Transport committees get more time to register as company

Citing the necessity to amend a few provisions in the existing Company Act to bring the large transport associations and committees under the company format, the government has today extended the deadline for the transport bodies – for the second time – to register themselves as a company till mid-March.
Though the government has decided – a few months ago – to end transport cartel, it has failed to implement the decision, presumably under pressure from transport entrepreneurs, and extended the deadline.
The three-month extension allows them to continue operating as committees, which means the public transport operators will run its cartel until then, though the government has promised an amendment in the Companies Act to insert a special provision for the existing bus operator committees to register as companies even if a committee is run by more than 101 individuals.
However retired secretary at the Ministry of Physical Infrastructure and Transport Tulasi Prasad Sitaula claimed that both the changes in the law were unnecessary. "This raises questions as to why should they be allowed to run a company with so many members," he said, adding, "No company requires that many number."
A joint meeting of three ministers – transport minister Raghuvir Mahaseth, industry minister Matrika Prasad Yadav and home minister Ram Bahadur Thapa – decided to allow them to run as bus operator committees for more three months on Thursday, only two days before the Dec 16 deadline.
According to director general at Department of Transport Management, the deadline has been extended for the final time. "The extension is basically intended to address a few concerns raised by the transport entrepreneurs," he said, adding that transport entrepreneurs had last week ‘officially’ agreed to switch to the company model but had set a few preconditions that include transferring transport bodies’ movable and immovable properties, including their vehicles and staffs to the new company.
By scrapping the registration of transport bodies including transport committees and associations earlier in April, the government had claimed that it would not renew their registration from mid-July, if they failed to transform into the company modal. But the  the government’s recent decision – for the second time – to extend the deadline for transport bodies to register themselves as company reflects government’s unwillingness to illegalise transport cartel.
The government move was, however, intended not only to end the monopoly of transporters in the public transportation sector and ensure its growth, but also to bring public transport sector, which makes billions worth transactions annually, under the income tax net of the government. The company model was also introduced to bring the transport operators into tax net, formalise the transport service sector, stop them from manipulating the services, and make public transport a properly organised system.
Publishing a notice a week ago, the department has informed that public vehicles that have not been registered with the department under the company model will not be allowed to ply the roads from December 16. However, going against its own decision to end transport cartel, the department has once again extended the deadline to register themselves into company till mid-March.
According to the department, only around 10,000 public vehicles – of the total 1,500 transport bodies – out of more than 200,000 public vehicles across the country have registered with the department under the company model so far.
The government’s move earlier this year was resisted by the bus operators, who defied the government’s announcement to convert them into companies. They called strikes and the public transport services came to a grinding halt.
Home Minister Ram Bahadur Thapa had led a move to arrest the operators for obstructing essential public service, and ordered seizing bank accounts of the transport committees, though tye resisted to the government move. But the committees surrendered to the government and promised to convert themselves into companies when their bank accounts were frozen. They were given a deadline of doing so until mid-July, but the government later extended it to December 16. 

House approves amendment to Company Act

The Company Act Amendment Bill has finally been endorsed by the parliament.
The bill, which couldn’t get through the parliament on Friday due to lack of a quorum, was endorsed today. The new law is expected to simplify entry, operation and exit of companies in Nepal.
One of the key laws that could encourage prospective investors – both domestic and foreign – in Nepal, the amendment to the Company Act (2063 BS) has made things easier for companies, which are defunct for long and are looking to wind up their operations legally, according to industry minister Nabindra Raj Joshi.
The amendment has also relieved individuals and firms of liability to pay fees and fines piled up for several years. Such individuals and firms will have to pay only one per cent of their paid-up capital, according to a provision in the new law. Companies, which failed to report their operation details and pay liabilities for several years, can enjoy this facility for one time only.
“Around 50,000 defunct companies can benefit from this exit scheme,” according to the ministry.
According to the Act that has given exit chance to domestic and foreign firms in Nepal that are registered but are no longer in operation, any defunct firm can exist by paying 0.5 per cent of its paid-up capital or 0.5 per cent of due taxes that such companies owe to the government – whichever is less – in the next two years.
According to Joshi, the amendment, which started five years ago, has a number of provisions aimed at easing doing business and creating more jobs in the country.
“Apart from easy exit, the amendment has also made entry of a company easy,” Joshi said, adding that the amendments in the Company Act are expected to improve doing business environment and also attract private sector investments including foreign direct investments. "The Act has also given validity to online registration of companies and use of digital signatures."
With the introduction of online company registration three years ago, Nepal’s doing business indicator had progressed by five points.
The new law has also raised the threshold of paid-up capital of firms requiring compulsory formation of three-member auditors committee for auditing of their financial operations to Rs 100 million from existing Rs 30 million. Likewise, a firm can donate up to Rs 100,000 in a fiscal year up from Rs 50,000 in the existing law.
The legislature has also capped administrative cost of firms not distributing profit in the past year at 25 per cent of their annual expenditure. This measure is also believed to tighten screws on unscrupulous firms reporting loss by showing bloated meeting allowance and other unnecessary costs.
Similarly, the new Company Act has also increased the upper limit of number of promoters in a company from 50 to 101. The government has also introduced a provision whereby promoters of any company can participate in their annual general meeting (AGM) through video conference.

Telecommunication service providers must go public
Likewise, the new amendment has also made it mandatory for telecom companies having paid-up capital of Rs 50 million or above to float their shares to general public within the next two years. With such provision in the new law, private telecom operators will have to issue shares to the public in near future.
Except Nepal Telecom (NT), other five telecom service providers in Nepal are owned by the private sector. Among the private sector-owned telecom operators in the country, paid-up capital of United Telecom Ltd (UTL), Nepal Satellite Telecom and Ncell exceeds Rs 50 million. According to the Company Registrar Prem Kumar Shrestha, the provision is introduced for private telecom operators as they have comparatively higher direct every day linkage with the public.