TyroCity: Company Law Notes

Controls over the Management

Company Law Notes — Sun, 18 Aug 2013 05:41:42 +0000

Control over the management -by shareholders, by government, by company law Board for good governance of company. Which we know as corporate governance
Good governance in political and administration sector.
Corporate governance in corporate sector.
Control over the management is the way of application of corporate governance in company or corporation. Control is necessary for check and balance of powers role duties and jurisdiction of overall management including BOD and other stakeholders.
Corporate governance is set of process, customs policies, law and institution affecting the way of a corporation is directed administered or controlled. Corporate governance also includes the relationship among many stakeholders for which corporation is governed. The principle stakeholders are the shareholders, management and the boards of director, other stakeholders are employee, suppliers, customers, lenders regulatory, the environment and the community at large.
Controls of shareholders government and regulatory is essential for check and balance of scope and power of management.
There are so many stakeholders in any company or corporation. The harmonies, accountable, fair, credible, trustworthy and responsible relationship is possible from the check and balance. The way of check and balance is controls over the management.
Controls by different stakeholders such as by shareholders, by regulatory by government and by court is necessary for the protection of rights of shareholders and customers.

Control is the way of achieving the corporate governance which includes the following key elements.

Honesty,
Trust and integrity
Accountability
Responsibility
Mutual respect
Performance oriented
Commitment to the desired goal of corporation.

The important theme of corporate governance is to ensure accountability of certain individuals in a corporation through the mechanism which tries to reduce or eliminate the principal agent problem in corporations.

The corporate governance has some eminent principles which are as follows.

Right and equitable treatment to shareholders
Interest of shareholders and other stakeholders
Role and responsibilities of the board(Management)
Integrity and ethical behavior
Transparency etc.

Corporate governance is the system of structuring operating and controlling a company in order to achieve the following objectives.

To fulfill the long term strategic goals of the owners
To consider and take care of the interest of the different stakeholders or company
To maintain good relationship to customers and suppliers.
To take account of needs of environment and local community.
To ensure proper compliance with all applicable legal and regulator’s requirements

Organization of Economic Co-operation and Development) OECD- defines- corporate governance as a system by which business corporations are directed or controlled.

Check and balance of power of management shareholders and investor’s responsibility and accountability of management and board, Transparency and disclosure respect to law and system, respect to code of conduct, equal treatment to shareholder protection of interest of various stakeholders, a effecting accounting and auditing system are basic element or ingredients of corporate governance.

Therefor control over the management is the method of ensuring right and protecting to stakeholders. The concept and legal provision about controls are directly connected with corporate governance.

But controls should be based on law, policy and grounds of reasonableness otherwise controls may lead the management toward the defunct management.

Lifting (or Piercing) the Corporate Veil

Company Law Notes — Sun, 18 Aug 2013 05:41:42 +0000

Lifting the veil of incorporation or better still; “Piercing the corporate veil”:

means that a court disregards the existence of the corporation because the owners fail to keep one or more corporate requirements and formalities. The lifting or piercing of the corporate veil is more or less a judicial act. Judge Stoughton LJ defined the term as “to pierce the corporate veil is an expression that I would reserve for treating the rights and liabilities or activities of a company as the rights or liabilities or activities of its shareholders. To lift the corporate veil or look behind it, therefore should mean to have regard to the shareholding in a company for some legal purpose” whereas, Young Jon his part defined the expression “lifting the corporate veil” as “that although whenever each individual company is formed a separate legal personality is created, courts will on occasions, look behind the legal personality to the real controllers.”

Thus, it can be said that the Lifting of the Corporate Veil is the exception of Limited Liability. The courts will lift the corporate veil where it is necessary to secure justice, where it is the public interest to do so or where it is for the benefit of revenues. The concept of lifting the corporate veil describes a legal decision where a person of a company is held personally liable for the liabilities of the company despite the general principle that those persons are immune from suits in or that otherwise would hold only the company liable. The doctrine is also known as “disregarding the corporate entity”.

It is difficult to identify a consistent thread running through the decided cases indicating when the veil will be lifted. Certain themes can be identified. These are:

Fraud: Fraud is a crime of deceiving somebody in order to get money or goods illegally. The courts have been more prepared to lift the corporate veil when it feels that is or could be perpetrated behind the veil. The courts will not allow the Solomon principal to be used as an engine of fraud. In Gilford Motor Company Ltd. v. Horne, 1933. Horne was an ex-employee of The Gilford motor company and his employment contract provided that he could not solicit the customers of the company. In order to defeat this he incorporated a limited company in his wife’s name and solicited the customers of the company. The company brought an action against him. The Court of appeal was of the view that “the company was formed as a device, a stratagem, in order to mask the effective carrying on of business of Mr. Horne” in this case it was clear that the main purpose of incorporating the new company was to perpetrate fraud. Thus the court of appeal regarded it as a mere sham to cloak his wrongdoings.

Group enterprises: The argument of group enterprises is to the effect that in certain cases, some companies that act as a corporate group may operate to hide behind the advantages of limited liability to the disadvantage of their creditors. They may operate in a way that the parent entity is not clearly distinguishable from the subsidiaries. The argument in favor of piercing the corporate veil in these circumstances is to ensure that a corporate group which seeks the advantages of limited liability must also be ready to accept the corresponding responsibilities. This was the opinion of Doyle CJ in the 1998 case of Taylor v Santos Ltd.

Agency: The doctrine of separate legal entity that the company is a legal entity with a different identity from that of its members means that a company does not exist to become an agent for its shareholders. A company having power to act as an agent may do so as an agent for its parent company or indeed for all or any of the individual members if it is or they authorize it to do so. If so, the parent company or the members will be bound by the acts of its agent so long as those acts are within actual or apparent scope of the authority. But there is no presumption of any such relationship in the absence of an express agreement between the parties it will be difficult to establish one. In cases where the agency agreement holds good and the parties concerned have expressly agreed to such a agreement them the corporate veil shall be lifted and the principal shall be liable for the a acts of the agent. The court in The Electric Light and Power Supply Corporation Limited v Cormack, 1911. refused to pierce the veil. A one-man company had contracted with the plaintiffs to use their power supply for his work during two years, and not to install any other alternative source of energy power during that period of time. But within that period, the defendant sold his company to another company of which he was both the manager and the main shareholder. The new company thereupon installed energy power other than he one contracted with the plaintiffs. The court refused to pierce the veil, considering the act as a personal undertaking. As such Lord Rich AJ found no evidence that the sale of the business by the defendant was done with the object of evading his personal obligations.

Unfairness: One other serious ground under which courts would be so ready to pierce the corporate veil is in cases where it is deduced that there was unfairness on the part of the company in question. The plaintiff may pray to the court to pierce the corporate veil on the grounds that doing so would help bring a fair and just result.

Sham or Façade: An argument that the company under scrutiny is a sham or a façade is one of the strongest points that would prompt a court to lift the veil of incorporation. The argument is quite close to the argument of fraud, but usually stands on its own. In short, to say a company was merely a façade or a sham means the corporate form was incorporated or merely used as a mask to hide the real purpose of the corporate controller. In the case of Sharrment Pty Ltd v Official Trustee in Bankruptcy 1988, Lockhart J, stated that: “A ‘sham’ is…something that is intended to be mistaken for something else or that is not really what it purports to be. It is a spurious imitation, a counterfeit, a disguise or a false front. It is not genuine or true, but something made in imitation of something else or made to appear to be something which it is not. It is something which is false or deceptive.“

Trust: The courts may pierce the corporate veil to look at the characteristics of the shareholders. In the case of Abbey and Planning the court lifted the corporate veil. In this case a school was run by a company but the shares were held by the trustees on educational charitable trusts. The court pierced the veil in order to look into the terms on which the trustee held the shares.

Tax: At times tax legislations warrant the lifting of the corporate veil. The courts are prepared to disregard the separate legal personality of companies in case of tax evasions or liberal schemes of tax avoidance without any necessary legislative authority.

Legal provisions:
In case, any member is found guilty after the veil has been lifted, then he or she as per section 89 of the Companies Act 2063 (2006) will be disqualified from being appointed and from continuing to hold office. The following sections provide circumstances for disqualification:

Section 89 (1) (e): who is convicted of an offense of theft, fraud, forgery or embezzlement or misuse of goods or funds entrust to him/her, in an authorized manner, and sentenced in respect thereof, a period of three year has not elapsed from the expiry of the sentence.
Section 89 (1) (f): who has personal interest of any kind in the business or any contract or transaction of the concerned company.
Section 89 (2) (a): Any person referred in Sub-section (1) shall not be eligible to be appointed to the office of an independent director.
Section 89 (3) (f): If one is blacklisted by a competent body pursuant to the prevailing law for his/her default in repaying a loan of any bank or financial institution, and the period of such black listing has not expired.

[1] Atlas Maritime Co SA v Avalon Maritime Ltd (No 1) [1991] 4 All ER 769

[2] Pioneer Concrete Services Ltd v Yelnah Pty Ltd (1986) 5 NSWLR 254 (SCNSW, Young J).

[3] Gilford Motor Company Ltd. v. Horne, 1933 (Ch. 935)

[4] Taylor V. Santos. Corporate Law Electronic, 1998 (Bulletin no. 13, September)

[5] The Electric Light and Power Supply Corporation Limited v Cormack (1911) 11 NSWSR 350

Points:

An exception of distinct personality.
Concept of ‘piercing the corporate veil’ describes legal decisions where a shareholder, member or director of a corporation is held liable for its debts or other liabilities.
Generally, corporation is liable, but exceptionally, in the course of delivering justice the members or shareholders are liable.
This doctrine is known as disregarding corporate entities.
The phrase ‘disregarding of corporate entity’ relies on the metaphor of a ‘veil’ or ‘legal fiction’.
The doctrine is generally used in cases where liability is found but the corporation is insolvent.

Lifting the corporate veil - (Exception to corporate personality)

Disregarding of corporate entity.
The principle of separate personality was established in a famous case of Salomon v. Salomon & Company.
It is a fundamental principle of company law that company has distinct personality.
There is a veil drawn between the company and its members.
as per this principle typically, courts in most cases refuse the separate personality, go behind the curtain and see who are the real persons composing the company, but sometimes necessity of situation come to the courts or authorities to disregard the corporate legal entity and look to individual members who are in fact the real beneficial owner of all corporate property, and this is fact known as lifting or piercing the corporate veil.
If the veil is lifted, individual members are held liable for acts or entitled to its property.

Grounds for Lifting the Corporate Veil

For securing justice.
For the benefit of revenue
Separate legal entity is general rule and lifting the veil is an exception.
Statutory provisions for application lifting the corporate veil; Section 24,120(3),121,122,123,124,163,160(a),160(b),160(m),160(e),160(f),1609(g),160(h),160(i)160(l),161(a),!61(b),95(4),161(w),80,81,160(n),114,161(c),47,160(x),160(z),141,175,160(j), 160(A),160(P),160(Q),160(r),160(t),138-139 etc. of the Companies Act 2063 BS.

Use of Lifting the Corporate Veil on the basis of the Principles Developed by Courts;

To determine the enemy character or residency relation .( See; Company Kanoon, Bharat Raj Uprety)

Daimler v. Continental Tire & Rubber Co.

To determine group of companies (Agency Relation) ( See; Company Kanoon, Bharat Raj Uprety)
In case of Fraud or Misconduct ( See; Company Kanoon, Bharat Raj Uprety)

Gilford Motor Co. V Horne

For revenue purpose. ( See; Company Kanoon, Bharat Raj Uprety)

Income tax Commissioner V. Sri Meenaxshi Mills

A legal decision where a Shareholder or director of company is held liable for debts or other liabilities of company.
General principle is that shareholders are immune from suits. Only the company is liable but piercing the corporate veil is an exception.

Factors to consider the doctrine of disregarding corporate entity

Inaccuracy of corporate records.
Concealment or misrepresentation.
Failure to maintain arm’s length relationships with related entities.
Failure to observe the corporate formalities in terms of behavior and documentation.
Failure to pay dividends.
Intermingling of assets of corporation and of the shareholders.
Manipulation of assets or liabilities
Non- Functioning corporate officers and directors.
Other factors the court find relevant. Siphoning of corporate fund by the dominant shareholder(s).
Treatment for individual in terms of assets of corporation as his/ her own;
Alter ego.

Features of Company

Company Law Notes — Sun, 18 Aug 2013 05:41:42 +0000

The most distinguishing features of company are as follows;

1. Separate Personality or Distinct Personality or Legal Personality

Company will have separate legal personality after its incorporation.
Other enterprises like Partnership, Proprietorship have no separate legal personality.
Personality different and distinct than shareholders or member.
Distinct personality is the main feature of company. Other features are the outcomes of this main feature.
No material existence but separate personality.
Section 7 of the Companies Act 2063 B.S – “Company to be body Corporate”.
An autonomous and corporate body with perpetual succession.
Company may acquire, hold, sell dispose of, or otherwise deal any movable and immovable property like an individual.
Company may sue and be sued like an individual.
Company may enter in to a contract and exercise the rights and perform the obligation as referred to in such contract.
Different than shareholders/ members after its incorporation.
Common seal.
The concept of separate or distinct personality originated from these cases in different time
Saloman V. Salomon and Co. at the end of 19th century ( See; Company Kanoon of Bharat Raj Upreti)
Piush Raj Pandey v. Tax Office Kathmandu(D.No 1857,NLJ 2040,) (See; Company Kanoon of Bharat Raj Upreti)
Bijaya Kumar Dugar V. Industrial Promotion Board (D.No 7401 NlJ 2061) (See; Company Kanoon of Bharat Raj Upreti)
Abdul Hok V. Das Mal (1910 19 IC 595) (See; Company Law of Ashok K Bagrial)
Lee and Lee’s Air Farming ltd (1960 3 All E.R.420) (See; Company Kanoon of Bharat Raj Upreti)
Company has a legal entity distinct from and independent of its members.

2. Limited liability

One of the important advantages of company is that liability of its member’s is limited.
The creditor can recover their money only from company, not from individual behind the company.
Shareholders are not liable to pay the debt personally dues. This is very limited liability nature of company’s shareholders. Only, company is liable to pay not the shareholders.
Actually limited liability for only its shareholders /members, not for the company.
The shareholders are only liable for the value of their share.
Shareholders liability is limited within the extent of maximum value of their shares amount.
If any shareholder paid the nominal value of its share his liability is nil. But in the proprietorship and partnership firm they are not free from this liability they are individually liable.
Section 8 of the Companies Act.

3. Perpetual Succession (Permanent Existence)

Section 7(1) of the Companies Act 2063 states about this feature.
-A company shall be an autonomous and corporate body with the perpetual secession after its incorporation.

Company shall carry on all of its activities and transactions by its name. (Section 10 (a) of the Companies Act)

Natural persons have age and certain period for fix time but no for company.
Company cannot be ended without fulfilling legal procedure determined by law.
Without dissolution company cannot die.
C.B.Gower: “The death of members leaves the company unmoved. Members may come and go but the company can go on the forever.’’ (Davies Paul L, Gower and Davies’ Principle of Modern Company law 7th Edition, Sweet& Maxwell London)

During the World War- II,
All members and their employers of one American Private Company, were killed by a bomb while they were in a general meeting, but court declared that company can survive even in this situation. Not even a hydrogen bomb could have destroyed a company.

K/g meat suppliers (Guildford ) ltd. Re 1966
(Ashish Adhikary & Sudeep Gautam; Business Law in Nepal p.no 269)

Perpetual succession leads stability and long life to a company as compared to other forms of business organization.

In Re Neel Tedman Holding Pvt. Ltd Only two members were killed in a road accident, the Company was held could operate even after their death. (Ashish Adhikary & Sudeep Gautam; Business Law in Nepal)

Only the shares are traded with due the process, not the company –sec 42(1) (2)
Corporate life of company never ends without following particular legal formalities.
Even One Man Company cannot be ended after the death of the shareholder. It can end by the legal procedures.
Incorporated Association

Section 2(a) &3, 4, 5,6&7 of the Nepalese Company Act

Common Seal
Sec 26

Transferable Share
as movable property
Sec 42, 43

Capacity to sue and being sued
Sec 7(3) of the Company Act

(Bed Krishna Shrestha v. Govinda Krishna Shrestha; Kanoon Bibarnika, 2041,Year 2 p. 13)

Legal capacity to enjoy property right
Sec 7(2) of Nepalese Company Act
Purshotam Aacharya v. Boris Bar & Restruant pvt. Ltd (NLJ 2044 p.934 Decision No. 3206)
Management of representatives
Sec .86, 87 of Nepalese Company Act
“Board of Directors are the brains and the only the brains of company, and does act only through them’’ Bates V. Standard land 1910 2 Ch. 408 at p.16
Registered Office
Section 4 , 5,6 & 10(a) & (b) of Nepalese Company Act

Accounts and Audit

Company Law Notes — Sun, 18 Aug 2013 05:41:42 +0000

Account

Typically, account means invoice or record of money paid or owed.
A detailed statement of all types of financial transaction.
A recording of monetary dealing
Keeping a ledger/ register relating financial transactions
Account book or ledger Balance sheet or financial statement.

Therefore account is a language of business expressed in monitory form. Account must give a true and fair view. Due to lack of such true and fairness Enron Company, world.com of USA, Satyam Computer of India, were collapsed. The movement of corporate governance in corporate law was started all over in 2006 AD.

Basically, there are 3 types of accountancy:

Financial Accountancy
Only the historical
Picture of financial position and performance
Reporting to external parties
Management Accountancy
Interpretation of financial account
Plan of action of certain presumption and analysis of future prospects.
Cost Accountancy
Measurement of efficiency of cost.
Cost of production and trading (recording)
The aim of cost accountancy is maximizing wealth and profit
Input and output cost
The ratio between input and output, e.g. depreciation cost of machine, house etc.

Preparation of Account:

“Preparation of account must be guided by the universally accepted accounting principle named GAAP (Generally Accepted Accounting Principles)
Because it gives the picture of trust worthy and reliable.

Accounting fundamental:

In course of preparation of account the following principles must be followed.

Ethic is core value of account. So, ethic must be shown in account preparation.
GAAP must be followed double entry book keeping system is applied in account in almost country.
The principles of corporate governance must not be ignored.
Legal provision must not be ignored,

Generally the users of accounting system are of 2 types;

1. Internal party

Management committee, Audit committee, Finance or planning Dept.

2. External party

Such as; shareholders, regulators

Objectives of Accountancy

To know the internal objective is fulfilling or not.
To find error and to detect fraud

Right of the shareholders relating to account

Right to inspect the account

Final account gives:

The income and expenditure statement (Financial statement or balance sheet)
Trade Account
Profit – loss account
Profit – loss appropriation
The level of application of accounting fundamentals (corporate governance and law)

Nepalese prospective

Preparation of Account section 108
Section 108(1) of Nepalese Company Act – language Nepali, English; Section 108(2) of Nepalese Company Act – system double entry book keeping ,reflection of actual affairs(true and fair), Section 108(3) of Nepalese Company Act – place to be kept the account book, Section108(4) of Nepalese Company Act – maintaining cash balance.

Liabilities relating to account

Final responsibility is of directors or other officers (Section 108(5) of Nepalese Company Act)
Board of directors must prepare annual financial statement and report of the board of directors Section 109 of Nepalese Company Act.

Audit

Account and Audit are the best instruments for maintaining financial ethic and transparency.
Corporate governance is depended upon the better accounting and auditing of companies.
Generally the term auditing is associated with detecting the fraud errors in account.
But widely speaking, Auditing validates honesty and fairness in financial statement or account and as whole in operational system.
Auditing provides a critical basis for management in taking decisions.
Auditing is an independent valuation of an organization.
So, presently the Auditing is not limited in financial data but Auditing examines the financial as well as operational system of an organization.
In course of Auditing an auditor involves in searching and verifying the accounting records as well as in examining other evidences which supports the financial and operational facts.
Auditing is more concerned with verification of accounting data with determining accuracy and reliability of accounting statement and reports.
Auditing is conducted by obtaining the internal and external data of organization, incepting documents, by observing enquires within and outside of organization and performing other necessary auditing procedures.
Auditing is essential for reduction of risk. Audited financial statements are the means by which business corporations’ reports their operating results and financial position.

As per the value of good corporate governance;

Audits should be performed by individuals who are independent from the management and controlling shareholders of corporation being audited and are knowledgeable in auditing.
Auditor’s should undertake auditing with sufficient information and devote sufficient time and efforts to the task.
Auditors must not reveal, unless required by law, any confidential corporate information learned while auditing.

Therefore, an audit is the independent examination of financial information contained in financial statement of an entity, whether profit oriented or not, conducted with view of expressing an opinion.

Objectives of Audit:

1. Primary objectives

To determine whether financial statements have been prepared in conforming with GAAP or not
To verify that statements reflect true and fair financial position of business organization

2. Subsidiary objectives

detection and prevention of errors
Detection and prevention of fraud.

Types of Audit

1. Statutory Audit
Statutory audit is properly known as annual external audit. It checks financial statement as required by governing laws. It is a financial valuation conducted by external auditor. (Section 110 to 119 of Nepalese Company Act)

2. Internal Audit
It is a profession acting to achieve desired objectives of the organization.

Internal audit is carried out by utilizing a systematic methodology for analyzing the business process, purpose procedures and activities highlighting organization’s problem and recommending solution. Professional are called the internal auditors, who are employed by organization to perform the internal auditing activities

Here, professionals mean internal auditors who are employed by organizations to perform the internal auditing activities.

Internal Audit involves:

Efficiency of operation.
Reliability of financial reporting
Deterring and investigating frauds
Safeguarding assets
Compliance with laws and regulations

Internal Auditors are not merely concerned with the organizations financial controls. Their works include all of the organizations internal controls.

3. Cost Audit

It is an efficiency audit.
The Audit that concluded basically to find out the cost of any product or services. It measures the monetary value of goods and services.
It is conducted to find out machinery tools, equipment and other things.
The price is determined after the fair valuations of goods on the basis of materials used, labor consumed and resources used by it.

4. Social Audit

An outsider, who is a critical friend of a company, can be a social auditor of this company.
Such auditor will check the book and ask the probing questions to find out the effectively of organization’s internal operation and broad external impacts in society or community.
She/he needs not to be expert on accounting and having license of auditing.
Just s/he evaluates the organization’s social responsibility towards the society at large.

5. Legal Audit

Corporate governance and Auditing are correlated
Transparency, disclosure, good process, good decision-making etc. are fundamentals of corporate governance.
Good process denotes doing things according to the laws and best practices.
Legal audit is practiced by such corporate lawyer which examines the position of corporate governance status of entity.

The 19th century laid down the foundation of modern corporation. That is why, that was the ‘century of entrepreneurs’.

The 20th century was the ‘century of management’

Now, the 21st century promises to be the ‘century of corporate governance’.

Financial Audit, legal Audit and Social Audit help to promote the corporate governance.

Therefore, Auditing has a vital role to enforce the law, regulation, and principle of corporate governance.

Proper accounting and auditing is protection measure for security of every stakeholder of corporation.

Appointment of Auditor:

Auditor is appointed to safeguard the interest of shareholders and other stakeholders of company.
It is clear that auditing is an independent examination of financial and other operational information or descriptions of company. Therefore, an auditor must be appointed independently.
Only independent auditor can examine the accounting and other operational records in fair and true basis.
Fair and true view is the essence of auditing.
Section 110 of Nepalese Company Act – every company shall appoint an auditor.
It is suggested to read, Chapter – 8 (Sections 110 to 119) of Nepalese Company Act.

Concept and Meaning of Company

Company Law Notes — Sun, 18 Aug 2013 05:41:42 +0000

Definition of a “Company”

A company is a “corporation” – an artificial person created by law.

A human being is a “natural” person.

A company is a “legal” person.

A company thus has legal rights and obligations in the same way that a natural person does.

A corporation under Company law or corporate law is specifically referred to as a “legal person” i.e. as a subject of rights and duties that is capable of owning real property, entering into contracts, and having the ability to sue and be sued in its own name. In other words, a corporation is a juristic person that in most instances is legally treated as a person, and empowered with the attributes to own its own property, execute contracts, as well as ability to sue and be sued.

The term company implies an association of a number of people for some common object(s). It is more complicated form of association; than other type of business enterprise. It consists of large and fluctuate membership requires a more elaborative organization i.e. should recognize that 1st constitute a distinct, legal person subject to legal duties and entitle to legal right separate from those of its member. It is a legal person and is only created by law and dissolved only in accordance to law. It is not true that company implies an association because even a single person can create a company. Thus a company may be established by one or more persons, should be established with the intention of making a profit, should have one or more objectives and there are mention in memorandum.

Company is competent to have a personality and also regarded as a new person capable of bear right & duties after incorporation. Although it is a legal person has no body, no soul or conscience, no physical existence except in the eye of law.

Insider Dealing

Company Law Notes — Sun, 18 Aug 2013 05:41:42 +0000

Insider dealing is simply an unauthorized inside trading of corporate securities by the corporate insiders. Abusive self-dealing occurs when the persons having close relation to company abuse this relationship to the detriment of company and investors.
Unpublished inside information’s play very crucial role in securities transactions. There is always chance of such information to be disclosed by directors, shareholders, officials and other people who are involved in management.
Trading of securities by the persons who have price sensitive information with them, which is not available to the person with whom one is contracting at the relevant time may cause harm to one an undue benefit to the others.
Such activities are required to be controlled in order to protect the investment of general public and shareholders.
Insider dealing means any person dealing with sensitive information, which is illegal in many ways by own self or through any other person, which has not publicly disclosed

So, insider dealing is the dealing of securities of company with the benefit of confidential and restricted or unpublished information by such persons through his /her position or relation with the “officials” of the company.

Who are insiders?
(Section 92 of the Securities Act 2063 BS.)

The person who may have inside information due to his / her position such as directors, promoters, shareholders, officials or employees.
Any professionals who obtain inside information are by the cause of delivery of such professional services such as auditors and legal consultants.
Any persons who have capacity or access to obtain such information directly or indirectly.

So, the persons having access to notice or information that is price sensitive are called insiders.

Existing Nepalese Company Act has no explicit provision on insider dealing rather it imposes duty on directors of company to disclose their interest in company.
Section 91 of the Securities Act 2063 BS has provided that ‘’ any person who transacts or causes transacting on securities on the basis of inside information which are not made public that may affect the price of securities or gives notice or information known to him, to any other except to his / her course of duty is deemed to act as insider dealing.
Section 101 the Securities Act 2063 BS provides punishment on the crime of insider dealing. The culprit shall be fined as per value involved in transaction or imprisonment up to one year or both.
The Securities Act further provides that if any person is punished in insider dealing will be disqualified to be appointed as director or manager in public limited company until 10 years from the date of punishment. (Section 108 of the Securities Act 2063 BS).
Any aggrieved persons may recover any loss sustained by him from such person committing crime of insider dealing.
Insider Dealing is regarded as criminal act and included in schedule -1 of State Cases Act 2049 BS.

(Need to look Section 102 of the Securities Act, Sections 32/ 92/93/94/ of the Companies Act and 11 of BaFI Act)

Transfer of Share

Company Law Notes — Sun, 18 Aug 2013 05:41:42 +0000

The shares of a company are movable property and can be transferred in a manner prescribed by concerned law and articles of association of company.
The transferability of shares is one of the significant advantages of company form of organizations.
Section 42 of the Companies Act of Nepal specifically declares that the shares or debentures of a company may be sold or pledged like a movable property subject to this Act , MoA & AoA.
So, as a matter of fact, it is right of every shareholder to transfer his/ her share. However the manner of transfer may be prescribed by MoA, AoA and respective law.
The MoA & AoA of company can make some preconditions, but cannot absolutely restrict the right of member to transfer there share.
In absence of any restrictions, in the AoA , MoA & law the shareholder has an absolute right to transfer his/ her shares.
Share is a special type of movable property; it is not like gold, furniture and cash etc. Therefore, there are some special laws to regulate transfer procedure viz; the Companies Act 2006, The Securities Act, BAFI Act, NRB Act 2058 B. S. etc.
Transfer of share will be furnished only by fulfilling the prescribed procedures of such special laws.
There are so many ways of transfer of shares from one to another. The share transfer deed document and will paper are the means of voluntary transfer of shares. Non voluntary transfer court order i.e. order of distribution in partition case ( ansa mudda)
As per legal provision of section 42(1) of the Nepalese Companies Act “the shares or debenture of a company may be sold or pledged like a movable property subject to this Act, MoA & AoA.
As per section 42 (2) of this Act the promoter share of a company, other than a private company which has not borrowed loan from any other company, shall not be entitled to sell or pledge any share held by him until the 1st general meeting of company is held and a call on the share issued in his name is fully paid up.
Section 43 of the Companies Act states about the procedures of the transmission of shares or debentures of company. As per this section if any share or debenture is sold, the buyer thereof shall make an application to registered office of the company with a copy of deed and share or debenture certificate. In compulsory transmission there will be order of court. Than the company cross off the name of transferor and enter the name of transferee shareholder debenture holder in the register within 15 days after making of such application. But if any prevailing law on securities provides that no deed of transfer is required for transfer the title, such deed is not required to be produced along with the application to be so made.
The grounds to refusal have been mentioned in section 44 of the Companies Act. As per this legal provision in following circumstances company can refuse to record the transmission; A) If a call on share has not been paid up. B) If the transmission is contrary to the articles of association of company and the agreement concluded between the shareholders. The information regarding transmission will be provided to both transferor and transferee from the date of application.
Section 55 of Nepalese Companies Act states about the ownership of share or debenture. As per this legal provision, if a dispute arises about the ownership of any share or debenture issued by any company, the person whose name is registered in the share or debenture register of company shall, unless otherwise proved, be regarded as the owner of such share or debenture.
Section 45 of the Companies Act describes the other circumstances where the share or debenture may be transmitted by operation of law. Circumstances may be the death or insolvency.
Process of transfer; a) the shareholders should be registered in the Stock Broker’s Office at first. b) Joint application with deed of transfer with original share certificate.
Transfer in case of private company; a) Board decision, b) deed c) application d ) information providing for record to the CRO d) fulfilling the prescribed process of record by CRO.
Restriction on transfer ; by making provisions in AoA & consensus agreement in case of private company section 10 (d) 42(2) section 145(1) (b), if there is no entitlement, as per legal provision such as section 42(2) of Act.
The case of Lun Karan Das Chaudhary V. NRB( A collection of some important precedents of commercial case; part 4 S.No. 42 p. 290) . The transfer of share should not be restricted by making some conditions of contract.
There must be a valid authority or entitlement on share to transfer the share. A person who has no authority or entitlement, such shareholders cannot make a valid transfer of shares. Thus transfer of shares by the husband of a lady shareholder without her authority was held to be void and transferee got no rights by such transferred share.( John Tinson & Co. v. Surjeet Malhan , AIR 1997 SC 1411).

Prospectus of Company

Company Law Notes — Sun, 18 Aug 2013 05:41:42 +0000

Any document, described or issued by a company includes any notice or circular, authentic advertisement inviting deposits from the public.
Document inviting offers to the public for the subscription or purchasing of shares, debenture or securities.
Elements of prospectus;
A valid invitation to the public.
The invitation must be to subscribe or purchase shares or debenture of company.
The invitation must be made by or on behalf of the company.
Only the commercial advertisement is not prospectus.
Section 2 ( m) and 23 & 24 of Nepalese Company Act to know the concept, features and importance of prospectus.

Allotment of Share

Company Law Notes — Sun, 18 Aug 2013 05:41:42 +0000

Section 28 of Nepalese Company Act.
Allotment is the process of distributing and selling of shares by company for the persons who are going to be future shareholders of the company.
Prospectus issued by the company is the invitation to the public to apply for the shares of the company.
On the basis of invitation the persons apply to the company for its shares.
An application for shares is an offer from the applicant to purchase the shares.
When such application is accepted by company that is called an allotment.
Allotment is the appropriation of shares to a particular person, out of the previously inappropriate capital of the company.
So, allotment is the fresh issue of shares by company.
It is a binding contract between the company and shareholders.
The rules of offer and acceptance of contract law are applied in allotment process.
The company must make a decision of allotment to go in public. The board fixes certain reasonable time frame to pay the share amount.
General rules of allotment; – 1) the allotment must be made by proper authority e.g. board of directors, or delegated authority.2) the allotment must be communicated. – to the applicant e.g. postal communication, public notice.3) there should be a reasonable time for application.4) the allotment must be unbiased and absolute.4) There must be clear terms and conditions in application itself.
The allotment process must be mentioned in MoA and AoA as per the legal provisions of the companies Act 2006.
The allotment is done privately in case of private company, not publicly, private company cannot make public offer for allotment, if made that is punishable by section 160(q).
Respective legal provision of allotment is sections 28 of the Companies Act 2006 of Nepal

Board of Directors: Function, Duties and Liabilities

Company Law Notes — Sun, 18 Aug 2013 05:41:42 +0000

(Chapter 6, section 86 to 104 of Nepalese Company Act)

A board of directors is a body of elected or appointed person who jointly oversee the activities of a company or organization. Oversee in the sense of monitor, control and guide through policy formulation and directives.
The body has different name BOD, board of trustees, board of governors, board of managers or executive board etc.
It is often simply referred as “the board”
Board activities are determined by the powers, duty and responsibilities delegated to it by authorities General Meetings & other regulators.
The powers, duties and responsibilities are typically detailed in companies buy laws.(MOA,AOA or others internal rules)
The buy laws commonly also specify the numbers of board members, how they are to be chosen, when and how they are to meet and function.
Section 2(Y) of Nepalese Companies Act ‘director’ means any director of a company this term includes any alternate directors.
Section 2(z) ‘board of directors’ means the board of directors of a company.
Section 2(z1) ‘Managing Director’ means a managing director of a company.
CEO is popular and now in use.
Director is a person occupying a position of a director.
A director is a person who performs the duty of directors.
Directors are the persons who are responsible for direction, control and management of the affairs of a company.
Since company is an artificial person, it is the directors who exercise the powers, and functions of company.
The board of such directors is the board or BOD.

Powers and function of Board of Directors
(Section 95 of Nepalese Company Act)

Governing the organization by fulfilling the objectives.
Selecting, appointing supporting and reviewing the performance of the CEO or manager or managing director.
Insuring the availability of the adequate financial resources.
Preparing and approving the annual budget.
Typically, the board chooses one of directors to be chair or chairperson of the board of directors.
Theoretically, the control of a company is divided between two bodies;
BOD
General Meeting

Practically, it depends on the nature of company.

In small private company, the directors and shareholders will normally be the same people.There is no division of power.

In Large public limited company

The board tends to exercise more of supervisory role. There may be; professional directors (such as a finance director a marketing directors).
The board tends to have more de facto power.

Responsibility & Duties of Board of Director
(Section 99 of Nepalese Companies Act)

A board of director is a group of people elected by the owners of a corporation or a company who have;

Decision making authority
Voting authority (in Meeting)
Specific responsibility is to distinct and separate from the owners (shareholders) or members of company or business entity. (Divorce between ownership and management)
Directors must be individuals.
Directors can be owners, managers or any other individuals elected by business entity.
Some time in exception, board of directors are compared with advisory board or board of advisors.
An advisory board is group of people selected (but not elected) by the person wanting advice.
Advisory board- No decision making authority no responsibilities.
Role and responsibility is also power and duty.
The role and responsibility depends upon the business entity.
House of Lord observed that unless the directors are acting contrary to law or provisions of articles, the powers of conducting the management and affairs of the company are vested in them. (Quinn and Artens v. Salmon (1909) A 442 )
In most legal system, the appointment and removal of directors is voted.

Directors are removed;

By expiry of tenure
By resignation
By resolution of remaining directors only by any cause
By removing by the G.M.

Exercise of Powers by BoD

The exercise of powers by the board usually occurs in meeting. (Section 97 of Nepalese Company Act).
Sufficient notice has to be given to all directors of these meetings in most legal system.
Quorum must be present before taking decision.
In most legal system the power of board of directors is vested in a board as a whole not only in the individual.
Decision is based on majority basis, but minority can claim regarding their interest.
Power must be used by the individual directors by virtue of ostensible authority.
Director exercise control and management of the company, but company are run for the benefit of the shareholders (in theory at least)
The law imposes strict duties on the directors.
Generally, the duties imposed to the directors are fiduciary duties.
Typically, there are two important points in relation to director’s duties.
The directors’ duties are several which must be done jointly.
The duties are automatically associated with company. But it does not mean that director can never stand fiduciary relationship to the individual shareholders.

Fiduciary Duties (on the basis of Court Developed Principles)

Acting in bona fide
Directors must act honestly and in bona fide, not mala fide.
Directors must act in good faith what they consider.
Proper purpose
Directors must exercise their power for proper purpose.
Purpose of company
Whether the purpose is serving the purpose of company or not.
Unfettered Discretion
Duty to avoid conflict of interest
Transaction with company conflict
Use of corporate property & opportunity and company.
Duties of care and skill

(Section 93, 94,95,99,100 & 103etc. of Nepalese Companies Act 2063 BS)

Duties of Directors
Fiduciary duties & Statutory Duty

Fiduciary Duty
Fiduciary means power is entrusted for the benefit of others.

Acting in bona fide

Directors must act honestly and bona fide
They must act in utmost good faith what they consider
They should act in the interest of the company

Directors are not required by the law to live in a unreal region of detached altruism and to act in a vague mood of ideal abstraction from obvious facts which must be present to mind in any honest and intelligent man when he exercise his powers as a directors. (Mills v Mills 1938, 60 CIR 150 an Australian case)

Sometime distribution of dividend may be considered as the act not bona fide act Improper distribution of dividend may reduce the wealth of company but sometime this is considered as honest , not breach of fiduciary duty.

Acting for proper purpose

Directors must use power for proper purpose of company.
Providing opportunity to their close relative may not be for the purpose of company.
Banks strictly prohibits providing loan for their close relative.
The powers must be exercised within the ambit of authority of company.
They cannot use their power for improper purpose.

Unfettered Discretion

Not to fetter
The discretionary powers or responsibility conferred upon the directors must not be delegated to others.
Section 95(6) of Nepalese company Act the matters which cannot be exercised by the decision of board of directors.
Directors cannot without the consent of company, fetter their discretion in relation to exercise of their powers.
Directors cannot delegate the power of vote in meeting to other or they cannot say that I am not going to vote.

Duty to avoid conflict of Interest

Directors must avoid the conflict of interest between them and company. Good faith must not only be done but must manifestly be seen to be done.
As a fiduciaries, the directors may not put themselves in the position where their interest and duties conflict.
Section 89 (1), ( f )of the Nepalese Company Acts – directors cannot compete directly with the company.
They should not act as the directors of competing company,
When directors himself enters into a transaction with a company, there is a conflict between the director’s interest and duty with company’s interest.
If director falls under such transaction he/she must ensure that the company gets as much out of the transaction but that is very difficult to prove.
Directors must not enter in a transaction which create problem.
Directors must avoid his /her transaction with companies,
Director must disclose and avoid close relative’s direct involvement or any kind of interest in transaction with company.

Duty of care and skill

A director must show reasonable care & skill.
Responsible care & skill.
A director need not exhibit in performance of his duties a greater degree of skill than may responsibly be expected from a person of his knowledge and experience.
Such care & skill should be a responsible care & skill of an ordinary man that might be expected to take on his own behalf.

Statutory Duties of BoD

Duty to disclose interest – Section 92 & 100 of Nepalese Company Act.
Interest in Transaction.
Any kind of interest in appointment of MD/ company secretory or officer of the company.
If he is director of another company.
Transaction on securities of company.

Duty to exercise corporate power

Section 95(1) of Nepalese Company Act – The directors shall use the corporate power according to company law, article of association, and decision of general meeting.

Duty to manage transaction and exercise of power

Section 95(1) of Nepalese Company Act –The directors shall manage all transactions, exercise the power and perform the duties of company through the board of directors collectively.
To present in meeting personally, not through the (proxy).
The directors must be present in person not the proxy, (Section 97 of Nepalese Company Act.)

To participate in general meetings as far as possible.

Section 68 of Nepalese Company Act; Directors required to be present in general meeting as far as possible.
Not to participate and vote which is going to decide his obligation of his misconduct etc. (Section 70(2) of Nepalese Company Act)

To prepare and submit annual account and report as mentioned by law – Section 78,80,109 of Nepalese Company Act.

Duty not to receive remuneration of the directors without decision of G.M.

The director cannot obtain any remuneration or other facilities or incentive without decision of general meeting.

Duty not delegate authority on; – (Section 95 (6) of Nepalese Company Act)

The power to make calls on shareholders in respect of money unpaid on their share.
The power to issue debenture.
The power to borrow the loan.
The power to invest funds of company.
The power to make loan.

Duty and power to appoint MD/CEO (Section 96)

Duty not to take personal benefit, to take oath of secrecy and honesty, (Section 99 of Nepalese Company Act).

Duty to discharge duty on good faith. (Section 99(4) of Nepalese Company Act).

Duty to disclose about securities. (Section 100 of Nepalese Company Act).

Remedies for Breach of Duties

Injunction or declaration
- Section 138 & 139 of Nepalese Company Act provides remedy of injunction also.
Recovery for Damages
- Section 140 of Nepalese Company Act -If any director has caused loss to company while acting contrary to the Act, MOA, AOA or consensus Agreement Company or aggrieved party may demand the recovery of such loss.( need to read whole clauses of this section 140)
Restoration of company’s property
- Section 163 of Nepalese Company Act speaks about realization of amount loss.
Recession of relevant contract
- If a director has concluded a contract beyond the scope of his authority or working scope of company any shareholders may make an application to rescind from implement and avoid the contractual liability.
Summary Dismissal
- Section 89(3) (b) of Nepalese Company Act states that if the general meeting possess a resolution to remove from the post, the director shall not continue to hold the office of director.

Directors’ Liabilities, Immunities and Limitation

The authority of directors is usually determined by the MoA AOA and decision of general meeting (Section 95(1) of Nepalese Company Act)
If all the acts have been performed in good faith within the scope of authority, the directors cannot be held liable personally for such loss or damages.
But if the director fails to perform good faith, the director is liable for such consequences.

Independent Directors

Public company should appoint independent directors under section 86(3) –if 7 directors-1 independent director, if more than 7 - 2 independent directors.
The independent directors should have qualification prescribed in AOA and also have knowledge of and experiences of business of company
The shareholders cannot be appointed as independent director.

Share Qualification of Director

Section 88 of Nepalese Company Act, if AoA specifies the number of shares as a requirement.

Disqualification of Directors – See; Section 89(1) of Nepalese Company Act.

Term of Office of the Directors (See; Section 90 of Nepalese Company Act).

Meeting of Directors

Section 97 of Nepalese Company Act.
Private company as per provision of AOA
For public company shall be at least six times in a year.

Advantages and Disadvantages of MNCs and Nepalese Context

Company Law Notes — Sun, 18 Aug 2013 05:41:42 +0000

Concept of MNCs and Operational Provision:

National means one nationality connected with particular nation. Vice versa of this is multinational. It means more than one nationality or including several nationalities.
Multinational companies mean such companies those are operating in several countries or more than one country.
Company is an artificial person, incorporation of company gives the birth of company the company where it takes its birth is the nationality of company like a natural person. One company incorporated in one nationality and then transacts in other countries by fulfilling the prescribed legal procedure for operation is the situation of existence of multinational companies.
The headquarters of Multinational Company normally is based on one country and operates on several countries. Typically MNCs functions with headquarters while other facilities are based in location in other countries.
Multinational company is referred to as Multinational Business Enterprises (MBE) Transnational Corporation (TNC).
MNC, MBE & TNC are the same.
The exact model for MNC may vary slightly. But common model of MNC is the positioning of executive headquarters in one nation, while production, business transaction or other types of facilities are located in one or more other countries. It is the operational system of MNC.
In this model, the multinational companies take advantage of benefit of incorporation in a particular country. While also being able to produce goods or services or to transact in the geography where the cost of production or service is lower than the incorporating nationality. It is also the way of operation of MNC.
Another structural model is based on parent and subsidiary company. Parent and subsidiary company also may be MNCs. Parent is based on one nation and operates its subsidiary in other countries around the world. So, the model of operation of MNCs or operational provisions of MNCs may vary.
One approach to set up an MNC involves the establishment of headquarters in one country that oversees a diverse conglomeration that states many different countries and industries with this model.
Following on success of corporate model at a national level many corporations have become transnational or growing beyond the national boundaries to attain sometimes remarkable position of power and influence in the process of globalizing.
Multinational Corporations are important actors in the international system as they are not only major source of investment, trade, and employment but also they exercise considerable influence in economic and social policy of many developing countries in which they operate.
The United Nation Commission on Trade and Development (UNCTAD) is acting in the field of effects of operation of MNCs in the many countries especially in developing countries.
The driving force behind business of MNCs is profit motive and free market economy.

From human right perspective

MNCs should be held accountable and responsible to the host state or affected community for violation of human rights through appropriate legal regime and mechanism.

Ways are;

Reciprocity –the company should give something back to society.
Compensation
Ethical principle

Kofi Anan Launched a ‘’Compact for New Century” in 1999, which stressed the need for business community to observe the human rights, labor standards and environment protection.

ILO declaration on fundamental principles and rights at work.

Fundamental principles

Freedom of association
Right to collective bargaining
Elimination of all forms of forced and compulsory labor.
Abolition of child labor.

Development:

The idea of MNC has been around for centuries. Some trace the origin of MNC concept back to Dutch East India Company of the 17th century.

The corporate structure of Dutch East India Company involved a presence in more than one country.

During 19th and 20th century the idea regarding MNC became increasingly common.

In 21st century this business model continues to be highly desirable.

There are several approach that MNC came into existence;

1st approach:
MNC is to intentionally establish new company with head quarter in one country while producing goods and services in facilities locates elsewhere.

2nd approach:
MNC comes about due to merger b/w 2 or more companies based on different countries.

3rd approach:
Acquisition and hostile takeover also sometimes result in creation of MNC.

Due to the concept of global village, the interdependency in goods and service from one corner of world to another corner is increasingly growing more interconnected each day.

Door for diversification of business:

Possibility to remain solvent, even one subsidiary is posting to a temporary loss.
MNC often creates global business strategy that targets emerging markets in countries that offers maximum growth and profit potential.
Executing a successful multinational strategy can create tremendous value for MNC’S shareholders.
Global company operates in multiple countries.
Before becoming a MNC a company may first sell its product or services in foreign countries with limited risk by exporting or licensing its product in that company.
To expand foreign market, to save on shipping or transportation cost and foreign tariffs the MNCs are establishing or incorporating.
A company typically becomes a MNC when it makes direct investment in foreign countries to establish operations and conduct business there. That gives the company more control over its business in the country.

A company can setup its operation in a foreign country from scratch by establishing its own manufacturing distribution and retail operation or use several other strategies to build its foreign presence. It can establish branches or partnership with and established firm in a foreign country. It can buy complete ownership or a controlling stake in a foreign country. A company that aims for a larger approach can form a long term global partnership with another company to invest and penetrate multiple foreign markets

Advantages and Disadvantages

A MNC benefits from international growth opportunity that may not exist in its home market.
It may be able to manufacture its products in a foreign country cheaper than it can in its home country.
MNCs can minimize the effect of foreign currency exchange rate fluctuation.
MNCs can take advantages of lower tax in foreign country, especially in developing countries.
The disadvantage is operating in foreign countries poses risk.
A company is exposed to a country’s law regulations and political environment that can less stable than those in its home country.
Investors in MNCs can take benefit from their international diversification for example investing in a multinational food company that generates a significant percentage of its profit in other countries gives an investor’s exposure to growth potential of those countries.

Operational provision in Nepalese context

Section 154 to 158 (Chapter 16) of Nepalese Company Act has mentioned about operational legal provision of foreign company which is related with MNC. The provisions of ;
Branch office
Liaison office or contact office
Registration compulsory
Incorporation process
Approval from concerned regulatory, ministry department or regulatory
Registration fee, determined by notification in Gazette.
Account and Audit of foreign company
Power to attorney
Cancellation or registration and liquidation of foreign company.
Similarly, Foreign Investment and Technology Transfer Act 2049 (FITT Act) BS also creates space for foreign company.

Memorandum of Association (MoA)

Company Law Notes — Sun, 18 Aug 2013 05:41:42 +0000

MoA is very basic document of company. MoA can be compared with constitution and AoA with Acts or Rules of country.
MoA contains name clause, objectives clause, major functions clause and capital arrangement clause etc.
As per Section 2(k) of Nepalese Companies Act, memorandum of association is memorandum of association.
MoA is the 1st important document to be filed for incorporation.
It is a charter or constitution of company as it regulates the relationship of company with the outsider stakeholders.
Name of company, Powers, objects and scope of operation of company are major elements of memorandum of association. That is actually essential element of memorandum of association.
Lord Cains, observation regarding MoA is “ the memorandum is as it were the area beyond which the action of company cannot go; inside that area the shareholders may make such regulations for their own governance as they think fit. (Ashbury Rail Carriage & Iron Company V. Riche 1875 LR 7 HL 653) .
MoA is a public document, the person who deals with company is presumed that s/he has sufficient knowledge regarding contents of memorandum.
Egyptian Salt & Soda Co. Ltd. v. Port Said Salt Association Ltd. 1931 AC 677 – “a memorandum of association is a document which sets out the constitution of a company and as such it is really the foundation on which the structure of company is based. It defines its relation with outside world and scopes its activities. Its purpose is to enable shareholders, creditors and those who deal with company to know what is permitted range of enterprises.’’
MoA is needed at the time of incorporation of company.
Name clauses, objects clauses, main functions, provisions of capital etc. must be stated in MoA.
The matters to be stated in MoA have been clearly mentioned in Section 18(1) and 18(2) of Nepalese Company Act.