Company Compliance Audits

Company Compliance Audits in Nepal

Operating a corporate entity in Nepal requires continuous adherence to statutory mandates. A legal compliance audit identifies administrative omissions, corporate record discrepancies, and exposure to statutory fines before regulatory authorities intervene.

Under the Companies Act 2063, the Labor Act 2074, and the Income Tax Act 2058, every domestic company and foreign subsidiary must maintain accurate statutory registers and file periodic reports with the Office of the Company Registrar (OCR), the Inland Revenue Department (IRD), and the Department of Labor.

Key Compliance Areas We Evaluate

1. Corporate Secretarial and OCR Records The Companies Act 2063 requires every registered company to file annual audited financial statements and shareholder returns within six months of the fiscal year end. We review:

• Board meeting minutes, Annual General Meeting notices, and formal resolutions.

• Share registers (lagat kitta), director registers, and registered office updates.

• Share transfer records, capital increases, and pending late filings on the CAMIS online portal.

2. Labor Law and Social Security Compliance Under Section 100 of the Labor Act 2074, enterprises must conduct an annual labor audit and submit the report using Schedule 10 by mid-January (end of Poush). We assess:

• Written employment contracts, statutory minimum wage rates (NPR 19,550 per month), and working hour limits.

• Mandatory enrollment of your workforce with the Social Security Fund (SSF) and monthly contribution records.

• Overtime tracking, annual leave ledgers, maternity benefits, and workplace safety protocols.

3. Tax Filings and Statutory Clearances Corporate entities must maintain clear alignment between audited accounts and tax declarations. We audit:

• Permanent Account Number (PAN) and Value Added Tax (VAT) periodic returns.

• Tax Deduction at Source (TDS) withholdings on payroll, vendor invoices, and office leases.

• Annual corporate tax filings and Tax Clearance Certificates issued by the IRD.

4. Sectoral Licenses and Local Operating Permits Beyond company registration, operational legitimacy depends on local and industry-specific permits:

• Annual municipal ward office business registrations and renewals.

• Industry registration certificates issued by the Department of Industry.

• Specialized operating licenses from authorities such as the Nepal Telecommunications Authority or Department of Commerce.

Inbound FDI: Establishing an IT Company in Nepal for Foreign Businesses

Nepal permits 100% foreign ownership in information technology and software services. Under current foreign investment regulations, qualified IT-based industries are exempt from the standard NPR 20 million minimum capital threshold, allowing foreign founders and offshore tech companies to enter with flexible capital structures.

We manage the entire entry process for overseas IT firms setting up development centers, tech hubs, or subsidiaries in Nepal:

• Securing Foreign Direct Investment (FDI) approvals through the Department of Industry or the online automatic route.

• Incorporating your private limited subsidiary at the Office of the Company Registrar.

• Obtaining Nepal Rastra Bank (NRB) capital inflow accounting certificates to safeguard future dividend repatriation.

• Drafting Master Services Agreements (MSA), Software as a Service (SaaS) terms, and Technology Transfer Agreements (TTA).

• Structuring intellectual property assignments to ensure source code, proprietary algorithms, and trademarks stay fully owned by the parent company.

Outbound Expansion: Establishing an IT Company Abroad for Nepali Citizens

While the Act Restricting Investment Abroad 2021 (1964) generally prohibits foreign asset ownership, recent legal frameworks and Nepal Rastra Bank (NRB) foreign exchange directives permit eligible Nepali IT exporters to establish branch offices and overseas entities.

We advise Nepali software companies expanding into markets such as the US, UK, EU, Singapore, or UAE:

• NRB & Department of Industry Clearances: Preparing export audit trails and securing foreign exchange permissions to remit funds for overseas incorporation, operational rent, and legal costs.

• Jurisdictional Structuring: Setting up foreign holding entities or subsidiaries (such as Delaware C-Corps, Singapore Pte. Ltd., or UAE Free Zone entities) while maintaining a compliant parent-subsidiary structure in Nepal.

• Cross-Border Contracting & Transfer Pricing: Drafting intercompany service agreements to govern foreign client invoicing, offshore billing, and inward remittance under Nepali income tax rules.

• Intellectual Property Controls: Protecting software codebases, trademarks, and technology assets across international borders.

Drafting Compliant Company Policies

Internal rules must protect your management authority while meeting the mandatory standards of the Labor Act 2074 and the Social Security Act 2075. We draft clear, legally binding operational handbooks tailored to your business model:

• Employment Contracts & Restrictive Covenants: Fixed-term, permanent, and contractor agreements containing enforceable non-disclosure agreements (NDAs), non-compete clauses, and IP assignment provisions.

• Employee Handbooks & Workplace Rules: Working hours, performance reviews, probation standards, and statutory leave administration.

• Social Security & Gratuity Schemes: Detailed rules for SSF deductions, provident fund transitions, and severance pay.

• Disciplinary & Grievance Procedures: Step-by-step mechanisms for misconduct investigations, warnings, and lawful employment termination.

• Workplace Safety & Anti-Harassment: Mandatory operational frameworks to prevent sexual harassment and manage internal complaints.

• Remote Work & IT Assets Security: Clear guidelines on company hardware usage, remote access security, and data protection obligations.

Our Audit and Regularization Process

1. Document Review: We examine your Memorandum of Association, Articles of Association, audit reports, board minutes, foreign investment records, and personnel files.

2. Liability Identification: We cross-reference your records against statutory rules to pinpoint unfiled returns, missing registers, or non-compliant contract terms.

3. Corrective Drafting and Filing: Our lawyers draft missing board resolutions, update statutory ledgers, regularize pending OCR filings, and pay necessary late fees to restore your company to good standing.