to be under common seal of company. This
common seal is the official signature of the company. Any document with the common seal and
duly signed by an officer of the company is binding on the company.

5. Perpetual Existence: The company enjoys continuous existence. Death, lunacy, insolvency or
retirement of the members does not affect the life of the company. It goes on forever. Since it is
created by law, it can only be dissolved by law.

6. Limited liability of Members: The joint stock company is able to attract large number of people
to invest their money in share because it offers them the facility of limited risk and liability. The
liability of a member is limited to the extent of the amount of shares he holds, Shareholder does
not need to sell his personal property to pay labilities. For example, If ram has 200 units of share
and its face value or investment per share is 100 then her liability is limited to Rs 20000. Personal
property of shareholder cannot be seized to the company debt.

7. Transferability of shares: The members of the company (Public company) are free to transfer
the shares held by them to others as and when they like. The shareholder generally transfers their
ownership that mean the shareholders exchange share with cash in secondary stock market, they
do not need the consent of other shareholders to transfer their shares.

8. Membership: to form a joint stock company, a minimum of two members are required in case of
private limited company and seven members in case of public limited company. The maximum
limit is fifty in case of private limited company. There is no maximum limit of membership for a
public limited company.

9. Ownership and Control : Generally all the person who hold the share of the company are the
owner of the company and they generally receive bonus share and dividend from the company
according to the company financial performance although they are owners of the company they all
cannot take part in the day to operation and decision because if all the shareholder participate in
each and every matter and decision then there will be delay in decision as well cannot the manage
the organization efficiently and effectively so from the shareholder they elects the board of director
who manages and control the organization and take important decision of the organization for the
benefit of the shareholders.
10 Large capital and resources: The joint stock company has huge capital and resources available
because large number of shareholders contributes capital to the organization. So joint stock
company has huge resources available to invest in automated machinery, land and building, raw
material, branch expansion and product development which are needed to establish and operate
business as well as to remain ahead on competition in the market.

Advantage of joint stock company

1. Large Resources: A joint stock company can raise huge resource because large number of
shareholders can purchase share issue by the company according to their capabilities. Since
the face value of share price per unit is only Rs 100 so small investor can buy a small unit of
shares whereas large investor can buy large unit of shares.

2. Limited Liability: In a joint stock company the liability of its members is limited to the extent
of share held by them, so investor does not need to sell his/ her property to pay the debts of
creditors even if it is not cover by the assets of the organization.

3. Continuous of Existence: The life of joint stock company is perpetual in nature. Even the
death, insolvency of shareholder, board of directors does not affect the existence of the
company, the company goes on running even in the death, insolvency of shareholders and
board of directors.

4. Research and Development: A company generally has huge capital available and company
can invest that capital on research and development for improved processes of production,
designing and innovating new products, improving quality of product, new way of training its
staffs which are very necessary in order to become competitive in the market.

5. Transferable of Shares: In joint stock company shareholders can easily transfer his ownership
to other person at his own will, he can go to secondary share market and sell his share instantly
with any troublesome process.

6. Effective management: The joint stock company can manage the organization in effective
and efficient manner because joint stock has a huge capital to recruit talent, skills and
experience employees as well as board of director are generally appointed who are experience
and educated so we can say joint stock company can manage organization effectively.

7. Easy to obtain loan: In joint stock company it is necessary to audit the account books as well
as it is necessary to publicize all the report relating to profit loss account, balance sheet and
cash flow in national newspaper so all the information are transparent as well as joint stock
company has a good public image so that it is easy to obtain loan.
8. Social Value: A joint stock company has a highest social value in the society because they
offer jobs to large number of individual as well as they contribute in society by providing
donation as well by participating in social work in society.
 9. Divided risks among shareholders: Risks is inherent in every types of business no one can
guarantee hundred percent success rate of any business. In joint stock company if the company
suffered losses than the losses are divided among the large number of shareholders according
to their shareholding.

Disadvantage of Joint stock company

1. Legal formalities: A joint stock company is a legal person created by law. It requires too many
legal formalities. A company has to submit several legal documents like Article of Associations,
Prospectus, Memorandum of Association at the time of registration. Experts also need to hire to
prepare these documents. So, it is very expensive and time-consuming process.

2. Lack of Secrecy: Joint stock company need to public its financial statements like Income
statement, Balance sheet, Cash flow Statements in daily newspapers so all the general public can
know about the company financial situations and there is also chance of leaking of sensitive
information because large number of board of directors and top level managers involved in
discussion about future plans, policies and strategy to be adapted by organization.

3. Difficulty in formation: It is very difficult to form joint stock company in Nepal. It requires many
legal and other formalities. Share issue, capital structure, types of company, etc. should be
determined in advance before its registration.

4. Separation of ownership and management: In joint stock company shareholders are owners of
the company. They are large in number so all of them cannot participate in the management of the
organization, so they elect few boards of directors as their representative who directly involved in
the management and decision of the organization.

5. Speculation in Shares: The shares of a joint stock company deal in a stock market. Price of shares
in secondary market depends on financial health, goodwill, dividends and prospects of the
company. In order to gain personal benefit managers and directors manipulate the financial data
of the organization which impact the value of shares. Unhealthy speculation on share in very
harmful to the company.

6. Corrupt management: All of the shareholders cannot take part in the management and control of
the organization so very few representatives of shareholders and top level managers take major
decision and management of the organization and if the dishonest person reaches in the top
management position there is danger of misuse of company property, fraud and cheating which
negatively impact all the shareholders of the organization.

7. Lack of prompt decision: In competitive business environment, quick decision and its
implementation is essential for business success. In company form of business quick decision is
not possible. Regular decisions of the company are taken by the board of directors. They come
into decision with mutual discussion about the various aspects of business which is time
consuming process. However major decisions of the company are taken at the general annual
metting.it take more time to inform shareholders to hold meeting and to decide the matters.
8. Lack of personal interest: Lack of personal interest is another demerit of joint stock company.
Even they are owner of the company they have no right to see the daily activities of the company.
Hired managers and employees look after all the affair of the company. Shareholder remains
inactive. They do not show personal interest.

TYPES OF COMPANIES
There are several types of companies. They can be classified on the basis of incorporation, liability,
ownership, and number of members.
1.On the basis of incorporation
There are three types of companies on the basis of incorporation. They are Statutory Company,
Chartered Company, and Registered Company.
 Statutory Company: Statutory Company is established by the Order of the President, or by
the Legislative Committee or by Bill of parliament. Its objective, power, responsibility,
accountability, and activities are defined by the special Act under which it is created. A
statutory company is generally established to run enterprises of national importance. Nepal
Electricity Authority, Nepal Rastra Bank, Nepal Airlines Corporation, Nepal Oil Corporation,
Nepal Industrial Development Corporation, etc. are some examples of statutory companies in
Nepal.
 Chartered Company: Chartered company is established by the Royal Charter or special
sanction granted by the head of the state. Chartered company is granted special privileges and
power. The Hudson’s Bay Company, the East India Company, the Bank of England, the Dutch
East India Company etc. are the examples of chartered companies. There are no chartered
companies in Nepal.
 Registered Company: Registered company is established under the prevailing law of the
company. In Nepal, the formation, operation and winding up such companies are governed by
the provisions of the Company Act.2063. Registered companies are the most common types
of companies in Nepal. Himal Cement Company, Laxmi Bank Ltd, etc. are the examples of
registered companies in Nepal.
2.On the basis of liability
1. Limited company
This type of company is registered with certain numbers of shares. In such company liability of
shareholders is limited up to extent of the face value of shares that they have purchased. The
creditor cannot claim excess amount from the shareholders even if assets or properties of the
company become insufficient to fully meet their claims. It means shareholders have no extra
burden for the payment of debts of the company more than their capital investment.
2. Unlimited company
It is just like an ordinary partnership. Under this type of company, shareholders are liable for
payment of all liabilities of the company. The shareholders are liable for the payment of creditors’
claim, if assets of the company become insufficient for the payment of debts, even by selling their
personal properties. Generally, this type of extra burden is created to the shareholders when the
company is suffered from loss for many consecutive fiscal year and problem of dissolution is
raised. The company of unlimited liability is rarely found in present business world .

3. Company limited by Guarantee

Under this type of company, the liability of the shareholders limited to a specified amount as
mentioned in the memorandum of association. The amount of guarantee may differ from
shareholders to shareholders. Shareholders are liable for the payment of face value of shares held
by them in addition to the guaranteed amount. Generally, Guaranteed amount each just like a
capital reserve which can be called up, when the company would suffer from loss or the problem
of dissolution is raised. Thus, under this type of company the liability of shareholder is limited up
to his written guarantee for payment in exceptional situation.

3. On the basis of number of members

On the basis of number of members, Joint stock company may be classified into two types:
1.Private Limited Company:
It is one of the registered companies incorporated according to the company act in the concerned
department. According to company Act 2063, the minimum number of shareholders may be one
and maximum shareholders should not be exceeded fifty. A private limited company can not issue
shares to the public for subscription and remain limited to some limited number of shareholders.
Shares of a private limited company are also not transferable with out consent of all the members.
In other words, it is nothing but a kind of partnership with limited liability. A private limited
company can start business after getting certificate of incorporation from concerned department of
the government. For quick identification of such company the word “Pvt.Ltd.”or private ltd. Or
[P]Ltd.is written after the name of the company.
2. Public Limited company:
Company other than private limited, comes under public limited company. According to section 2
of the company act 2063 public company means any company incorporated according to this act.
The minimum number of shareholders are 7 and maximum is unlimited for the registration of the
public limited company. A public limited company can issues share to public and shares are also
easily transferable. It needs to obtain the certificate of commencement before starting any business
along with certificate of incorporation. It needs to issues prospectus at the time of issuing share or
debentures for public subscription. For quick identification the word ltd or limited is written at the
end of the company.
4. On the basic of ownership
On the basic of ownership, the company may be classified into two types they are:
1. Government Company
In this type of company, Government has investment minimum 51 percent or cent percent [100%]
of the paid up share capital of the company. As government has maximum shares of the company,
the management of the company each taken by the Government authority. Generally, public utility
companies are established under government leadership. In the context of Nepal, Nepal dairy
development corporation, Janakpur cigarette factory, birgunj sugar Mill Ltd. etc. Are the example
of government company.
2. Non- Government Company
This type of company is established under private ownership. Government has no involvement in
the ownership of the company, if involvement of their that is also less than 50% of total paid up
share capital of the company. The private members need to complete some Government
procedures only for registration of the company. It is managed and controlled by the private owners
themselves according to their requirement. Government does not interrupt in the regular business
activities of the company, only completion of few rules of government is sufficient.

Main document for the incorporation of joint stock company

Memorandum of Association, Articles of Association and Prospectus are the main document for
the incorporation of joint stock company. Public limited must submit Memorandum of
Association, Articles of Association and Prospectus to company registrar for incorporation while
Private company must only present Memorandum of Association and Article of Association for
registration of company.

1. Memorandum of Associations
The Memorandum of Association is a main document of a company. It is known as Constitution
or Charter of a Joint Stock Company. It provides the foundation on which the Joint Stock Company
is built. It defines name and Address, objectives, functions, authority, capital structure of a
company and its relationship with the outside world. Special care has to be taken in the preparation
of MoA, because the company cannot go beyond the limit laid down by MoA and it can be changed
only with considerable difficulty. The main clause of Memorandum of Association are as follows:
-

1. Name Clause
The full name of joint stock company is stated in name clause. The name of company should
end with the world Public Limited for Public Limited Company and Private Limited for Private
Limited Company.

2. Address Clause
This clause states place of its head office where Joint company is to be situated.

3. Objective clause
Objective clause is most important clause of MoM because every company is established for
achieving certain objectives. It is difficult and inconvenient to alter this clause. This clause
 should clearly explain the main objectives and other objectives of the company that it tries to
attain beside work to be carried on for the achievement of the objectives are included in the
same clause. The company can do only the work specified in this clause.

4. Capital Clause
This clause states the amount of authorized capital, issued capital and paid-up capital, price
per unit of share and total number of shares of the proposed company. It also needs to clearly
specify the total capital structure that means it should provide information concerning the
promoter share capital, ordinary share capital and preferred share capital.

5. Liability clause
This clause states the liability of shareholders. The liability of shareholders of limited company
is limited up to the face value of shares held by them and liability of shareholder of unlimited
company is unlimited and liability of shareholder of limited guarantee company is limited up
to the amount that they proposed to pay in the case of loss.

6. Subscription clause
This clause is also known as association clause. It is the most important clause of MoM. It
states the name and addresses of subscribers or signatories to the MoM. Signatures must at
least one in case of private company and seven in the case of public company.

7. Agreement clause
According to company act 2063, public company is desired to do following things. (1) if
promoters or any others partner is entitled to subscribe share, they must pay in each. (2) if
company is to enquire any property from promoter at the time of commencement of its
transaction and (3) if company itself is to bear the expenses incurred on the corporation.

2. Article of Association (AoA)

An Article of Association is another important document for the incorporation of the company.
Article of association is the document of internal management of the company. It contains rules
and regulations and bye- law of the company for its systematic management. The company
should manage the business activities, internal structure and internal control system based on
rules and regulation mentioned in article of association. A company shall frame the Article of
Association in order to attain the objectives set forth in its MoM and carry out its activities in
a well-managed manner. It contains rules and regulations of the company. It deals with such
matters as the issue of shares, transfer of shares, increase in capital, general meeting, voting by
members, powers of directors, qualification of directors, the declaration of dividends,
maintenance of proper accounts and audit and so on.

Contents of Articles of Association

According to the company Act 2063 article of association contains the following contents:-
 Procedures of convening the general meeting of the company and notice to be given
for such meeting,
 Proceeding of general meeting,
  Number od directors, provision of alternate director, if any, and tenure of directors,
 If a person has to subscribe shares to become a director of a company, minimum
numbers of shares,
 If the case of a public company, qualification and number of independent directors,
 Power and duties of the board of directors and the managing directors,
 Authority of directors and delegation of authority,’
 Quorum for a meeting of the board of directors, notice of meeting and proceedings of
meetings.
 Matters on alteration in share capital,
 Provision relating to the transfer of shares,
 Appointment of company secretary and auditor,
 Provisions relating to remuneration, allowances and facilities of directors,
 Matters on buying back of shares by the company, if the company is to buy back it
shares and so on.

3. Prospectus
A prospectus is another important document for the incorporation of Public limited Company. A
prospectus is an invitation to the public to buy shares and debentures of the company. It can take
the form of any notice, circular, advertisement or any other documents, though it is usually turned
out in the form of an attractive booklet. A prospect explains the soundness of the business which
the company proposes to undertake and the security and profitability of the investment.
According to company act 2063 a public limited company must publish its prospectus before
issuing its securities publicly. As the prospectus reflects the personality of the company it should
be drawn in systematic and attractive manner. All information of the company should be given in
a separate paragraph and in step wise. For official validity one copy of prospectus should be signed
by the directors and send it to the registrar office. After getting approval form registrar office
company can issue prospectus to the public for subscription of share capital. Generally, the
objective of issue of prospectus are as follows
1. To provide summary of past information if any, present position and future programs of the
company.
2. To draw attention of the public for subscription of capital by purchasing share.
3. To create confidence among the public about the company and its its future prosperity.
4. To provide information to the public about the procedures, terms and condition of issue of shares
for subscription.
Some companies can draw a very rosy picture, exaggerate facts and even make false statements.
Such actions are undesirable. A prospectus should be based on the facts. Every prospectus issued
by the company must be dated, signed by every director and filed with registrar of companies
before its issue to the public. (1) It also must contain information regarding underwriting
commission (2) time and place of inspection of financial reports(3) salaries allowance and
remuneration of directors (4) information about share allotment (5) economic condition of the
company.
Contents of prospectus
 Main objectives of the company and particulars specified in MoA and AoA,
 Number of shares to be subscribed by directors and the salaries allowances and remuneration fired
for them,
 Financial soundness of the company,
 Brokerage rate on shares and debentures,
 A biographical introduction of directors,
 Arrangement, if any, for reserving shares for employees or any other persons.
 Financial arrangement of the company, and its net worth after making provision or all liabilities,
 Possible financial risk involved in the business to be undertaken by the company,
 Name and address of auditors and particular of the audit report, if any,
 The amount needed for the business of the company and the estimated,
 Total number of shares to be issued by the company,
 The past financial report of the company if any,
 When the notice of share allotment will be published.

Company meeting
A meeting is defined as an assembly of two or more persons for predetermined purpose and by a
previous notice for discussion and decision on some business matters. Company is an artificial
person formed by law. Shareholders are the owner of the company whereas their representatives
as members of board of directors are responsible for the management of the company.
Shareholders are more in members and scattered in various regions. It becomes inconvenient to
held meeting of shareholders within short time. The major decisions of the company are taken in
general meeting of shareholders whereas general decision are taken in board meeting. Thus, the
board meeting may be classified into two meeting 1. Shareholders meeting 2, board of directors.
1. Shareholder meeting
There are generally three types of shareholders meeting they are Preliminary general meeting,
Annual General Meeting, and Extra-ordinary General Meeting are major company meetings.
a. Preliminary General Meeting (PGM)
Preliminary General Meeting is also known as Statutory General Meeting. It is the first meeting
of shareholders. Under the Company Act 2063, it is held within one year from the date of getting
certificate of commencement of business. The notice of preliminary general meeting should be
sent to the shareholders by mentioning the date, venue and agenda of the meeting before 21 days.
This meeting discusses the preliminary reports or agenda which contains:
 Authorized capital, issued share capital and paid up capital
 Number of fully or partially paid-up shares, among the allotted shares
 Total amount received from the shares allotted
 Statement of income and expenditure of the company till 35 days before to meeting
 Full names, addresses and designations of directors, managers, company secretary, accountants
and auditors
 Amount due from directors
 Loan borrowed from any bank
 Other necessary information

b. Annual General Meeting (AGM)

An Annual General Meeting (AGM) is held annually. Under the Company Act 2063, it should be
held within six months after the expiry of the fiscal year. According to company Act, 2063 a public
company shall send a notice specifying the place, date, and agenda of meeting to every shareholder
at the address supplied by that shareholder to the company, in advance of at least twenty-one days
to hold the annual general meeting. A notice there of shall also be published at least twice in a
national daily newspaper. The Chairman of Board of Directors presents the following resolutions
at annual general meeting:
 Audited financial statements and auditor’s report of the previous years,
 Directors report,
 Declaration of the percentage of dividend to be paid to shareholders,
 Appointment of directors and auditors and their remuneration,
 Other presented by shareholders representing minimum of 5 percent of total votes, and
 Other necessary, if any.

c. Extra-Ordinary General Meeting (EOGM)

Extra-Ordinary General Meeting is special meeting of shareholders of the company. If the
important issues require immediate discussion and cannot wait till AGM, then this meeting must
be held in between two AGMs. According to Company Act,2063, if the shareholders holding at
least ten percent shares of the paid-up capital of a company or at least twenty-five percent
shareholders of the total number of shareholders makes an application, setting out the reasons
therefore, to the registered office of the company for calling an extra-ordinary general meeting of
the company, directors must call such meeting within 21 days. The notice must specify the reasons
for extra-ordinary general meeting. A public company shall send a notice specifying the place,
date, and agenda of meeting to every shareholder at the address supplied by that shareholder to the
company, in advance of at least 15 days to hold the extra-ordinary general meeting. A notice
thereof shall also be published at least twice in a national daily newspaper. The extra-ordinary
general meeting can be called by Board of Directors, Auditor, Shareholders and Company
Registrar.
a. Board of directors
The board of directors of a public limited company may call an extra ordinary general meeting if
they feel necessary through special resolution. It should be noted that such extra ordinary general
meeting must not be held until the first annual general meeting.
b. Auditor
While auditing the books of accounts of public company, if he feels it necessary to convene extra
ordinary general meeting for any reasons, he may request the board of directors to do so. In case
the board of directors fails to manage, he may submit an application to the office of the company
registrar mentioning the matters. in case any such application is received, the office may convene
an extra general meeting.

c. Shareholders
The board of directors can convene extra ordinary meeting on the demand of shareholders
representing at least 10 percent of the paid-up capital or at least 25 percent of the total number of
shareholders.

d. Company registrar
As the result of inspection if it is felt necessary to call special general meeting for any important
reasons the registrar, office itself or through the board of director may call special general meeting
of the public company.

The following issues or matters discussed in an extra ordinary general meeting of the public
limited company.
 To increase or decrease the share capital of the company.
 To convert company from private to public or vise versa.
 To issue bonus share.
 To alter name and address of the company.
 To merge of one company into another.
 Change the name or the main objectives of the company.

2. Board of directors meeting

Board of directors are the representative of shareholders and responsible for management of the
company. The members of board of director are responsible for holding meeting for the evaluation
of performance and achievement of goal. Company act has made the following provision for the
meeting of board of directors.
1. Meeting of board of directors of a private limited company should be held as terms provided
for in the articles.
2. Meeting of the board of directors of a public limited company should hold at least six times a
year. The time gap between two board meeting should not exceed three months of a time.
3. The directors must be personally present in the meeting of the board of directors of a public
limited company.
4. No meeting of the board of directors will be held unless it is attended by at least fifty one
percent of the total number of directors who are entitled to attend and vote in a meeting.
5. The decision of a majority in the meeting of the board of director is binding and in the event
of neutral, the chairman may exercise his decision vote.
6. Minutes regarding the directors’ present in the meeting of the board of directors, the subject
discussed, the decision taken there on must be recorded in a separate book. Such minute must
be signed by at least sixty percent of the total number of directors.

Agenda and Resolution

Agenda
Agenda is an ordered sequence of item to be discussed in a formal meeting. It is a list of meeting
activities in the order in which they are to be taken up, by beginning with the call to order and
ending with adjournment. It usually includes on or more specific items of business to be discussed
agenda is a subject or map which facilitates meeting. It is prepared by company secretary in the
consultation of chairman. Agenda is necessary for all kinds of meeting it is sent to person alone
with the notice of meeting. Agenda must incorporate the following things: date Time Location,
attendees, Objective and Called person.
Resolution:
A resolution is the formal proposal by which decisions are made by a meeting. It is a written
statement made by the board of directors detailing which officers are authorized to act on behalf
of the corporation. It provides clear and systematic subject matter in the meeting for discussion
and decision. According to company Act 2063 there are two types of resolution They are:
Ordinary resolution:
A resolution shall be an ordinary resolution when the votes in a general meeting cast in its favour
or more than votes against it on other words, a ordinary resolution is passed by a simple majority,
51 percent of the members present at a general meeting. The votes cast may either by show of hand
or on a poll on favors of the particular resolution. An ordinary resolution is necessary to pass:
 Audited financial statement and auditors report of previous year
 Declaration of Dividends,
 Hold election of directors and fixation of the remuneration
 Appointment of auditors and fixation of their remuneration
 Other matters

1 Special Resolution

A special resolution is one which is specifically mentioned in the notice of the general meeting
and passed by such a majority that the number of votes cast in favor of the resolution is three times
the number cast against it either by show of hand or on a poll. A special resolution is passed by
special majority {i.e. 75 percent} of the members present at a meeting. Special resolution is
necessary to pass:
 Change in capital of the company,
 Change of name and main objectives of the company
 Merger of company in to another company
  Issues of bonus share.

Incorporation of the joint-stock company in Nepal

Incorporation of the joint-stock company means recognition. The joint stock company must be
registered in the office of the Company Registar under the provision of the company Act, 2063
B.S. for its legal recognition. The interested people must gather and prepare a plan and concept of
the business and apply to Company Registar. The people who prepare framework and who carry
the responsibility of the business is known as promoters. They decide about the activities of the
business. The following things are to be observed for incorporation of joint-stock company:

1. File an Application:

It is the first step of incorporation. The promoters have to file an application in company Registar
with the application form. The application must be signed by at least 1 promoter in the case of a
private company and at least 7 promoters in the case of public company. The following documents
and detail must be attached with the application:

 Name and address of the proposed company

 Name and address of the promoters
 Description of the company's share
 Copies of Memorandum and Articles of Association (2 copies)
 Copy of the citizenship certificate of the promoters
 Copy of agreement if any among promoters
 Copy of unanimous agreement if any
 Deposit voucher of registration fee
 other particulars

2. Payment of registration fee:

The promoters of the proposed company must pay prescribed registration fee. The prescribed
registration fee should be deposited in Nepal Rastra Bank or paid in cash or should provide the
deposit voucher to the office of Company Registar. The amount of registration fee depends on the
amount of authorized capital. The current amount of registration fee is presented below:
For Private Limited Company
Authorized Capital Registration fee
1. Up to Rs.1,00,000 Rs.1,000
2. Rs.1,00,001 to Rs.5,00,000 Rs.4,500
3. Rs.5,00,001 to Rs.25,00,000 Rs.9,500
4. Rs.25,00,001 to Rs.1,00,00,000 Rs.16,000
5. Rs.1,00,00,001 to Rs.2,00,00,000 Rs.19,000
6. Rs.2,00,00,001 to Rs.3,00,00,000 Rs.22,000
7. Rs.3,00,00,001 to Rs.4,00,00,000 Rs.25,000
8. Rs.4,00,00,001 to Rs.5,00,00,000 Rs.28,000
9. Rs.5,00,00,001 to Rs.6,00,00,000 Rs.31,000
10. Rs.6,00,00,001 to Rs.7,00,00,000 Rs.34,000
11. Rs.7,00,00,001 to Rs.8,00,00,000 Rs.37,000
12. Rs.8,00,00,001 to Rs.9,00,00,000 Rs.40,000
13. Rs.9,00,00,001 to Rs.10,00,00,000 Rs.43,000
14. Above Rs.10,00,00,000 Rs.30 per 1 lakh
For Public Limited Company
Authorized Capital Registration fee
1. Up to Rs.1,00,00,000 Rs.15,000
2. Rs.1,00,00,001 to Rs.10,00,00,000 Rs.40,000
3. Rs.10,00,00,001 to Rs.20,00,00,000 Rs.70,000
4. Rs.20,00,00,001 to Rs.30,00,00,000 Rs.1,00,000
5. Rs.30,00,00,001 to Rs.40,00.00,000 Rs.1,30,00
6. Rs.40,00,00,001 to Rs.50,00,00,000 Rs.1,60,000
7. Above Rs.50,00,00,000 Rs.3000 per 1 crore

3. Receiving certificate of incorporation:

After submitting the application form along with necessary documents and registration fee, the
office of Registrar examines all these documents submitted by the promoters. If the office is
satisfied by the documents, then the office will Registrar the company name within 15 days of the
receipt of the application. After registering the office, the Registrar will issue the certificate of
incorporation to the company and the company becomes legal.

4. Certificate of Commencement of Business:

After receiving the certificate of incorporation, the private limited company can run its business.
But in the case of a public limited company, it can run business only after receiving the certificate
of commencement of business. To obtain a certificate of commencement of business, the company
need to submit the report of at least 25% of issued capital already paid by the promoters with duly
signed by at least one director must be filled with the Registrar. Then, the office of Registrar will
examine the report. If the report satisfies the office of Registrar then, it will issue a certificate of
Commencement of Business. After receiving the certificate of Commencement of Business, the
public limited company can legally run its transaction and can issue prospectus also.
Winding up of a Joint Stock Company in Nepal

The process of bringing the existence of the company to the end is known as winding up of a
company. It is also called liquidation. It collects all the assets to pay the total liabilities in order to
close the company permanently. If the assets of the company exceed the liabilities the shareholders
share the surplus amount in the ratio of their shareholding and if the assets are not insufficient to
meet the liabilities, the creditors will get in proportion to their dues in order of priority.
According to the Company Act, 2053, the joint stock company can be wind up by the following
way:
Voluntaryliquidation
The agreement of all the shareholders at a special general meeting to wind up the company is
known as voluntary liquidation.
A public company can be liquidated itself by a special resolution under the following
conditions:

 If the time-frame prescribed in the Article of association for the operation of the company
has expired.
 If the company has excess liabilities to fulfill and it becomes impossible to continue the
business.
 If the company is running in loss continuously for several years and there is no chance to
run profit in the near future.

The public company must publish the decision of liquidation of the company in the national
newspaper twice within a week from the date of such resolution. It must send its effect to the
office of the Registrar. This meeting appoints the liquidator and the auditor to complete the
liquidation process and to audit the accounts of the company

A private limited company can be liquidated according to the provisions of the Memorandum
and Articles of Association.
Compulsory liquidation by company Registrar.
The liquidation of the company made by the office of the Registrar is known as compulsory
liquidation. Under this, two-third part of the creditors can apply to the office of the Registrar for
the liquidation of the company to recover the credit amount. When the application is received, the
Registrar can place an order for the liquidation of the company. The Registrar appoints liquidate
and auditor to complete the process of liquidation. Under the following conditions, the compulsory
liquidation is made:
 If an application is submitted to the company registrar to liquidate the company as passed
by a special resolution.
 If the company meeting is not called as per company Act 2063.
 If 50 percent of the total creditors apply to the office of the company Registrar for the
liquidation of the company to recover the credit amount.
 If banks or financial institutions sell or takeover all the assets of the company.
 If the report has not been submitted to the office regularly for 3 years or the fine imposed
by the office has not been paid.
 If the office believes that the company is not in existence any more.