Business Renewal & Closure (De-registration) in Nepal: Procedure & Penalties

Every registered business in Nepal has ongoing obligations that continue until it is formally closed. A company registered with the Office of the Company Registrar (OCR) must file an annual return each year; a private firm or a cottage/small industry must renew its certificate on schedule with its registering authority. Simply stopping trade does not end these duties. A 'dormant' business that owners walk away from keeps accruing fines and remains legally alive, and its directors or proprietors remain personally exposed until de-registration is complete.

This is the single most common gap owners fall into. Searches such as 'company band garne nepal', 'firm renewal nepal' and 'ocr annual return fine' almost always come from people who registered a business, never operated it or stopped operating years ago, and now face a growing penalty ladder. The correct fix is not to ignore it but to either bring filings current and continue, or to formally de-register/wind up the entity so the liability stops.

The path differs by legal form. Companies (private limited, public limited, non-profit) are governed by the Companies Act, 2063 (2006) and dealt with at OCR. Sole-proprietor private firms and cottage/small industries are governed by their registration statute and handled by the Department of Cottage and Small Industries (DoCSI), a provincial industry office, or the local municipality/ward, plus the Inland Revenue Department (IRD) for tax. This page covers both tracks and where they meet.

A company's core annual compliance is filing its annual return with OCR after holding its Annual General Meeting (AGM). Under the Companies Act, 2063, a public company must submit a pre-AGM report to OCR at least 21 days before the meeting (Section 78), and every company must forward the return of the AGM to OCR within 30 days of holding it (Section 80). The return carries the audited financial statements, the auditor's report, the directors' report and the resolutions passed.

In practice this means each company must complete an audit, hold its AGM, and file with OCR annually. Even a private company that is not actively trading must file to stay compliant; there is no automatic 'dormant company' exemption from filing. Filing today is done through OCR's online company administration portal (CAMIS, at camis.ocr.gov.np), where the company profile, shareholder and director details, and the financial documents are uploaded.

Separately from OCR, a company must file its income-tax return (and VAT return if VAT-registered) with the IRD for the same fiscal year, which in Nepal runs from Shrawan 1 to Ashad end (roughly mid-July to mid-July). OCR compliance and IRD compliance are distinct: clearing one does not clear the other, and closure later requires both to be in order.

When a company misses its annual return, OCR charges an escalating fine under Section 81 of the Companies Act, 2063. The amount depends on the company's paid-up capital and on how long the default has run, and it accrues year on year, which is why a long-dormant company can owe a large accumulated sum. Directors are personally liable for these fines.

The fine is structured in bands. For the first three months after the deadline it is NPR 1,000 (capital up to NPR 2.5 million), NPR 2,000 (up to NPR 10 million) or NPR 5,000 (over NPR 10 million). For the next three months it rises to NPR 1,500 / 3,000 / 7,000. For the following six months it is NPR 2,500 / 5,000 / 10,000. Thereafter it accrues annually at NPR 5,000 / 10,000 / 20,000 respectively for each further year of default.

Because the penalty compounds every year until either the returns are filed or the company is de-registered, owners of inactive companies should act rather than wait. A company that ignores filings for three consecutive financial years also becomes a target for OCR-initiated cancellation under Section 136, so the fine ladder and the de-registration risk run in parallel.

A company can be brought to a formal end in two main ways under the Companies Act, 2063. The lighter route is de-registration (cancellation of registration) under Section 136, suited to companies that never really operated or have no material assets or liabilities to distribute. The heavier route is voluntary liquidation (winding-up) under Chapter 10, used where a solvent company has assets, creditors and shareholders whose interests must be settled by an appointed liquidator.

Under Section 136, OCR may cancel a company's registration when a promoter applies stating why business was never commenced and pays the prescribed fee; when a company has failed to file returns for three consecutive financial years or not paid the associated fines; or when OCR has reasonable grounds to believe the company is not carrying on business. Before cancelling, OCR must notify the company at its registered address or by public notice, and give it a window (about two months) to show cause why it should not be struck off. After cancellation the company may not use its former name, and directors and officers remain personally liable for any unpaid debts.

Voluntary liquidation under Section 126 is available only to a solvent company: the board must confirm in writing that the company can pay all its debts and liabilities immediately or within one year, and no compulsory (insolvency) liquidation must be pending. Shareholders pass a special resolution to liquidate, appoint a liquidator, and notify OCR and the IRD of the appointment within seven days. The liquidator realises assets, settles creditors, distributes any surplus to shareholders, and reports back to OCR to complete the winding-up.

The practical sequence to close a company blends OCR and IRD steps, and the order matters because OCR generally will not finalise closure while filings and tax remain outstanding. The first job is to bring the company current: file every missing annual return (the special deregistration route requires each defaulted year's Section 80 financials to be uploaded separately) and, in a normal closure, pay or settle the accumulated fines calculated by CAMIS.

The company then passes the required resolution. For de-registration under Section 136 a shareholders'/board resolution and a self-declaration that the company has no undischarged liabilities are typically filed; for winding-up a special resolution appoints a liquidator. In parallel the company files its final income-tax and VAT returns with IRD and obtains a tax clearance certificate (kar chukta pramanpatra) through the IRD taxpayer portal, which is a near-universal precondition for closure and for surrendering the company PAN.

With returns filed, resolution passed and tax clearance in hand, the company submits the de-registration application through CAMIS with the supporting documents. OCR publishes a public notice inviting objections; if none is received within the notice window it issues the final de-registration decision and the company ceases to exist. Keep the OCR strike-off/de-registration record and the tax clearance certificate, as they are the proof the entity and its PAN are properly closed.

Recognising that tens of thousands of companies sit dormant with mounting fines, OCR has periodically opened a special deregistration facility so owners can exit at a reduced cost. The Directive Relating to Special Deregistration, 2025, issued under Section 136A (136ka) of the Companies Act, 2063, targets companies that never commenced business after registration and companies in default of their Section 80 annual filings.

The scheme's headline benefit is the fee: instead of paying the full accumulated Section 81 fines, an eligible company can pay the lower of the total fines computed by CAMIS or an amount equal to 0.5 percent of its latest paid-up capital. Applicants must still upload the defaulted annual financials/returns, submit the deregistration application on CAMIS with a self-declaration, shareholder resolution and identity documents, and pass through a public-notice period (around 30 days) during which objections can be lodged before OCR issues the final decision.

Because these are time-bound schemes tied to a specific fiscal year and directive, owners should confirm the current window, exact eligibility and fee on OCR's official portal before relying on it. When a concession scheme is not open, the standard Section 136 route with full fines and tax clearance still applies.

Sole-proprietor private firms and cottage/small industries follow a different lifecycle from companies. They are registered with the local municipality/ward, a provincial or district industry office, or the Department of Cottage and Small Industries (DoCSI), and their certificate must be kept valid by renewal on schedule rather than by an OCR annual return. A cottage/small industry registration is commonly valid for a set term (often around five years) before renewal, while many local-body firm registrations are renewed on a shorter cycle tied to the fiscal year.

Late renewal attracts delay fees set by the registering body. For extending the operation of an industry, reported delay charges run to the order of NPR 5,000 per year for micro industries and around NPR 15,000 per year for cottage and small industries; local municipalities set their own late-renewal surcharges for firms. As with companies, the firm still owes its income-tax filing with IRD for each fiscal year regardless of trading activity.

To close a private firm or cottage/small industry, the owner clears business debts and employee dues, files the final income-tax (and VAT, if registered) returns and obtains the IRD tax clearance certificate, deregisters from the Social Security Fund if staff were enrolled, and then applies to cancel the registration at the ward/municipality or industry office with the tax clearance and original certificate. The PAN is then surrendered to IRD with the closure application and tax clearance. Owners should confirm current fees and documents with the specific registering office, as rates vary by local body and industry class.